Elite Banking at Your Expense: How Secretive Tax Havens are Used to Steal Your Money

Posted on March 13, 2019 by Reid Mukai

By Robert J. Burrowes

Tax havens are locations around the world where wealthy individuals, criminals and terrorists, as well as governments and government agencies (such as the CIA), banks, corporations, hedge funds, international organizations (such as the Vatican) and crime syndicates (such as the Mafia), can stash their money so that they can avoid regulation and oversight and, very often, evade tax. According to Nicholas Shaxson: ‘Tax havens are now at the heart of the global economy.’

Which is why, as he explains it: ‘The term “tax haven” is a bit of a misnomer, because such places aren’t just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering.’ See ‘The tax haven in the heart of Britain’. A tax haven (or ‘secrecy jurisdiction’) then is a ‘place that seeks to attract business by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere’. See Treasure Islands: Tax Havens and the Men Who Stole the World.

Tax havens are a vitally important part of the global infrastructure of corruption and criminality – see ‘Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption’ – that enables privileged individuals and their organizations to legally and illegally steal money from the rest of us, particularly those in developing countries, and to have the services of a vast network of accountants, bankers, lawyers and politicians (often from captured legislatures) to help them do it, and to ensure that they get away with it.

How many tax havens are there? Where are they? How much money do they have? Who uses them? Why? How do they work? Why does all this matter to us? And what can we do about them?

Tax Havens: how many and where are they?

In his book Treasure Islands: Tax Havens and the Men Who Stole the World, author and financial journalist Nicholas Shaxson identified about sixty ‘secrecy jurisdictions’ or ‘offshore groups’ around the world which he divided into four categories, as follows.

The most important category, by far, is those tax havens that form the spider’s network of havens centred on the City of London. It has three main layers: there are two inner rings – Britain’s Crown Dependencies of Jersey, Guernsey (which includes the sub-havens of Sark, Alderney and Brecqhou) and the Isle of Man, and its overseas territories such as the Cayman Islands, Bermuda, the British Virgin Islands and Gibralter – which are substantially controlled by Britain. The third layer is an outer ring with a more diverse array of havens, like Hong Kong, Singapore, the Bahamas, Dubai and Ireland, which are outside Britain’s direct control but have strong historical and current links to that country and the City of London (which I will discuss below). This network controls almost one half of all international bank assets.

The second category of tax havens is those in Europe notably including Switzerland, Luxembourg – see ‘Explore the Documents: Luxembourg Leaks Database’ – the Netherlands, Belgium and Austria, as well as microstates such as Liechtenstein and Monaco. While ‘Geneva bankers had sheltered the secret money of European elites since at least the eighteenth century’, the European havens ‘got going’ during World War I as governments raised taxes sharply to pay for the war.

The third category of tax havens is that focused on the United States. It has three tiers as well. At the federal level, the US government offers a range of tax exemptions, secrecy provisions and laws designed to attract foreign money. This means, for example, that US banks can legally accept proceeds from a range of crimes as long as the crimes are committed overseas. The second tier involves individual US states such as Florida (where Central/South American elites do their banking and the countries adversely impacted are prevented by US secrecy provisions from accessing relevant data, and where much Mob and drugs money is hidden too), Delaware, Nevada and Wyoming, where even terrorist money is protected by secrecy provisions. The third tier of the US network is the overseas satellites such as the American Virgin Islands, the Marshall Islands, Liberia and Panama, with the latter, according to Jeffrey Robinson, being ‘one of the filthiest money laundering sinks in the world’. See The Sink: Terror, Crime and Dirty Money in the Offshore World.

As Shaxson notes: ‘offshore finance has quietly been at the heart of Neoconservative schemes to project US power around the globe for years. Few people have noticed.’

The fourth category of tax havens identified by Shaxson includes those that do not fit in the categories above, such as Somalia and Uganda.

The (incomplete) list of tax havens on the website ‘Tax Havens of the World’ will give you some idea of where these secrecy jurisdictions are located but there are important omissions in this list, notably including the City of London Corporation.

For a brief look at 15 tax havens (again, notably excluding some of the most important) and some of the corporations that use them, see ‘What Are the World’s Best Tax Havens?’

And for a highly instructive and utterly sobering video documentary on British Tax Havens, see ‘The Spider’s Web: Britain’s Second Empire’. This documentary will inform you, among many more important things, that the building housing Her Majesty’s Revenue and Customs, the UK tax office, is owned by an offshore company in Bermuda!

To summarize the central aspect of the development of tax havens following World War II: ‘The British Establishment – an old boys network of privileged elites – had carved out a lucrative vehicle for themselves in the offshore world after the demise of Empire. They transformed themselves from administrators of Empire to financial handlers for the global elite and multinational corporations.’ See ‘The Spider’s Web: Britain’s Second Empire’.

Before concluding this section, it is worth emphasizing that, as Shaxson explains it, ‘the offshore world is not a bunch of independent states exercising their sovereign rights to set their laws and tax systems as they see fit. It is a set of networks of influence controlled by the world’s major powers, notably Britain and the United States. Each network is deeply interconnected with the others.’ He goes on: ‘The world’s most important tax havens are not exotic palm-fringed islands, as many people suppose, but some of the world’s most powerful countries.’ Shaxson quotes Marshall Langer, a prominent supporter of secrecy jurisdictions: ‘It does not surprise anyone when I tell them that the most important tax haven in the world is an island. They are surprised, however, when I tell them that … the island is Manhattan. Moreover, the second most-important tax haven … is located on an island. It is called the City of London.’

The City of London Corporation

What is the City of London Corporation, also known as the ‘Square Mile’? It is ‘a 1.22-square-mile slab of prime central London real estate that stretches from the Thames at Victoria Embankment, clockwise up through Fleet Street, the Barbican Centre, then to Liverpool Street in the north-east, then back down to the Thames just west of the Tower of London.’ See Treasure Islands: Tax Havens and the Men Who Stole the World.

According to Shaxson, the City of London Corporation, the ‘modern period’ of which dates from 1067 (yes, that is not a typing error), is ‘the local-government authority for the 1.2-square-mile slab of prime real estate in central London that is the City of London. The corporation is an ancient, semi-alien entity lodged inside the British nation state; a “prehistoric monster which had mysteriously survived into the modern world”, as a 19th-century would-be City reformer put it.’

Importantly, Shaxson explains, ‘the role of the City of London Corporation as a municipal authority is its least important attribute. This is a hugely resourced international offshore lobbying group pushing for international financial deregulation, tax-cutting and tax havenry around the world.’ Moreover, it is ‘the hub of a global network of tax havens sucking up offshore trillions from around the world and sending it, or the business of handling it, to London’. Notably, so powerful is the City of London that no sovereign or government of Britain in a thousand years has had the courage to seriously take it on and attempt to subject it to British government control. See ‘The tax haven in the heart of Britain’.

How much money is in Tax Havens?

So how much of the world’s wealth is stashed in tax havens around the globe? According to the Tax Justice Network in its 2012 report written by James S. Henry ‘The Price of Offshore Revisited: New Estimates for “Missing” Global Private Wealth, Income, Inequality, and Lost Taxes’: ‘A significant fraction of global private financial wealth – by our estimates, at least $21 to $32 trillion as of 2010 – has been invested virtually tax-free through the world’s still-expanding black hole of more than 80 “offshore” secrecy jurisdictions. We believe this range to be conservative…’ He goes on to emphasize that ‘this is just financial wealth. A big share of the real estate, yachts, racehorses, gold bricks – and many other things that count as non-financial wealth – are also owned via offshore structures where it is impossible to identify the owners’.

