Proper Gander: Where the wealth went (2022)

The Proper Gander TV column from the March 2022 issue of the Socialist Standard

Since the financial crisis and through austerity, Brexit and then the pandemic, we’ve had to get used to the effects of the economy at its most volatile. Reminding us of the depressing years from 2008 onwards is BBC Two’s documentary The Decade The Rich Won, which would more accurately be titled ‘Another Decade The Rich Won’. This two-part programme has an all-star cast of politicians, economists and government advisers who tell us how they navigated the last decade’s fiscal turbulence. Instead of a narrator, captions in block capitals flash up on the screen to pull the story along, accompanied by urgent-sounding ominous music.

The documentary begins with the government’s ‘bailouts’ of hundreds of billions of pounds to banks such as the Royal Bank of Scotland. Without this intervention, we would have faced ‘financial armageddon’, according to then-Governor of the Bank of England Mervyn King, and with this intervention, the wealthiest got even wealthier. It’s explained that this is because the bailout funds stayed with the banks, rather than flowing through and boosting the economy. So, an alternative strategy was tried: quantitative easing. This tactic (credited to King and then-Chancellor of the Exchequer Alistair Darling) is when the Bank of England ‘creates money’ to buy government bonds from financial institutions, which then have more funds to lend out to people and businesses. Between 2009 and November 2020 the impossible-to-visualise amount of £895 billion went through the UK’s quantitative easing plan, with more paid out by other countries’ central banks. The effect of this was an increase in the value of assets, and consequently, according to hedge fund head honcho Paul Marshall, the ‘owners of assets have all made out like bandits’. Marshall isn’t the only city bigshot interviewed for the programme who knows exactly how capitalism works, and in whose interests. Private equity supremo Guy Hands says it’s obvious that wealth attracts more wealth, regardless of what the government recognises. If they and the other economists featured didn’t already know this when quantitative easing was used in 2009, then they would have learned it when the same pattern recurred when the strategy was used after Brexit and again when the pandemic hit.

The super-rich haven’t only benefited from bank bailouts and quantitative easing, but also from shrewd management of their tax affairs. The tax havens where the elite stash their cash were revealed in the Panama and Paradise Papers, leaked to German reporters Bastian Obermayer and Frederik Obermaier. Alongside these revelations, companies such as Vodafone, Amazon and Starbucks were outed as paying little or no tax to the UK government, which at that time was implementing its austerity measures. Then-Prime Minister Theresa May wagged her finger and said to these corporations ‘I’m putting you on warning. This can’t go on any more’, although nothing was done because her reduced-majority government became distracted by Brexit, according to ex-minister and senior aide Gavin Barwell. A more fundamental reason (not given in the documentary) is that governments see high profitability as good for the economy, and therefore are reluctant to impose a heavy tax burden on corporations which would reduce the amount of profit they make.

While the richest grew and held on to their massive amounts of money, millions of people were struggling because of job losses, insecure ‘gig economy’ contracts, rising house prices, shrinking wages and cuts to government funding of services. The widening inequalities of wealth led to the normalisation of food banks and global protests. The programme features some of the campaigners with UK Uncut (a direct-action group targeting corporate tax dodgers) and also the Occupy movement. When asked what the movement achieved, Tina Rothery, one of its members says ‘so much… Occupy pulled the conversation back… to real humans’, although she also admits they didn’t offer solutions beyond this. Another way people reacted to the establishment letting them down was by voting for Britain to leave the European Union. Brexit created more financial instability, responded to with more quantitative easing which again boosted the elite’s coffers.

Some of the interviewees who represent the status quo are more candid than might be expected because they’ve since retired or left their previous careers. For example, Mervyn King (now a life peer) says it’s ‘deeply unfair’ that banks get bailed out when in financial trouble, but other businesses wouldn’t. Ex-Deputy Prime Minister Nick Clegg, who looks like he’s still recovering from his spell in government, tells us there was no debate about further cuts to public spending, as the coalition agreed they would be necessary, despite his talk of ‘difficult decisions’. The Chancellors of the Exchequer (Alistair Darling, George Osborne and Philip Hammond) all seem to be sticking strongest to the decisions made during their tenures. In contrast, Gary Stevenson, a Citibank trader between 2008 and 2014, has shifted his views because of his experiences during those years. As an ‘interest rate trader’, he discovered he could make a fortune by betting on the economy getting worse and as a result became Citibank’s most profitable trader in his area. Realising that economic crises have led to increases in the value of the capitalist class’s stocks and assets, Stevenson felt guilty and left his job. He now works as an economist campaigning against inequality, although the documentary doesn’t mention his proposal to remedy this by placing a time limit on property ownership, thereby forcing the elite to sell their assets, which no government would agree to.

