The Observer’s bankrupt when it comes to Labour

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The Observer is Bankrupt when it comes to Labour

Richard J Murphy from Tax Research UK

If you read the Observer today (19/7/15) you would think that the Tories will rule in the UK until at least 2030.

You would also believe that Labour has taken leave of its collected senses to even have Jeremy Corbyn as a member.

And that a triumvirate based around Liz Kendall, Chuka Umunna and Tristram Hunt is the only group in touch with reality.

It goes on, and on, and on, all based around Andrew Rawnsley’s jaded perspectives, an appeal to people to believe the findings of a small set of focus groups (Really? After all Labour’s experience of them?) that say some people might never return to the Labour fold after 2015 and a poverty of analysis that belittles the paper.

What do I mean? Take this example (and there are so many more in today’s paper it could provide enough material for a PhD thesis) from the editorial, where it is said that Labour must learn that:

Parties can help shape … questions, but they can’t tell voters what they should be and certainly can’t ignore the ones that they don’t like.

And yet only paragraphs later the same editorial notes:

Even as the Conservatives are masterfully shaping the territory on which the 2020 election battle will be fought, Labour is focused on an introspective conversation with its members, not a dialogue with the country.

When the paper cannot even be internally consistent on what is politically possible from the left and right – one of which can apparently define the whole agenda for discussion, and so opinion, and yet the other can’t – within the same editorial its inability to construct an argument becomes painfully clear.

The whole paper is riddled with that inability today. Take this wonder from Alistair Darling from today’s edition where he says:

We want people to get on, each generation building on the achievements of the last.

Quite right Alistair. And then he adds:

That needs a strong stable economy, but also needs investment. Borrowing to provide housing or a decent transport system is a good thing and we should say so.

I agree. And then he offers this next observation:

And yes, we need to get debt and borrowing down, as I have always said. I’m glad Osborne was able to meet my target.

Any you wonder why people aren’t voting Labour? Let me explain it as a non-party member who looks at politics but does not partake in it at a party level.

The problem is threefold. First what Alistair Darling says is incoherent economically unless you say a) that you are going to screw the electorate for large sums of money to pay for the investment or b) you’re going to do more of the much hated PFI that is shifting vast amounts of public funds to the private sector or c) you’re going to do what I call Green Infrastructure Quantitative Easing but which Jeremy Corbyn calls People’s QE (as far as I can tell they’re the same). But Alistair did none of those things. I don’t suppose he has a clue what that form of QE is so he looked stupid, and deservedly so. And people, even people who know little of economics, have rumbled that. Until Labour talks economically literately it has no hope, and it is not.

The second problem is also implicit in Darling’s comment: he ended up playing on Osborne’s territory. That’s because Labour has no story of its own. This myth of the middle ground is nonsense. It’s a fabrication. It’s a lie that there is such a thing. The middle ground is simply where people are in the prevailing narrative. It’s where that  narrative has taken them, but let’s not pretend that parties cannot move where that is or should not want to do so: the Observer editorial recognises implicitly – but without the candour or wit to admit it – that this is what the skill of the Tories in the last decade has been: they have been able to move the middle ground their way. But what they then argue is that Labour should not seek to change that fact, or where the middle ground is. What the Observer is saying is that Labour must play by Tory rules on the middle ground the Conservatives have created.

But why would they do that?  If sending people into poverty, deliberately; slashing funding for the NHS; cutting investment in education; sending undergraduates deeper into debt; holding wages at near poverty levels; offering tax cuts for the richest and no one else; threatening to end the BBC and going to war without bothering to tell anyone is the middle ground then the Observer has clearly lost the plot. And anyone saying that this is where Labour needs to be, or thereabouts, has also lost any scintilla of reasoning they might have once possessed. It is this loss of reason so that they are even unable to identify the true nature of the problem that they face that is the third problem the likes of those in the Observer who think that they are on the left face.