Henry also notes that given that Credit Suisse estimated global wealth in 2011 at $231 trillion, the amount of money in secrecy jurisdictions is conservatively estimated at 10% of global wealth.

But other figures do indeed suggest this estimate is low. Shaxson cites compelling evidence that ‘More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets and a third of foreign direct investment by multinational corporations, are routed offshore.’ Moreover, as long ago as 2008, the US Government Accountability Office reported that 83 of the 100 biggest corporations in the USA had subsidiaries in tax havens and the following year, using a broader definition, the Tax Justice Network discovered that ninety-nine of Europe’s hundred largest companies used offshore subsidiaries. And in each country, ‘the largest user by far was a bank’. See Treasure Islands: Tax Havens and the Men Who Stole the World.

In any case, the most recent estimate by the Tax Justice Network indicates ‘tax losses to profit shifting by multinational companies (a)pplying a methodology developed by researchers at the International Monetary Fund to an improved dataset… of around $500 billion a year’. See ‘New estimates reveal the extent of tax avoidance by multinationals’.

To reiterate then, on the understanding that these estimates are probably quite low, by 2010, between $US21 and $US32 trillion had been taken out of circulation so that it was beyond the laws, financial regulations and taxes that the rest of us cannot escape. But that figure has been added to by half a trillion dollars each year since, by moving more money into tax havens. And don’t forget: this figure does not include non-financial wealth. How many gold bricks, yachts, artworks and racehorses do you own and have stashed away somewhere free of scrutiny?

Who uses Tax Havens? And why?

As I mentioned above, tax havens are used by wealthy individuals (including businesspeople, sports and pop stars), criminals and terrorists, as well as governments (and their agencies), banks, corporations (such as Amazon and Google), international organizations and crime syndicates (such as the Medellin Cartel). While motives vary, in essence the lack of regulation and oversight, as well as tax evasion, are the reasons that individuals and organizations use them.

An individual might want to hide stolen wealth, to evade tax or cheat a divorced spouse out of their share of the family fortune. A bank, corporation, crime syndicate, international or terrorist organization might want to evade scrutiny of the source of their money and/or evade tax on windfall or even ongoing profits (legal and/or otherwise). A government might want to hide the ‘dirty money’ it uses to finance ‘black ops’ (that is, illegal and secret military violence such as that carried out by the CIA). But there are myriad explanations.

In John Christensen’s analysis of over 100 offshore clients of accounting firm Deloitte Touche he studied in Jersey, he found that the clients were engaging in insider trading, market rigging, failure to disclose conflicts of interest, weapons trading, illicit political donations, contract kickbacks, bribery, fraudulent invoicing, trade mispricing and tax evasion. See ‘The Spider’s Web: Britain’s Second Empire’.

Most people have heard of the money stashed away by corrupt dictators like Suharto in Indonesia, Ferdinand Marcos in the Philippines and Mobuto Sese Seko of Zaire (now Democratic Republic of the Congo) each of whom stole from the people of their country. However, they could only do this with the help of western enablers and ongoing elite resistance to developing country attempts to create a more transparent and fairer process for collecting tax on cross-border financial flows. As a result, Alex Cobham of the Tax Justice Network observes, worldwide, developing nations lose in excess of $1trillion per year in ‘capital flight’ and tax evasion to wealthy countries. See ‘The Spider’s Web: Britain’s Second Empire’.

But these more public examples, while terrible, tend to obscure two important facts. The amount stolen from sub-Saharan Africans, for example, between 1970 and 2008 was at least five times the total amount of their foreign debt during that period – see ‘The Spider’s Web: Britain’s Second Empire’ – and, by highlighting these examples, attention is drawn away from even worse and ongoing examples of such criminality by those corrupt/criminal individuals and organizations (including banks, accountancy and legal firms, corporations, international organizations, crime syndicates and governments) committed to using outright theft, fraud, money laundering and other devices to steal wealth from ordinary people all over the world.

So, for example, if one follows the money trails of various lucrative financial operations, some technically legal but immoral and others simply illegal, apart from the world’s major corporations, one quickly comes across the names of the major (and well known) banks and financial institutions (such as the Bank of England, Barclays, Goldman Sachs, JPMorgan Chase…), the ‘big four’ accountancy firms (Deloitte, Ernst & Young (EY), KPMG and PricewaterhouseCoopers), and elite lawyers (such as those in London’s ‘Magic Circle’, like Clifford Chance, Mourant du Feu & Jeune, and Slaughter and May). See, for example, Treasure Islands: Tax Havens and the Men Who Stole the World, ‘New estimates reveal the extent of tax avoidance by multinationals’ and ‘Looting with Putin’.

Apparently, like major corporations and crime syndicates, few banks, accountancy firms and lawyers have ethics policies that require them to follow the law and to exercise ‘due diligence’ (check out a client before signing a contract) so that they can steer clear of handling illegal and immoral profits, especially if they are monstrous.

In fact, according to a US Senate report, ‘virtually every major bank in the world – especially the biggest in North America and Europe – holds accounts for offshore banks and/or banks in suspect jurisdictions’. See The Sink: Terror, Crime and Dirty Money in the Offshore World.

As Eva Joly MEP, vice-chair of the Panama Papers Committee of the European Parliament, succinctly puts it: ‘Ordinary people are paying taxes. Rich people are not.’ See ‘The Spider’s Web: Britain’s Second Empire’.

The Vatican

But perhaps the example which best illustrates the moral depravity of those who use tax havens is the Vatican. In his carefully researched book Operation Gladio: The Unholy Alliance between the Vatican, the CIA and the Mafia author Paul L. Williams recounts the efforts of the CIA, former Nazis, the Sicilian/American Mafia, the Vatican and even Freemasonry to resist an anticipated postwar invasion of western Europe by those ‘Godless communists’ in the Soviet Union by establishing ‘stay-behind units’ (clandestine military and paramilitary units) throughout the countries of Europe (Belgium, Denmark, Italy, Netherlands, Norway, Portugal…) led by former Nazis and composed of ‘die-hard fascist fanatics’.

This alliance to fight the Cold War against the former Soviet Union and the rising tide of progressive governments in Europe and the rest of the world, particularly as the US war on Vietnam gathered pace, led, as Williams chillingly puts it, to ‘the toppling of governments, wholesale slaughter and financial devastation’ around the world. It was also, of course, the forerunner to its equivalent – Operation Condor – to resist, and destroy if possible, the spread of progressive movements, ranging from communism to liberation theology, throughout Central/South America.

While the Vatican played a number of unsavory roles in this alliance, including its facilitation of massive numbers of heroin addictions, its use of counterfeit securities, participation in false flag attacks that killed thousands and strings of gangland slayings, support of military juntas (that massacred tens of thousands) and the ‘purging’ of progressive priests (including Archbishop Óscar Romero of San Salvador and two Jesuit priests denounced by Fr. Jorge Mario Bergoglio, now Pope Francis, in Argentina: see ‘Who is Pope Francis? Jorge Mario Bergoglio and Argentina’s “Dirty War”’) while causing the financial destitution of thousands of families, one of its key ongoing functions, designed to maximize the Vatican’s power while highlighting its moral and spiritual bankruptcy, was to act as ‘God’s banker’ for many of these operations. See Operation Gladio: The Unholy Alliance between the Vatican, the CIA and the Mafia.