The Decade The Rich Won shows that the way the economy works has enabled the capitalist class to prosper through the turmoil of recent years. The wealth owned by UK billionaires has risen by 310 percent since 2010, little of which has trickled down to those of us scraping by on low incomes. The documentary is worth watching not only because it’s a grim reminder of how capitalism functions but also because it reveals the views of those in prominent positions. Their openness now makes the spin we heard last decade – ‘we’re all in this together’, ‘stronger economy, fairer society’, ‘aspiration nation’, ‘strong and stable leadership’, ‘a country that works for everyone’ – sound even more hollow.

Mike Foster

Rear View: Revolutionary romantic (2016)

The Rear View Column from the May 2016 issue of the Socialist Standard

Revolutionary romantic

‘A TV interior designer and curators at the William Morris Gallery were among the speakers at a school’s exhibition and celebration of his life last week. Over 330 people crowded into the chapel at Forest School in College Place, Snaresbrook last Thursday (March 24) on the artist’s birthday for an evening of talks and an exhibition of his work. One of the guest speakers was TV personality Laurence Llewelyn-Bowen, who is part of the campaign to put Morris on British bank notes ahead of the 200th anniversary of his birth in 2034’ (guardian-series.co.uk, 31 March). What a silly way to celebrate the birthday of a Marxian socialist, author of the Socialist League’s manifesto – upon which our Declaration of Principles, written some 30 years later, drew heavily – countless pamphlets and polemics and the utopian novel News From Nowhere, which describes what life could be like in a moneyless post-capitalist world of common ownership and democratic control.

Ferengi-free future

Morris and those who founded the Socialist Party would likely be astonished and appalled that worldwide capitalism continues into the 21st century. Even the confused James Connolly saw over a hundred years ago that the day for patching up the capitalist system had passed and that it must be replaced. Yet we must not despair as more recently groups and individuals who would not necessarily describe themselves as socialist embrace ideas that are clearly part of our tradition: ‘what makes Star Trek particularly attractive for many viewers is its progressivism. Star Trek depicts a future where the scourges of sickness, racism, poverty, and war have been eradicated on Earth and throughout much of the Federation, an inter-planetary alliance of which the Earth is a founding member. The elimination of poverty, hunger, and wage slavery has resulted from overcoming capitalism, markets, and currencies’ (dissidentvoice.org, 1 April). Add to this books such as Life Without Money and Trekonomics: The Economics of Star Trek and we just need to convince those excited by a world of free access and production for use to join our movement and make it so.

War and want

‘Weapons spending worldwide increased in 2015 and now stands at a mind boggling $1,676 billion, according to new data released by the Stockholm International Peace Research Institute today. This 1% increase from 2014 marks an important shift: since 2011, military spending stayed at more or less at the same level. It is now going up’ (greenpeace.org, 5 April). War is endemic to capitalism as is poverty. Ending the latter would cost just a fraction of the wealth spent on weapons: ‘eradicating extreme poverty and hunger – two of the Sustainable Development Goals (SDGs) agreed by the United Nations in 2015 – may seem far out of reach. But, according to a new study, it could done with about ten percent of the world’s military spending’ (commondreams.org, 6 April), yet, armageddon aside, ending war and want can only achieved in a world without wages.

Chinese capitalists

The Panama Papers are a reminder that the 1 percent, like capitalism itself, exist worldwide. They also add another nail to the coffin of Chinese so-called communism. ‘Directly connected to Xi is his brother-in-law, Deng Jiagui, who is named in the documents. Deng married Xi’s elder sister, and it was reported in 2012 the couple already held hundreds of millions of dollars worth of assets including real estate and shares. In 2009, at the time that Deng was the sole director and shareholder of two British Virgin Islands-based firms under Mossack Fonseca’s purview, Xi was rising within the Chinese Communist Party, en route to becoming its head. The documents also name Jasmine Li, the grand-daughter of Jia Qinglin, a top ranking official in the Communist Party. Li reportedly received her first offshore company as an undergrad at Stanford University, and through a number of complicated ownership agreements, Li was able to hide her holding of several offshore companies (mashable.com, 5 April). Putin, his family, and entourage have also apparently stashed funds overseas. Joshua Kurlantzick adds to the socialist nail gun: ‘the most serious threat from state capitalism is that the two big state capitalist authoritarian powers, China and Russia, will use their state companies as weapons in conflicts with other countries, as vehicles to control certain types of natural resources, as vehicles for obtaining and stealing sensitive technology from other nations, or as tools for undermining environmental and labor norms in countries where their state companies invest’ (State Capitalism: How the Return of Statism is Transforming the World, OUP USA, June 2016).