It is this lack of intellectual capacity to reason that impoverishes Darling, and it is the same problem that cripples the Observer: somewhere within it (I can’t be bothered to re-find the link) it is said that all parties die in the end and so, it is claimed Labour must die if the left is to go forward. But implicit in that statement is the glaringly obvious fact that so too will the Conservative Party and its current narrative die, and yet there is not in any one the many articles the Observer publishes today (with the single unifying theme of attacking Jeremy Corbyn) any hint of this possibility. What is astonishing is that when the Tory narrative on Europe is close to shredding itself and that people may reject the whole Tory edifice when they lose parts of the NHS, education, the BBC, or just the nation as Cameron shatters the Union which was supposed to be the basis of his party, the Observer seems quite unable to notice any such possibility, at all.

So let me offer explanation for what is happening. What the Observer is really saying today is that it thinks there is one hegemonic narrative in UK politics and that it thinks it is neoliberalism.

It is saying that any threat to that narrative, from wherever it comes, should be challenged. So Corbyn is unacceptable.

And it is saying that Labour must oppose the Conservatives from within that constraint of subscribing to neoliberalism when the whole basis of neoliberalism is the shrinking of the state, the increasing division of reward, the privatisation of gain and the outsourcing of risk, all of which should be antithetical to Labour as I understand it.

So let me tell the Observer a simple fact: opposition on that basis is not possible. If the middle ground is neoliberalism a policy called neoliberalism lite is not going to work: from the outset that is by definition both a failure and bound to fail.

Opposition now is to take control of the narrative. Opposition then, when neoliberalism has become so universal in apparent appeal (except, that is, in Scotland, Wales, Northern Ireland and significant parts of the North), is about offering a different narrative. It has to be: neoliberalism is a totalitarian logic of exclusion. The Observer’s logic is not just appeasing that totalitarianism in that case, it is in the process supporting it. This is not a situation where ambiguity is possible. You’re either for or against neoliberalism: there is no possibility of sitting on the fence and the Observer has made clear today on which side it fits.

So what is the alternative narrative? Is it some bizarre logic, as all Jeremy Corbyn’s opponents would wish to suggest? Without wishing to be involved in party political debate – because, I stress, that is not my bag – I suggest not.

Instead it is  a narrative that says people are the foundation of wealth, whoever they work for.

That means this is a narrative that values people equally whether they work for the state or private sectors.

And it is a narrative that says let each do what it is best able to deliver.

But which also says that if markets are best able to deliver then they have to be based on certain rules, like transparency, accountability, paying taxes, the prevention of monopoly power and the promotion of enterprise and not rent seeking speculation, because in case the Observer has forgotten it, these are the qualities that make markets work when the concentrated power of neoliberalism is simply about reward extraction by a few from the effort and assets of the many, and is as far removed from real market theory as Soviet tractor factories were.

None of which then says that this alternative narrative is opposed to business: far from it, this is a more pro smaller business agenda than anything that the right has put forward for decades because of the right’s bias towards wealth, big business and globalisation, all of which are the antithesis of small business success.

And that narrative has to recognise that effort is and will be rewarded but that the right to enjoy that reward is dependent upon complying with the democratic wishes of the society of which a person is a member, including its expectation that redistribution to deliver greater equality is not just the right thing to do, but a basis for enhanced prosperity for all in the long run.

That narrative also says that the state must and will use the powers available to it to deliver these goals if it is to be responsible. So it will invest when it thinks fit, and create the money to do so (back to QE) when the market will not deliver the scale of economic activity that the country can sustain. Wouldn’t anything else be wholly irresponsible?

And it will regulate to correct market failure, whether by banks or in the environment.

And it will foster employment by reducing the taxes on labour and increasing them on unearned income.

And it will not waste resources paying housing benefits when it would be better off building houses.

And nor will it penalise the young and lay a lifetime burden of debt upon them when they are the basis of our future prosperity.

There is much more to the vision, of course.

But for heaven’s sake, if the Observer cannot see that it is only by talking about alternatives that Labour (or any other left of centre party) can put together the necessary coalition of interests to create change in this country then no wonder they back Labour leaders who might, like the last shadow chancellor, feel comfortable discussing VAT on replacement windows but ducked big issues like the tax gap.

Or to put it another way, if a debate is to take place, shall we make it about something more than the positioning of deckchairs whilst neoliberalism steams on?

– See more at: http://www.taxresearch.org.uk/Blog/2015/07/19/the-observers-bankrupt-when-it-comes-to-labour/#sthash.UH3VtZ9Q.dpuf

Bankers + Tax Havens = Lower wages, benefits and pensions

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This video clip of the ‘looting of America’ exposes the same type of looting that is occurring in the UK.  In fact, it is generally accepted that the City of London is an even more criminogenic environment than Wall Street.  Banks that are too big to fail and bankers that are too big to jail.