It did this, for example, by accepting Mafia/Medellin Cartel-collected drugs money (for a 15-20% cut) into the Vatican Bank (technically: Istituto per le Opere di Religione or Institute for the Works of Religion) and then laundering it through its shell companies – such as Cisalpine Overseas Bank, Astolfine SA, United Trading Corporation, Erin SA, Bellatrix SA, Belrose SA, Starfield SA and Nordeurop Establishment – in tax havens in the Bahamas, Liechtenstein, Luxembourg, Panama and Switzerland.

With the CIA providing services, such as the transport of Mafia/Medellin cocaine to drug dealers in the US, its share of the drug profits (cycled through its own CIA-controlled banks including Continental Illinois, Castle Bank & Trust, and Bank of Credit and Commerce International but eventually involving many of the most prestigious banks in the US, as the money was passed to the Vatican Bank) were used to finance key aspects of Operations Gladio and Condor with weapons also supplied by the CIA from NATO arsenals. But there was plenty of Vatican money in these Operations too.

As an aside, so devastating was the fallout from the ongoing exposure of the many aspects of Vatican corruption that, by the beginning of the twenty-first century, Roman Catholic membership was falling by 400,000 per year in the USA alone but the trend was even stronger in Europe with ‘magnificent churches and cathedrals’ becoming museums visited solely by tourists, parishes being boarded up, seminaries and convents closed, and parochial schools consolidated. And this was before the ‘plague of pedophilia’ had fully hit further decimating the Church’s tattered reputation. To this day, the Vatican Bank remains ‘one of the world’s leading laundries for dirty money’. See Operation Gladio: The Unholy Alliance between the Vatican, the CIA and the Mafia.

How do Tax Havens work?

Each tax haven offers its own unique combination of services. After all, it is a tough market competing for the world’s wealth and so each jurisdiction has developed its own set of services designed to maximize its attractiveness to potential clients. In essence, this means that there is some ongoing ‘competition’ to reduce regulatory and oversight requirements so that each tax haven can attract clientele. This has become so extreme that basic requirements of banking for those who do it legally, such as proof of identity, are not required in the offshore world. In fact, even your true name can be withheld if you wish. It is easier to avoid any risk of embarrassment from exposure this way.

As a result, virtually any jurisdiction will open an account (or as many accounts as you want) in whatever names you specify. Then, usually employing a variety of devices, ranging from secret bank accounts, nominee directors (usually locals who play no part in the organization bar give it their name) and structures such as shell companies (that exist on paper and perhaps a wall plaque somewhere, but nothing else) and trusts (which, unlike the legitimate version, appear to separate responsibility and control from the benefits of ownership but actually do not), to processes such as transfer pricing (a technique by which companies ‘shift paper profits into low-tax countries and costs into high-tax countries’ to minimize – or eliminate – tax payments) and often employing a convoluted process that rapidly shifts monies through several jurisdictions so that it becomes ‘untraceable’ (because authorities must get permission to access each jurisdiction in turn in any effort to trace the money), profits are effectively hidden and any accountability to authorities of any kind utterly eliminated. See Treasure Islands: Tax Havens and the Men Who Stole the World.

For one simple example of such a strategy, employing a technique known as the ‘double Irish, Dutch sandwich’ (which is legal), see ‘Google shifted $23bn to tax haven Bermuda in 2017, filing shows ’. But you can read other examples here: ‘The tech giants will never pay their fair share of taxes – unless we make them’ and ‘7 Corporate Giants Accused of Evading Billions in Taxes’.

Why does the existence of Tax Havens matter to us?

Well, the simple answer to this question is that just a fraction of the money hidden in tax havens would feed, clothe, house and provide clean water, medical care and educational opportunities to everyone on Earth. It would eliminate the 100,000 deaths by starvation-related diseases each day. It would eliminate poverty and homelessness. And, as one byproduct of having these material needs met, it would facilitate the emergence of an informed, engaged and empowered human population to tackle the vast range of environmental, climate and military threats that currently threaten biosphere collapse and imminent human extinction. See ‘Human Extinction by 2026? A Last Ditch Strategy to Fight for Human Survival’.

As Professor Prem Sikka puts it more simply: Because of the penetration by financial services executives of the British state, including the Treasury ‘It deprives people of opportunities to have healthcare, education, security, justice and, ultimately, a fulfilling life.’ See ‘The Spider’s Web: Britain’s Second Empire’.

Fundamentally, then, tax havens and their secrecy are at the heart of those elite institutions and processes that functionally undermine democracy and give extraordinary power to certain anonymous individuals and their entities without accountability. See ‘The Spider’s Web: Britain’s Second Empire’.

Of course, the elites that control the tax haven networks are not about to let this change. Tax havens are simply too important as part of the global infrastructure for maintaining elite profit, power and privilege and for resisting grassroots efforts to bring peace, justice and ecological sanity to our world. And that is why they are protected by government legislation and legal systems, with an ‘army’ of accountants, auditors, bankers, businesspeople, lawyers and politicians ensuring that they remain protected.

So don’t forget: laws are designed to control and punish you, no matter how trivial your infringement: a parking fine, a littering offence, a petty theft. But if you have enough money, the law simply does not exist. And you can evade taxes legally and in the full knowledge that your vast profits (even from immorally-acquired wealth such as sex trafficking, gun-running, endangered species trafficking, conflict diamonds and drug trafficking) are ‘lawful’ and will escape regulation and oversight of any kind. See ‘The Rule of Law: Unjust and Violent’.

Let me give a personal example. I have been a war tax resister since 1983: I have a conscientious objection to paying taxes to the Australian government to deploy military forces in other countries to kill people in my name. So, instead of paying taxes to kill, for many years I donated the equivalent amount to organizations engaged in peace, development, environment and human rights work, and to ‘pay the rent’ for my use of indigenous land. As some of many outcomes to this conscientious and highly public resistance (garnering national media attention at times), in 1991 I was bankrupted, in 1992 I was convicted of contempt of court (for my conscientious refusal to cooperate with the bankruptcy trustee) and in 1993 my passport was seized. In 1999, I was advised that I will be ‘bankrupt forever’ because of my ongoing conscientious refusal to finance the killing.

In the same period, since 1983, trillions and trillions of dollars of tax have been illegally and secretly evaded as wealthy individuals and corporations, criminals and crime syndicates, international organizations and governments channel their incomes and profits through tax havens. Laws and legal systems throughout the world make this possible and, provided it is done correctly, it is quite straightforward to avoid any penalties for secretly evading payment of taxes or hiding money acquired through criminal activity. But the point, as you can see, is that tax evasion by wealthy individuals and corporations meant that many of these individuals and corporations didn’t pay taxes to kill people either. They just didn’t pay taxes at all.

Of course, their motive was personal gain, their way was legal, they incurred no penalty and, of course, they didn’t pay an equivalent amount to support peace and justice causes. More fundamentally, however, the trillions of dollars they took from the global economy were made by killing and exploiting people and the planet in a significant variety of other ways, ranging from sex trafficking, gun-running, conflict diamonds and trafficking in drugs and endangered species, to simply starving people to death at the rate of 100,000 people each day by managing the global economy, using tax havens as a primary tool, to extract maximum profit.

Richard Brooks documents how this legal exploitation occurs in another way in his book The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business. The vast tax evasion by elites in Britain, including by diverting funds through tax havens, attracts just five prosecutions each year per £1 billion of evasion of direct taxes. In contrast, benefits fraud by those on unemployment and disability pensions attract 9,000 prosecutions each year per £1 billion of fraud. ‘So theft by the poor warrants the full force of the law’. But not theft by elites who write the law and largely control the political and legal processes in relation to it.