The Panama Papers: All in it Together (2016)

From the May 2016 issue of the Socialist Standard

Capitalism is an expensive business. In any society where the population is divided between those few who own but do no productive work, on the one hand, and the many who have to work but own little, on the other, it is obviously necessary to build up a powerful and far-reaching state apparatus to protect the owning few. Each country’s owning class has to safeguard itself both internally and externally. Internally, it must construct and maintain police forces (overt and undercover), courts, prosecuting machinery, prisons and so forth, in case the propertyless many should rise against them, and attempt to construct a different society – or even just to try and replace the present leaders. Externally, it must construct and maintain armies, navies, air-forces and so on in order to prevent any other country’s capitalist class trying to seize part of its property, and also to support any attempt it may make to seize territory at present held by another country’s owning class.

All this costs money, a great deal of money. Britain is building a new super-prison in Wrexham, with places for 2000 inmates, at a cost of £250 million. And that’s just building it. Apparently it costs about £40,000 a year to keep each prisoner in jail - or £65,000 a year if you include the costs of the police, courts etc. But these expenses, enormous as they are, are dwarfed by the amount a capitalist class will pay out to defend its property from possible attack by foreigners (or possibly to acquire more property from foreigners). The United States is planning to procure a new generation of bombing planes (to destroy the buildings of hostile countries and kill their citizens); there are 175 of them, the total cost being estimated at between $40 and $50 billion. (That’s somewhere between twenty-eight thousand million pounds, and thirty-five thousand million pounds – which comes to about £100 for every man woman and child in the United States.)

So where will the money come from? The answer becomes more obvious the more you think about it. If you want food, you have to go and get it (and pay for it) at a place where they have food, e.g. a supermarket. If you want clothes, you go to a place where they sell clothes. And if you want money, you have to get it from the people who have money. There’s no point in demanding significant contributions from all those people who have to work for a living. When the economists examine the finances of people with low and middle incomes, they always say it’s a matter of swings and roundabouts. Taxation is demanded from many such people, and many others get various kinds of benefits. At the end of the day, it’s merely redistributing the income within that (very large) group of people. Apart from all that, of course, if the working class as a whole did have to pay serious taxes, it would mean much greater pressure for higher pay to make up for it, and in the end the capitalists as a whole would be taking with one hand and having to give back with the other.

All this being so, the money to run the state and preserve it from dangers both internal and external has to come from the capitalists themselves. But while all ruling authorities acknowledge this, and have strict laws in place in order to collect sufficient money from the rich to operate the state machine, the individual capitalists will often be tempted to reduce as much as they can their own personal tax burden. And this is where ‘offshore’ companies and similar dodges come in. Recently many documents – emails, correspondence etc – have been leaked from an influential law firm, Mossack Fonseca, in Panama. The firm has apparently acted for many wealthy people round the world who wished to conceal money or property from the authorities in their own countries. The leaked data from this single firm make it clear that the further up the power scale a wealthy person is in their particular country, the more they will be tempted to fiddle their tax affairs in such a way that they end up paying very little or sometimes nothing: like a member of a tug-of-war team who cheers on the others but personally does very little tugging.

One way to make your affairs ‘tax-efficient’ as the lawyers say (i.e. putting your money where it is safely out of sight of the local tax-collectors) is to establish a company or trust in one of several countries round the world that advertise themselves as ‘tax-havens’. Money gained illegally can also be stashed away quietly, since criminals often find it difficult to explain how without any very obvious sources of income, they are suddenly in possession of a lot of cash (a Rolls-Royce parked outside a terraced downmarket house would cause inconvenient curiosity). Through these secretive companies it’s possible to ‘launder’ money, for example when offshore companies (with anonymous owners) buy houses in London’s booming property market. ‘World leaders, criminals and billionaire sheikhs have secretly poured hundreds of millions of pounds into London properties, leaked offshore data reveals. The cache of documents from a Panamanian law firm confirms the capital as the go-to place for wealthy foreigners and criminals anxious to protect their anonymity and assets’ (Times, 6 April).