In spite of being only 12 minutes long, it romps through the major ruses with an impressive list of commentators which include New Economic Perspective‘s Professor Bill Black and Professor Stephanie Kelton; Naked Capitalism‘s Yves Smith, James Henry, author of ‘The price of OffShore Revisited’ and Citicorps’ 2005 plutonomy document on the inconvenience of the franchise.

There is even a clip of Goldmans Sach’s Lloyd Blankfein explaining that the 99% of Americans have to lower their expectations of wages, benefits, pensions and sell off the remaining public assets.  We don’t need the chief vampire squid.  We have George Osborne turning the UK into a third world country.

The Truthseeker: Looting Of America (E12)

Published on Apr 5, 2013

The man who jailed a thousand bankers tells us how to do it; Twice the size of the US economy exposed offshore; and Wall Street circles the nation’s last assets. Seek truth from facts with former senior financial regulator Bill Black, The Price of Offshore Revisited author James Henry, former Wall Street executive Richard Eskow, Econned author Yves Smith, economists Stephanie Kelton and Dean Baker, and chief vampire squid Lloyd Blankfein.

Major Banks Help Clients like Romney Hide Trillions in Offshore Tax Havens

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Forget the 47 percent. Foreign tax havens—and investment vehicles like those the GOP candidate established at Bain Capital—are robbing world treasuries of billions.

Major Banks Help Clients Hide Trillions in Offshore Tax Havens

Published on Aug 3, 2012 by 

James Henry of Tax Justice Network:  US media and politicians mostly ignore massive untaxed wealth that big banks help rich move to tax havens.

Well, when you look at the distribution of wealth here that’s offshore, we think there’s no more than about 10 million people that really account for about 83 percent of the $21 trillion that is at a minimum offshore. And that’s pretty concentrated. The top 100 are multibillionaires. They account for about 8.1 percent of the total. The next 2,900, billionaires with an average wealth of $1.4 billion, account for another 7 percent of it. So that’s about 3,000 people that already are owning nearly 15 percent of the world’s financial wealth.

And then we have—the next step in the ladder is the sort of ultra high net worth crowd, which are—their average wealth is on the order of $58 million, and there’s about 117,000 of them in the world. And then, finally, there’s another fortunate few, who are about 9.9 million, whose average wealth is on the order of $6.3 million, and they account for about 60 percent of this. So 82 percent of the world’s wealth, then, when you add all this up, is—of the offshore wealth is owned by about 0.14 percent of the world’s population.

So if you look at it from the standpoint of who’s actually benefiting from this industry, you know, it’s a tiny share of the global population. And that group has—in terms of global wealth, which is about $231 trillion, they own about a third of all that global wealth. And so that’s a—you know, 0.14 percent is a tiny fraction owning that much wealth.

 http://truth-out.org/news/item/10825-trillion-dollar-tax-havens-inequality-and-recession-part-ii

James Henry, a former chief economist at McKinsey & Co., describes offshore tax havens like the “bar scene in Star Wars.” He explains, “Dictators and kleptocrats used them to conceal stolen loot. Arms dealers and drug dealers use them to launder their deals. Google and Apple and Pfizer use them to park their intellectual property and pay themselves tax-free royalties. Banks use them to park lousy loans and stash the offshore accounts and assets under management of their wealthy individual clients, many of which are paying zero taxes back home…And so on.” 

Romney has investments in a number of well known tax havens, including Ireland, Luxembourg, the Cayman Islands, and Bermuda. Until 2010, he held a few million in the Swiss bank UBS, which in 2009 was forced to pay the US $780 million in fines and penalties for helping more than 17,000 Americans commit tax fraud by hiding as much as $20 billion overseas. The total value of Romney’s offshore investments is unknown, but his tax returns have revealed that he has at least $30 million invested in the Cayman Islands, in at least 12 different Bain Capital funds. When pressed about the relationship between his offshore investments and his low tax rate (he paid 14.1 percent on $13 million in income, according to his 2011 tax return), Romney has largely declined to answer questions about his overseas holdings other than to say, “I pay all the taxes that are legally required, not a dollar more.” Romney has also denied getting tax benefits from his offshore accounts. He told Fox News, “[T]here was no reduction, not one dollar reduction in taxes by virtue of having an account in Switzerland or a Cayman Islands investment. The dollars of taxes remained exactly the same. There was no tax savings at all.”