Hence, under the guise of ‘relationship taxing’ (that is, building a relationship between tax authorities and corporate executives and ‘tailoring’ tax payments to corporate wishes to the extent the law allows), corporations have long known that ‘If you don’t like the law… we’ll see what we can do’.

As is obvious from this example, attempts at government reform, including to defeat tax havens, in the direction of making elites financially and legally accountable, both nationally and internationally, for the responsibilities which the rest of us cannot escape, are invariably for show and, in any case, achieve zero of substance. For example, the attempt to ‘approve’ a blacklist of tax havens at the G20 gathering in 2009 was resisted by the Chinese premier on behalf of Chinese elites who, like other national elites keen to have political control but ‘judicial separation’ from their offshore centres, opposed the listing of notorious havens Hong Kong and Macau: see Treasure Islands: Tax Havens and the Men Who Stole the World. The global elite is clearly in control with national governments and international organizations powerlessly doing as instructed. So complete is this control, in fact, that Brooks notes that, in Britain, ‘Anti-tax avoidance laws had to be relaxed to accommodate companies’ tax avoidance schemes.’

Brooks concludes that ‘British taxation policy really had been so comprehensively captured by the world’s biggest corporations that screw-the-poor policies… could be written into the statute books at their whim, without a pang of conscience being felt anywhere in Whitehall.’ Clearly, however, his comment can be applied to virtually any government in the world.

So does it matter to you that these tax havens exist and do what they do?

What can be done about Tax Havens?

Authors such as Nicholas Shaxson and Richard Brooks suggest a raft of measures to correct the large number of ‘faults’ that facilitate the secrecy, protection from regulation and tax evasion that individuals, corporations, organizations, criminals and terrorists utilize in tax havens.

For Shaxson, these include financial reforms such as ‘blacklisting’ of tax havens so that their rogue state status is public knowledge; greater transparency, for example, through government sharing of information about the local income and assets of each other’s citizens and by requiring multinational corporate activities in each country to be made visible (rather than hidden behind ‘international’ figures); promoting the needs of developing countries which need their tax bases protected far more than they need aid or debt relief; confronting the British ‘spider’s web’ of tax havens by abolishing the City of London Corporation and submerging it into a unified and fully democratic London; taxing an entire multinational ‘group’ as a single unit and then allocating the appropriate amounts of its income out to the different jurisdictions in which it was earned and allow it to be taxed as each jurisdiction decides; onshore tax reform such as a land value tax (because land cannot be moved offshore and so tax on it must be paid locally), and by a direct distribution of mineral wealth in any country to each of its inhabitants (who can then be taxed); tackling the ‘enablers’ – the accountants, lawyers, individual bankers, businesspeople – and not just the clients, so that they go to jail; rethinking the meaning of ‘corporate responsibility’ (because corporations are given a wealth of capital in public infrastructure, an educated and healthy workforce… with which to work) so that corporations are transparent about their affairs and pay tax as part of their corporate responsibility; re-evaluating the meaning of corruption – insiders abusing the common good in secrecy and getting away with it and so worsening inequality and entrenching vested interests and unaccountable power – so that we see, more clearly, all of the actors and their activities; and changing the culture that fawns over people who abuse the system for personal gain. See Treasure Islands: Tax Havens and the Men Who Stole the World.

And some progress appears to be occurring along lines he suggests. For example, a version of automatic information exchange (AIE), by which governments make sure that essential information is made available to other jurisdictions as a matter of routine, has been discussed by the OECD and, while full of loopholes – see ‘Loophole USA: the vortex-shaped hole in global financial transparency’ – some commitments have been made. For the list of commitments as at November 2018, see ‘AEOI commitments’.

However, the USA has not made this commitment and while Switzerland, for example, finds this objectionable – see ‘The U.S. hasn’t signed the AEoI Agreement: Reciprocity demanded’ – the reality is that it makes little difference. For example, ICO Services, which specializes in the formation of offshore companies and offshore banking, will assist you to get around the AEoI requirement. Their website advertises that ‘asset holders need to start looking for alternative jurisdictions for protecting their assets. There are some reputable jurisdictions that are still outside the AEoI – e.g. Cyprus – but U.S. states of Delaware and some others shouldn’t be dismissed.’

But if you want a more established name to help you take advantage of a tax haven in the USA, you really can’t go past Rothschild & Co. So, to check out what they are offering: ‘Here Is Rothschild’s Primer How To Launder Money In U.S. Real Estate And Avoid “Blacklists”’.

Moreover, the AEoI agreement ‘outlaws’ bank secrecy but not trust secrecy (which dates from the Crusades) on which the British model is based – ‘The Trust lies at the core of the British secrecy model’ – so it does not address the cornerstone of British tax haven secrecy and explains why the British were happy to see the Cayman Islands commit to the AEoI. In short: the British government would be happy to kill off bank secrecy so that they can capture a larger market share (based on Trust secrecy). See ‘The Spider’s Web: Britain’s Second Empire’.

Separately from this initiative, in 2018 the UK parliament enacted a new law requiring its overseas territories – including notorious tax havens like Bermuda, the Cayman Islands and the British Virgin Islands – to start disclosing the owners of corporations they register by 2020. In theory: ‘This could shut down a huge amount of offshore tax evasion and other financial crimes because individuals from anywhere in the world, including the United States, have long been able to set up secret corporations in these tax havens to stash their money.’ See ‘New UK Law May Shut Down the Biggest Tax Havens – Aside from the U.S.’

However, while the report pointed out that the new law obviously does not impact the USA (or, of course, Switzerland or …) and the easy rerouting options available if these havens are effectively (or even actually) shut down, it failed to mention that this initiative does not in any way address the City of London Corporation so the impact of this initiative must be very limited unless it is followed by some pretty drastic initiatives in Westminster, Washington, Bern and elsewhere.

In summary, while one cannot disagree with any of Shaxson’s fine suggestions or be displeased that public pressure has led to some effort being made by the OECD and the UK parliament to address elements of the tax haven scourge, the reality is that the extent of the changes necessary are not going to happen without enormous grassroots pressure, strategically applied, and they are very unlikely to happen as reforms of the existing capitalist system. This is simply because the global elite is solidly in control of the institutions and processes of global capitalism, including its compliant governments and international organizations, and will readily stymie any attempt at serious reform of tax havenry particularly given the number of major reforms needed and the number of nations in which these reforms must be enacted. To state two obvious examples: The City of London Corporation has not existed for 1,000 years because it has no defense. And the changes noted above have only made the US more attractive as a secrecy jurisdiction.

Meanwhile, with the aim of promoting ‘financial innovation’, Switzerland has recently made things easier for smaller financial technology companies thus making tax havenry more attractive to those who might not have otherwise considered it. See ‘Swiss watchdog to propose looser anti-money laundering rules for fintechs’.

So, given that most tax havens are protected by host government legislation and there is no international mechanism to control them, the tax haven industry generally is not under threat of being held to account in any significant way.

And, despite the more elaborate explanation offered above, there is a simple reason for this. Unofficially, of course, illegal money, laundered through tax havens, has become an essential and sometimes stabilizing element of the global financial system. See ‘Drug money saved banks in global crisis, claims UN advisor’.

So what can we do that will make a difference?

Given the deeply entrenched and long-standing nature of this problem, clearly it needs to be addressed at various levels.