Capitalism is fundamentally the same throughout the world, but local history and local conditions often mean that the local version looks different on the surface. Different politicians have different names for their own version of capitalism – some try to get votes by calling it socialism, some even have the nerve to call it communism – but in fact it is recognisably the same the world over. And being the same, the local politicians share the same desires: how to hide their own wealth, while at the same time getting the rest of the country’s rich people to hand over enough of the readies to enable the country’s capitalist system to survive and prosper. Here are a few of those listed by theTimes or the BBC as being connected with these offshore subterfuges, who appeared in the Panama papers – either their own names came up, or the names of family members or close friends:

·        Sigmundur Gunnlaugsson, Iceland’s prime minister (in fact there are links in the data to twelve present or former heads of state or prime ministers); poor old Sigmundur had to resign.

·        David Cameron, Britain’s premier, who is going to host an anti-corruption summit in London  shortly; there were also calls for his resignation.

·        Gianni Infantino, the new head of FIFA (just installed to ‘clean up the mess’, because of the  peculiar financial transactions of the last lot).

·        Gonzalo Delaveau, head of the Chilean branch of the anti-corruption watchdog, ‘Transparency  International’.

·        James Ibori, ‘the corrupt Nigerian governor who is known to have bought property across London’.

·        Leyla and Arzua Aliyeva, who ‘are said to have amassed vast business empires’ since daddy –  President Aliyev of Azerbaijan – came to power in 2003.

·        President Macri of Argentina.

·        Two close associates of Marine Le Pen, head of France’s National Front.

·        A close associate of President Pena Nieto of Mexico.

·        Alaa Mubarak, son of the former Egyptian dictator.

·        Sheikh Khalifa Bin Zayed Al Nahyan, President of the United Arab Emirates.

·        Mariam Safdar, the daughter of Nawaz Sharif, Prime Minister of Pakistan (and two sisters of hers).

·        Kojo Annan, son of the former head of the U.N.

·        Kalpana Rawal, Deputy Chief Justice of Kenya’s Supreme Court.

·        Ayad Allawi, former Prime Minister of Iraq.

·        Dr Saraki, President of the Nigerian Senate.

·        Rami Makhlouf, cousin and close associate of President Assad of Syria.

·        Li Xiaolin, daughter of the former Prime Minister of China.

·        Petro Poroshenko, president of Ukraine.

·        Kim Chol Sam, a senior official of the North Korean regime.

·        Close associates of Vladimir Putin.

·        Brother-in-law of Xi Jinping, president of China.

Plus lots of others: e.g. Hans-Joachim Kohlsdorf, former senior executive of Siemens, Europe’s largest engineering company, Michael Geoghegan the former HSBC boss, David Hunt, ‘one of Britain’s most feared gangsters’ according to the Times, Dominic Chappell, now principal owner of British Home Stores, Tarek Obaid, the founder of Anglo-Saudi oil company Petro-Saudi (and a ‘leading investor’ in a company running a dozen academy-type schools). And, of course, Mossack Fonseca, with 300,000 clients, is only one firm among dozens in the business of helping people to hide away their assets. It will be seen that there are people here from all sides of the various hostile groupings and power blocs into which capitalist countries naturally cluster themselves. They may denounce each other ferociously, but they are all alike when it comes to seeing if they can avoid paying their fair share of the enormous costs of running capitalist countries. The laws operating in each country are very often different, but even so it is quite possible that none of those named broke any laws: it was merely a question of being able to enjoy wealth but not pay taxes on it.

David Cameron appeared on the list because his father, Ian, had operated two offshore trusts, one in the British Virgin Islands, one in Jersey. In 2012 he criticised Jimmy Carr, comedian, who had joined an offshore tax-avoidance scheme: he said it was ‘morally wrong’. When asked about Gary Barlow, a pop star, who had campaigned alongside Cameron for the Conservatives in the 2010 election, and who had joined a similar scheme, he said he hadn’t had time to look into yet; though he had found sufficient time to give Barlow an OBE in 2012. So it’s a little embarrassing that Cameron and his wife bought shares in his father’s off-shore fund in 1997 for £13,500, and sold them thirteen years later for £31,500, two-and-a-half times as much – a very acceptable profit made through offshore trading. Not to mention that Cameron’s education (Eton, fees now £32,000 a year, and Oxford, where Cameron joined the Bullingdon Club – dress-suit to wear at club dinners: £3,500) was presumably paid for by his father’s offshore activities.

So it seems that’s how ‘morally wrong’ can be financially right.

Alwyn Edgar