Similarly, a Romney campaign spokeswoman told Mother Jones that Romney’s foreign investments “are taxed in the very same way they would be if the shares were held in the US rather than through a Cayman fund. No taxes are avoided or reduced. These funds are registered with the IRS and report all income to investors and the IRS, just like domestic funds.”

Romney’s assertion that his offshore investments have not reduced his tax bill has been met with skepticism by tax experts.

http://www.motherjones.com/politics/2012/09/mitt-romney-offshore-investments-cayman-islands

Plutonomy – Invasion of the Political Body Snatchers.

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I want to pitch an idea for a contemporary science fiction film… the lead, called F, investigates the dark world of politics, wealth and manipulation of the economy in a small country called Brittania (B).

The first thing that intrigues F is a graph that shows that over a period of some 30 years, there had been a large upward redistribution of income from the bottom 90 per cent to the top 1 per cent… but most striking of all was the rapid increase in wealth of the top 0.1 per cent.

Whilst analysing international data, F realizes that this redistribution is not a generalised phenomenon of all advanced economies.  Instead it is particularly marked in Brittania and one other advanced economy, Americana.  It occurs to F that this puzzling pattern of income redistribution couldn’t have resulted from just any old factor.  It had to be due to government policies; and that meant that the redistribution had occurred regardless of which political party had been in power!

This is weird to F because there had been no significant change in the two countries’ formal systems of government … but F gradually begins to understand that there is more to government than its formal structures. The same institution, for example an elected parliament or even individual political parties, may perform radically, systematically and intentionally differently from one historical period to the next, including with regard to the welfare of the general population.

Perplexingly, even those political parties commonly identified with the interests of the wealthy, had won their seats by convincing the majority that their policies would best serve the electorate’s material interests.  The story was, that by generating a larger GDP, gains would ‘trickle down’ to be shared with the majority of the population.  Obviously, that hadn’t happened.  The graphs didn’t lie.

But in both Brittania and Americana, either of the two major political parties could win elections, and it was thus open to one or other of them to expose the policies which resulted in the declining standards of living for at least 90% of the population.

After all, F reasons:

 “It does not seem credible that the electorates would knowingly vote for their continuation. Together these points imply a change in the political structures of these countries.  Why?  Because if the major political parties have before them a straight-forward way of winning elections by appealing to the basic material interests of the overwhelming majority of the electorate and they repeatedly decline to do so even when it means defeat, then there must be a non-democratic reason that governs their decisions and their access to office.”

F concludes that it follows that the real agendas or platforms of the winning parties had been kept secret!  What are they?”  The plot thickens.

F reviews his findings.  It seemed that the populations of Brittania and Americana had been kept nearly totally ignorant of the fact that for over thirty years their countries have been subject to the engineering of huge and extremely skewed upward redistributions of income. Moreover, this central fact had virtually never been mentioned or discussed in their general media. Nor could F find much about it in economics journals.

The breakthrough comes when F finally gets hold of The Plutonomy Reports which, though incomplete, reveal that the redistribution phenomenon is documented, conceptually driven, and no mere historical accident. In fact, so-called Plutonomists exist… even though their history is clouded in secrecy.  Plutonomy is a real-world political force; and the primary players of this political ideology, political movement and concept of government, belong to the financial sector.  The Plutonomists are the 0.1%!

The three reports, written before the global banking crisis 4 years earlier, outline the key points of this political ideology.  Their strategic nature make it all too clear why it has been imperative for the plutonomists to keep the contents of these historical documents from entering into mainstream discourse.  Now F understands why the Plutonomists had gone to such lengths with threats of legal action to supress these important historical documents from the internet.  Fragments of the reports are given below:

.

‘Report no. 1

Little of this note should tally with conventional thinking. Indeed, traditional thinking is likely to have issues with most of it. The world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spania, in seventeenth century Hollander, the Gilded Age and the Roaring Twenties in Americana.  