Fundamentally, we can nurture our children so that we do not destroy their conscience. See ‘My Promise to Children’. Remember all of those corrupt/criminal accountants, bankers, businesspeople, priests and popes, lawyers and politicians that kept creeping up in the discussion above? The people who maintain the entire infrastructure that allows tax havens to exist and those who manage and profit from it too?

Do they care about you? Do they care about the people in Africa, Asia and Central/South America who starve as a result of the types of policies that allow tax havens to exist and function? Do they care about those driven into poverty and homelessness in modern industrial economies because vast sums are drained out of them and hidden in secrecy jurisdictions? Do they care about the people killed by the military and other violence from which they profit and then hide the proceeds to evade tax? Do they care about the Earth? Fundamentally, do they care about themselves?

Of course not! But this is only because they are extraordinarily psychologically damaged individuals. See ‘The Global Elite is Insane Revisited’ with a more complete explanation in ‘Why Violence?’ and ‘Fearless Psychology and Fearful Psychology: Principles and Practice ’.

If we inflict enormous violence on a child throughout their childhood to compel their obedience, how can we expect them to grow up to lead a life of integrity based on their conscience, courage, compassion, empathy and love? Those who use tax havens are truly ‘poor little rich boys’ (and girls). See ‘Love Denied: The Psychology of Materialism, Violence and War’ and ‘Why Set Up a Shell Company in Panama? The Psychology Driving Illicit Financial Flows’.

Beyond tackling the problem at its source however, we can also tackle manifestations of the problem but not by lobbying elites – and their political agents: there are no votes in it, in any case – to control this depravity for which they are well rewarded.

For a start we can boycott all of the major private banks in favor of those smaller or member-owned banks that have a serious commitment to peace, justice and ecological sustainability, or we can seek out equivalent institutions like credit unions. We can also create public banks based on ethical principles. See ‘What are Public Banks and How Do They Operate? An Introduction’.

We can boycott large corporations – like Amazon, Apple, Gap, Google, Ikea, Microsoft and Starbucks – that use tax havens. None of these corporations is a monopoly: there are alternatives which can be investigated and employed, assuming we can’t go without some version of the product or service they offer. Whenever you can, find a locally-owned outlet that offers a local product or service.

We can boycott the Catholic Church. God does not ask that you morally or financially support a corrupt organization that doesn’t understand or represent morality and spirituality. Remember, it was Jesus who threw the moneychangers out of the temple.

If our conscience speaks loudly enough, we can decline employment by any organization that is unethical, such as those that use tax havens.

We can refuse to gamble, refuse to buy the services of a sex worker (who might even be illegally trafficked into the work), refuse to buy the products of endangered species – see, for example, ‘Killing Elephants “for Pet Food” Condemned’ – and refuse to use illicit drugs. These products and services are virtually always offered by industries controlled by criminal organizations so by buying them you are only harming yourself and/or other people or species about whom you could choose to exercise a duty of care while also not contributing to the diversion of financial resources into tax havens.

We can encourage unions, with members who work for organizations using tax havens, to take a stand on the issue.

We can support existing organizations that work on the problem, preferably those that offer grassroots alternatives. The Tax Justice Network, an ‘activist think tank’, and its sister organization, the Global Alliance for Tax Justice, campaign for systemic change.

If we are genuinely ambitious, we can develop comprehensive nonviolent strategies to compel particular individuals and organizations to desist from using tax havens or even compel countries to close down tax havens. See Nonviolent Campaign Strategy. This can easily be part of a larger strategy to transform the global economy into one that satisfies human and ecological needs, particularly given the imminence of biosphere collapse, as noted above. See ‘The Flame Tree Project to Save Life on Earth ’.

If violence and exploitation in all of their guises concern you, consider signing the online pledge of ‘The People’s Charter to Create a Nonviolent World’.

So here is a final question for you to consider: What might the world look like if all those trillions of dollars were being shared and spent where they are most needed?

Biodata: Robert J. Burrowes has a lifetime commitment to understanding and ending human violence. He has done extensive research since 1966 in an effort to understand why human beings are violent and has been a nonviolent activist since 1981. He is the author of ‘Why Violence?’ His email address is flametree@riseup.net and his website is here.

Robert J. Burrowes
P.O. Box 68
Daylesford, Victoria 3460
Australia

Email: flametree@riseup.net

Websites:
Nonviolence Charter
Flame Tree Project to Save Life on Earth
‘Why Violence?’
Feelings First
Nonviolent Campaign Strategy
Nonviolent Defense/Liberation Strategy
Anita: Songs of Nonviolence
Robert Burrowes
Global Nonviolence Network

The Erosion of the Middle Class — Why Americans Are Working Harder and Earning Less

Posted on February 8, 2019 by Reid Mukai

By John Liberty

Source: The Mind Unleashed

“I don’t have to tell you things are bad. Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. The dollar buys a nickel’s worth, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there’s nobody anywhere who seems to know what to do, and there’s no end to it.” — Howard Beale

Howard Beale, the main character in the 1976 film Network, became a part of cinematic history when he uttered the line “I’m mad as hell and I’m not gonna take it anymore.” That one line expressed a growing rage among America’s shrinking middle class at a time when Americans were reeling from years of war, political scandals and economic downturn.

In the four decades that have followed, little has improved for the average American. We’re still ‘mad as hell’ and the middle class is being eroded right in front of our eyes. When adjusted for inflation, many Americans are working longer hours and earning less than they did in 1976. So, how have we gone from vibrant middle class to the working poor in a matter of decades?

Median Incomes Are Stagnant

Despite increases in the national income over the past fifty years, middle class families have experienced little income growth over the past few decades. According to U.S. Census data, middle class incomes have grown by only 28 percent from 1979 – 2014. Meanwhile, a report from the Congressional Budget Office (CBO) shows that the top 20 percent of earners has seen their incomes rise by 95 percent over that same period of time.

Contributing to the stagnation of wages is a notable decrease in the workforce participation rate. According to the Brookings institute, “One reason for these declines in employment and labor force participation is that work is less rewarding. Wages for those at the bottom and middle of the skill and wage distribution have declined or stagnated.” Historical data from the Bureau of Labor Statistics backs up these findings, showing a steady decrease in workforce participation over the last two decades.

The Erosion of the Minimum Wage & America’s Purchasing Power

Anyone who has read a comment thread on the internet about minimum wage laws knows the debate is currently one of the most highly contentious political topics in America. In the halls of Congress, the debate has turned into a nearly decade long impasse. As a result, workers at the low end of the wage scale have watched the purchasing power of their wages decrease from $7.25 in 2009, to $6.19 in 2018 due to inflation. In 2018, you need to perform 47 hours of minimum wage work to achieve the same amount of purchasing power as 40 hours of work in 2009.

The inflation-adjusted minimum wage value has been in steady decline since 1968, when the $1.60 minimum wage was equal to $11.39 (in 2018 dollars). Since then, lawmakers have reduced minimum wage increases relative to the rate of inflation. As Christopher Ingraham reports:

“Recent research shows that the reason politicians — Democrats and Republicans alike — are dragging their feet on popular policies such as the minimum wage is that they pay a lot more attention to the needs and desires of deep-pocketed business groups than they do to regular voters. Those groups tend to oppose minimum wage increases for the simple reason that they eat into their profit margins.”

To be clear, the erosion of the purchasing power of everyday Americans is hardly a new phenomenon. According to data from the U.S. Bureau of Labor Statistics, the purchasing power of the U.S. Dollar has plummeted by over 95 percent since 1913, the year the Federal Reserve was created. The Bureau’s Consumer Price Index indicates that prices in 2018 are 2,436.33% higher than prices in 1913 and that the dollar has experienced an average inflation rate of 3.13% per year during this period.

The Rich Get Richer

While the outlook may be grim for low-wage workers, this is fantastic news for large corporations. Data from the U.S. Bureau of Economics shows that corporate profits are approaching all-time highs. But it’s not just workers who are feeling the effect of growing income inequality. The contrast is also being felt on Main Street. An analysis of the S & P 500 and the Russell 1,000 & 2,000 indexes by Bloomberg revealed a growing gap between America’s largest employers and smaller businesses.

A report from the Institute for Policy Studies entitled Billionaire Bonanza: The Forbes 400 and the Rest of Us echoed these findings when it revealed that America’s 20 wealthiest people — a group that could fit comfortably in one single Gulfstream G650 luxury jet – now own more wealth than the bottom half of the American population combined.

Although the Trump administration continues to tout stock market and labor force increases as signs of economic prosperity, numbers show that the wealthiest 10 percent of Americans own 84 percent of all stock. A study conducted by the Economic Policy Institute found that wage growth remains too weak to consider the economy at full employment and that stagnant wage growth has contributed to the growing level of income inequality in America. The study noted that while wages have recovered from the 2008 recession, the gap between those at the top and those at the middle and bottom has continued to increase since 2000. As the study’s author, Elise Gould writes:

“We’re looking at nominal wage growth that is still slower than you would expect in a full employment economy, slower than you would expect if you thought there were any sort of inflation pressures from wage growth.”

The Decimation of the American Dream

Comedian George Carlin once said, “The reason they call it the American Dream is because you have to be asleep to believe it.” For millions of middle class Americans Carlin’s statement has proven eerily accurate. Stagnant wages and decreased purchasing power has put the prospects for middle class children in a tailspin as upward mobility trends have reportedly fallen by over 40 percent since 1950.

A poll conducted by the Pew Research Institute corroborates this claim. According to Pew, only 37 percent of Americans believe that today’s children will grow up to be better off financially than their parents. That means more Americans think that today’s children will be financially worse off than their parents than those who believe they will be better off.

The sentiments expressed by millions of middle class Americans appear to be wholly justified due to the fact that middle class families are becoming more fragile and dependent on two incomes. A report from the Council of Economic Advisors found the majority of the income gains made by the middle class from 1979 to 2013 were a result of increased participation in the workplace by women. The report also noted the fragility of two income families amidst a decline in marriage and a drastic rise in single parent homes in recent years.

As a result of the slow growth in wages, over half of Americans now receive more in Government transfer payments (Medicare, Medicaid, food stamps, Social Security) than they pay in federal taxes. An analysis of all 50 states also found that in 42 states the cost of living is higher than the median income.

The rising cost of healthcare is also putting the pinch on the wallets of many Americans. As Jeffrey Pfeffer noted in his book Dying for a Paycheck, healthcare spending—per capita—has increased 29 fold over the past 40 years, outpacing the growth of the American economy.

While many Americans continue to look to the government to fix problems like wage stagnation, income inequality and rising healthcare costs, the sad truth is that we live in a time when 1 in 3 households has trouble paying energy bills and 40 percent of Americans face poverty in retirement at the exact same time the Federal Government has admitted that they lost $21 trillion. Not only did they lose $21 trillion (yes that’s TRILLION with a T), but the Department of Defense indicated in a press conference that they “never expected to pass” the audit to locate the missing taxpayer money.

John Emerich Edward Dalberg Acton famously proclaimed in 1887:

“Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

Perhaps it’s time for the millions of Americans who are quietly ‘mad as hell’ to start expressing their rage at the corrupt institutions of power that are decimating their livelihoods rather than expecting those very same institutions to fix the problems they created.

Prices, plutocrats, and corporate concentration

Posted on February 5, 2019 by Reid Mukai

Would less corporate concentration – and a weaker corporate capacity to raise prices – mean less inequality?

By Sam Pizzigati

Source: Nation of Change

Andrew Leigh, a member of the Australian parliament, has a side gig. He just happens to be a working economist. Other lawmakers may spend their spare hours making cold calls for campaign cash. Leigh spends his doing research – on why our modern economies are leaving their populations ever more unequal.

Leigh’s latest research is making some global waves. Working with a team of Australian, Canadian, and American analysts, he’s been studying how much the prices corporate monopolies charge impact inequality.

The conventional wisdom has a simple answer: not much. Yes, the reasoning goes, prices do go up when a few large corporations start to dominate an economic sector. But those same higher prices translate into higher returns for corporate shareholders.

Thanks to 401(k)s and the like, the argument continues, the ranks of these corporate shareholders include millions of average families. So we end up with a wash. As consumers, families pay more in prices. As shareholders, they pocket higher dividends.

But this nonchalance about the impact of monopolies, Andrew Leigh and his colleagues counter, obscures “the relative distribution of consumption and corporate equity ownership.” Average families do hold some shares of stock, but not many. In the United States, for instance, the most affluent 20 percent of households own 13 times more stock than the bottom 60 percent.

These bottom 60 percent households, as a result, get precious little return from the few shares of stock they do hold, not nearly enough to offset the higher prices they pay on corporate monopoly products.

“On net, that means it’s nearly impossible for the typical U.S. family to make up for higher prices via the performance of their stock portfolio,” notes a Washington Post analysis of the Leigh team research. “When prices rise, low- and middle-class families pay. Wealthy families profit.”

By how much do these affluents profit? Leigh and his colleagues have done the math. The higher prices – and profits – that corporate concentration has generated have shifted 3 percent of national income out of the pockets of poor and middle-class families into the wallets of the affluent.

The larger our corporations become, in other words, the more unequal our societies become.

Now corporations don’t grow larger in the same way as people grow larger. Corporations have no adolescent growth spurts. They don’t mature. They have no real personhood. Corporations only become larger when the executives who run them make them larger, most typically by wheeling and dealing their way through ever grander mergers and acquisitions.

This wheeling and dealing takes up a huge chunk of modern corporate executive time and energy. Why do execs devote so much of their time and energy to getting bigger? Getting bigger pays – for execs.

Indeed, firm size determines how much executives make more than any other factor, as research has shown repeatedly over the years. Executives don’t have to “perform” – make their enterprises more efficient and effective – to make bigger bucks. They just to need to make their enterprises bigger.

Executives, in short, have a powerful incentive to grow their companies, and that powerful incentive, as the latest research from Andrew Leigh and his colleagues shows, isn’t just making these executives richer. It’s leaving our societies much more unequal.

So what can we do to ease the damage? Tougher antitrust enforcement could certainly slow our rates of corporate concentration. But the legislative activities of Andrew Leigh in Australia suggest another promising approach as well.

Leigh serves as a “shadow” minister for the Australian parliament’s Labor Party opposition. This past fall, he announced that his party, if elected to power, will require all major corporations to publicly disclose the ratio between their CEO and worker pay.

A similar disclosure mandate went into effect in the United States last year. As of January 1, 2019, the UK now has a pay-ratio disclosure mandate in effect as well.

Forcing Australian corporations to reveal their CEO-worker pay ratios, Leigh notes, would encourage these corporations “to think about how they are serving all their workers, and society as a whole.” But a growing number of progressives in the United States and the U.K. believe that pay ratios can do more than just “encourage” corporations to better serve their societies.