We project that the plutonomies (Americana, Brittania and Canadia) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.

In a plutonomy there is no such animal as “the Americana consumer” or “the Brittania consumer”, or indeed the “Russkian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

. . . we think the plutonomy is here, is going to get stronger, its membership swelling from globalized enclaves in the emerging world, . . .

Report no. 2

 The second report begins by identifying three things that have enabled the creation of plutonomies in Brittania, Americana, Canadia and Aussie:

Asset booms, a rising profit share and favourable treatment by market-friendly governments”…

What Could Go Wrong

. . . the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfrachisement remains as was – one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. . . . .  We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.

The third is the longest of the three reports.  Significantly, it notes that  ‘The rise of this inequality is not universal. In a number of other countries – the non-plutonomies – income inequality has remained around the levels of the mid 1970s. It singles out Japan, France, Switzerland and the Netherlands as examples and dubs them “The Egalitarian Bunch”.  Further on, after reminding the readership that “plutonomy countries” are those with “economies powered by a relatively small number of rich people” and geared to “financial wealth creation”…. “the risks to plutonomy” are, as in previous reports, considered.

 Report no. 3

‘Perhaps the most immediate challenge to Plutonomy comes from the political process. Ultimately, the rise in income and wealth inequality … is an economic disenfranchisement of the masses to the benefit of the few. However in democracies this is rarely tolerated forever. One of the key forces helping plutonomists over the last 20 years has been the rise in the profit share – the flip side of the fall in the wage share in GDP. As plutonomists or capitalists tend to be long {on} the profit share, they have benefited from trends like globalization and the productivity revolution, disproportionately. However, labor has, relatively speaking, lost out. We see the biggest threat to plutonomy as coming from a rise in political demands to reduce income inequality, spread the wealth more evenly, and challenge forces such as globalization which have benefited profit and wealth growth.’

[emphasis added]

Nonetheless:

Our own view is that the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.’

F is left reeling. These three plutonomy tracts, being windows both into the plutonomist’s mind and to their strategies, contain many interesting points, but for F, the most overwhelmingly significant one is that plutonomists see the subversion of the democratic process as the ultimate key to their success.

Indeed, if the “political enfranchisement remains” and is allowed to remain, then the “economic disenfranchisement of the masses” is only possible if the electorate can be bamboozled into voting against their interests.

The rest of the film is devoted to F uncovering the means by which the Plutonomists have undermined the democratic process and engineered the redistribution of wealth upward and off-shore.  F identifies the various strategies employed to effect and preserve the desired changes in law and government policy… the lobbyists, the think-tanks, the Public Relations, the political campaign funding, the long-term contracts enshrined by international treaties, the repeal of inconvenient legislation (particularly with regard to financial markets), off-the-books accounting for banks, deregulation (or non-regulation), tax havens, globalization, tax cuts for the 1%, shrinking state policies  and so on.

F finally realises, that underpinning all of this redistribution is the revolving doors movements of personnel between roles in government, corporations and finance.  For example, F’s attention is repeatedly drawn to the revolving doors movement of a mysterious organization referred to as the giant squid company, which seemed to wield inordinate influence in governments across the globe.

It also seemed that wherever the financial sector’s profit-seeking activities became focused primarily on the buying, selling, packaging and repackaging of either existing financial assets or new ones attached to existing real assets, the squid people were likely to be involved.  Furthermore, this profit-seeking activity, the redistribution of wealth upward, and the creation of asset bubbles were interlinked. By using their financial power to create rising prices which attracted investors, especially pension funds, from outside the plutonomy’s inner core, the prices became more and more inflated until eventually the bubble burst. Needless to say, the bubbles burst because the 1% sold off at the top, leaving themselves with proportionately huge profits to the disadvantage of the pension funds. The whole process was then re-started by the squid people, to create another bubble.

I will not spoil the climax of the film, which is essentially the struggle to regain power back from the 1%; and the difficulties for the 99% in identifying between the ‘good’ and the ‘infected’ politicians/activists … but suffice it to say that giant squids are definitely involved!

Reference:

Edward Fullbrook, “The Political Economy of Bubbles”, real-world economics review,

issue no. 59, 12 March 2012, pp. 138-154, http://www.paecon.net/PAEReview/issue59/Fullbrook59.pdf