These progressives are pushing for consequences on CEO-pay ratios, proposing legislation that would deny government contracts and subsidies to corporations with wide gaps between their CEO and worker pay. They’re also calling for higher tax rates on companies with wider CEO-worker pay ratios, and one American city, Oregon’s Portland, already has such an “inequality tax” in effect.

More moves in this direction could significantly reduce the incentive for the executive wheeling and dealing that’s concentrating corporate power in fewer and fewer corporate hands. That wheeling and dealing – in nations with consequences on pay ratios in effect – would no longer guarantee grand windfalls to our corporate executive class.

Less wheeling and dealing, in turn, would mean less corporate concentration – and a weaker corporate capacity to raise prices. And that would mean, as the new Leigh gang’s research so clearly shows, less inequality.

Expect Increased Smearing Of Progressives As Russian Assets

Posted on February 1, 2019 by Reid Mukai

By Caitlin Johnstone

Source: CaitlinJohnstone.com

After WikiLeaks documents provided irrefutable evidence that the Democratic National Committee had violated its charter by rigging its primary for Hillary Clinton against Bernie Sanders, what should have happened is this:

The DNC apologizing profusely to the public for violating the promises it had made to the electorate.
Massive, sweeping changes to bring transparency and public accountability to the DNC’s inner workings, including a complete overhaul of staff and leadership.
If at all possible, a complete do-over of the primary vote.
A dedication to attacking Trump’s right-wing policies from the left, showing the public that a progressive approach works better than a conservative one.

If this had happened Americans would not only be living in a vastly saner political landscape, but Trump probably would not have won in 2016. If the Democratic establishment had shown clearly and unequivocally that it was remorseful for its malfeasance and made an immediate overhaul that people could see for themselves, they wouldn’t have alienated nearly as many voters.

Instead, what happened was the DNC changing absolutely nothing, Nanci Pelosi saying she doesn’t see anything wrong with primary rigging, and the Democratic Party shrieking about Russia for more than two years.

Bernie was the one Democrat not to vote to keep sanctions on Deripaska (he also voted against Russia sanctions and Magnitsky). @SenSanders won’t stand up to billionaires in Russia and he wants you to to believe he’ll stand up to them in America. #fraud https://t.co/oNLK0tbf83

— Active Measures (@ActMeasuresDoc) January 16, 2019

Watching the establishment Russia narrative take hold of public consciousness was like watching a zombie outbreak. First it infected the slow ones, the virulent Clintonites who never had any natural defense against CIA/CNN narratives, which was disturbing and distressing but not at all surprising. Then, bit-by-bit, the Russia hysteria began to creep leftward. Progressives I’d been fighting alongside in 2016 began succumbing to the Russiagate mind virus in 2017, folding under peer pressure and aggressive mass media manipulation. Some of them held strong for a few months, then when one of the hollow but oh-so-confident-sounding “bombshell” Russiagate reports struck them in the right way at the right time they made public social media posts saying they were now convinced.

I watched them drop like flies. To this very day I still see Russia hysteria on my social media feeds from progressive Berniecrats I’d followed early on who transformed into McCarthyite cold war hawks at some point in the interim. When I post something skeptical of the establishment Russia narrative on Twitter I see accounts with red roses next to their name, a sign of support for the Democratic Socialists of America, arguing with me and accusing me of sympathizing with Trump and Putin.

Writers like Max Blumenthal and Glenn Greenwald have been warning since the outbreak of this pernicious mass manipulation that it would be used to target the left, but their warnings went unheeded as more and more progressive minds were funneled into the belief that the best way to fight Trump was to get behind the Russia hysteria bandwagon and push with all your might. And now, even as America’s 2020 presidential race is barely in its infancy, we are already beginning to see Russiagate used to smear anyone to the left of Hillary Clinton as Russian dupes.

I’d like to draw attention to a few recent social media posts which have gained a lot of traction in the last few days, not for the impact those posts have but for what they portend for the rest of the 2020 race. The first is from the Twitter account for the Russiagate documentary Active Measures, and it received thousands of shares:

“Bernie was the one Democrat not to vote to keep sanctions on Deripaska (he also voted against Russia sanctions and Magnitsky),” the post reads. “@SenSanders won’t stand up to billionaires in Russia and he wants you to to believe he’ll stand up to them in America. #fraud”

The second comes from professional linguist and engineer John Rehling, who has over 50 thousand Twitter followers, and it received hundreds of shares:

“Kamala Harris is immediately the front runner for the Democratic nomination, and if Russia is predictable, they will create armies of bots attacking her from the *left*,” reads Rehling’s (now deleted) tweet. “If you’re left of Kamala Harris, I’m sure you are honestly, but you’ll be doing Putin’s work, like it or not.”

The third comes from Shareblue manipulator Caroline Orr, just one of many similar posts that she has made in recent days. Orr has also launched a GoFundMe to investigate Tulsi Gabbard’s imaginary Putin-Assad ties/score a free vacation to Hawaii, and is also circulating the baseless rumor that “Russian-linked accounts” are pushing for a Bernie-Tulsi 2020 ticket. Note the URL Orr highlighted in the tweet below featuring her allegation that Gabbard is “pro-Putin” and “pro-Assad”.

https://twitter.com/RVAwonk/status/1085084216726044672

In each case, posts punching left with accusations of Kremlin servitude gained traction with their followers, which means there is already an audience for this schtick. And, again, the presidential race has barely even begun. Things are likely to get a whole lot uglier between now and November 2020.

This is your life for the next two years, progressives. This is what those of you who drank the Russiagate Kool-Aid have helped buy for what passes for America’s political left today. You can expect such accusations to get far more common and far more aggressive as this thing drags on. The left can either play along with this and let centrist cold war rhetoric suck all the oxygen out of the room for the advancement of progressive policies, or they can fight back against this moronic facilitation of longstanding intelligence community agendas.

This use of Russiagate to herd the political left toward supporting America’s “center” (so-called only because it is the mainstream view, which in turn is only due to plutocratic narrative control) will actively move things further into corporatist dystopia. Supporting a “moderate” Democratic Party while the Republican Party always pushes as far to the right as it possibly can is guaranteeing a continuous overall movement to the right, which is why the gains made by the left in the early 20th century are almost gone now. If you have one person half-pulling westward on one end of a rope and another person tugging eastward with all their might, they’re going to move steadily east.

The slow, incremental changes advocated by the political “center” are code for no change whatsoever; they’re just buying time so that their corporate sponsors, who themselves never slow down, can finish shoring up control before the public forces them to scale back. If progressives don’t start attacking this “Move right or you’re a Russian agent” schtick directly and with full force, it will snuff them out completely.

What Are We Working For? The Economic System is a Labyrinthine Trap

Posted on January 27, 2019 by Reid Mukai

By Edward Curtin

Source: Global Research

One also knows from his letters that nothing appeared more sacred to Van Gogh than work.” – John Berger, “Vincent Van Gogh,” Portraits

Ever since I was a young boy, I have wondered why people do the kinds of work they do. I sensed early on that the economic system was a labyrinthine trap devised to imprison people in work they hated but needed for survival. It seemed like common sense to a child when you simply looked and listened to the adults around you. Karl Marx wasn’t necessary for understanding the nature of alienated labor; hearing adults declaim “Thank God It’s Friday” spoke volumes.

In my Bronx working class neighborhood I saw people streaming to the subway in the mornings for their rides “into the city” and their forlorn trundles home in the evenings. It depressed me. Yet I knew the goal was to “make it” and move away as one moved “up,” something that many did. I wondered why, when some people had options, they rarely considered the moral nature of the jobs they pursued. And why did they not also consider the cost in life (time) lost in their occupations? Were money, status, and security the deciding factors in their choices? Was living reserved for weekends and vacations?

I gradually realized that some people, by dint of family encouragement and schooling, had opportunities that others never received. For the unlucky ones, work would remain a life of toil and woe in which the search for meaning in their jobs was often elusive. Studs Terkel, in the introduction to his wonderful book of interviews, Working: People Talk About What They Do all Day and How They Feel About What They Do, puts it this way:

This book, being about work, is, by its very nature, about violence – to the spirit as well as to the body. It is about ulcers as well as accidents, about shouting matches as well as fistfights, about nervous breakdowns as well as kicking the dog around. It is, above all (or beneath all), about daily humiliations. To survive the day is triumph enough for the walking wounded among the great many of us.

Those words were confirmed for me when in the summer between high school and college I got a job through a relative’s auspices as a clerk for General Motors in Manhattan. I dreaded taking it for the thought of being cooped up for the first time in an office building while a summer of my youth passed me by, but the money was too good to turn down (always the bait), and I wanted to save as much as possible for college spending money. So I bought a summer suit and joined the long line of trudgers going to and fro, down and up and out of the underground, adjusting our eyes to the darkness and light.

It was a summer from hell. My boredom was so intense it felt like solitary confinement. How, I kept wondering, can people do this? Yet for me it was temporary; for the others it was a life sentence. But if this were life, I thought, it was a living death. All my co-workers looked forward to the mid-morning coffee wagon and lunch with a desperation so intense it was palpable. And then, as the minutes ticked away to 5 P.M., the agitated twitching that proceeded the mad rush to the elevators seemed to synchronize with the clock’s movements. We’re out of here!

On my last day, I was eating my lunch on a park bench in Central Park when a bird shit on my suit jacket. The stain was apt, for I felt I had spent my days defiling my true self, and so I resolved never to spend another day of my life working in an office building in a suit for a pernicious corporation, a resolution I have kept.

“An angel is not far from someone who is sad,” says Vincent Van Gogh in the new film, At Eternity’s Gate. For some reason, recently hearing these words in the darkened theater where I was almost alone, brought me back to that summer and the sadness that hung around all the people that I worked with. I hoped Van Gogh was right and an angel visited them from time to time. Most of them had no options.

The painter Julian Schnabel’s moving picture (moving on many levels since the film shakes and moves with its hand-held camera work and draws you into the act of drawing and painting that was Van Gogh’s work) is a meditation on work. It asks the questions: What is work? What is work for? What is life for? Why paint? What does it mean to live? Why do you do what you do? Are you living or are you dead? What are you seeking through your work?

For Vincent the answer was simple: reality. But reality is not given to us and is far from simple; we must create it in acts that penetrate the screens of clichés that wall us off from it. As John Berger writes,

One is taught to oppose the real to the imaginary, as though the first were always at hand and the second, distant, far away. This opposition is false. Events are always to hand. But the coherence of these events – which is what one means by reality – is an imaginative construction. Reality always lies beyond – and this is as true for materialists as for idealists. For Plato, for Marx. Reality, however one interprets it, lies beyond a screen of clichés.

These screens serve to protect the interests of the ruling classes, who devise ways to trap regular people from seeing the reality of their condition. Yet while working can be a trap, it can also be a means of escape. For Vincent working was the way. For him work was not a noun but a verb. He drew and he painted as he does in this film to “make people feel what it is to feel alive.” To be alive is to act, to paint, to write. He tells his friend Gauguin that there’s a reason it’s called the “act of painting, the “stroke of genius.” For him painting is living and living is painting.

The actual paintings that he made are almost beside the point, as all creative artists know too well. It is the doing wherein living is found. The completed canvas, essay, or book are what is done. They are nouns, still lifes, just as Van Gogh’s paintings have become commodities in the years since his death, dead things to be bought and sold by the rich in a culture of death where they can be hung in mausoleums isolated from the living. It is appropriate that the film ends with Vincent very still in his coffin as “viewers” pass him by and avidly now desire his paintings that encircle the room that they once rejected. The man has become a has-been and the funeral parlor the museum.

“Without painting I can’t live,” he says earlier. He didn’t say without his paintings.

“God gave me the gift for painting,” he said. “It’s the only gift he gave me. I am a born painter.” But his gift has begotten gifts that are still-births that do not circulate and live and breathe to encourage people to find work that will not, “by its very nature, [be] about violence,” as Terkel said. His works, like people, have become commodities, brands to be bought and sold in a world where the accumulation of wealth is accomplished by the infliction of pain, suffering, and death on untold numbers of victims, invisible victims that allow the wealthy to maintain their bad-faith innocence. This is often achieved in the veiled shadows of intermediaries such as stock brokers, tax consultants, and financial managers; in the liberal and conservative boardrooms of mega-corporations or law offices; and in the planning sessions of the world’s great museums. Like drone killings that distance the killers from their victims, this wealth accumulation allows the wealthy to pretend they are on the side of the angels. It’s called success, and everyone is innocent as they sing, “Hi Ho, Hi Ho, it’s off to work we go.”

“It is not enough to tell me you worked hard to get your gold,” said Henry Thoreau, Van Gogh’s soul-mate. “So does the Devil work hard.”

A few years ago there was a major exhibit of Van Gogh’s nature paintings at the Clark Museum in Williamstown, Massachusetts – “Van Gogh and Nature” – that aptly symbolized Van Gogh in his coffin. The paintings were exhibited encased in ornate gold frames. Van Gogh in gold. Just perfect. I am reminded of a scene in At Eternity’s Gatewhere Vincent and Gauguin are talking about the need for a creative revolution – what we sure as hell need – and the two friends stand side by side with backs to the camera and piss into the wind.

But pseudo-innocence dies hard. Not long ago I was sitting in a breakfast room in a bed-and-breakfast in Houston, Texas, sipping coffee and musing myself awake. Two men came in and the three of us got to talking. As people like to say, they were nice guys. Very pleasant and talkative, in Houston on business. Normal Americans. Stressed. Both were about fifty years old with wives and children.

One sold drugs for one of the largest pharmaceutical companies that is known for its very popular anti-depressant drug and its aggressive sales pitches. He travelled a triangular route from Corpus Christi to Austin to Houston and back again, hawking his wares. He spoke about his work as being very lucrative and posing no ethical dilemmas. There were so many depressed people in need of his company’s drugs, he said, as if the causes of their depression had nothing to do with inequality and the sorry state of the country as the rich rip off everyone else. I thought of recommending a book to him – Deadly Medicines and Organized Crime: How big pharma has corrupted health care by Peter Gotzsche – but held my tongue, appreciative as I was of the small but tasteful fare we were being served and not wishing to cause my companions dyspepsia. This guy seemed to be trying to convince me of the ethical nature of the way he panned gold, while I kept thinking of that quote attributed to Mark Twain: “Denial ain’t just a river in Egypt.”

The other guy, originally from a small town in Nebraska and now living in Baton Rouge, was a former medevac helicopter pilot who had served in the 1^stGulf War. He worked in finance for an equally large oil company. His attitude was a bit different, and he seemed sheepishly guilty about his work with this company as he told me how shocked he was the first time he saw so many oil, gas, and chemical plants lining the Mississippi River from Baton Rouge to New Orleans and all the oil and chemicals being shipped down the river. So many toxins that reminded him of the toxic black smoke rising from all the bombed oil wells in Iraq. Something about it all left him uneasy, but he too said he made a very good “living” and that his wife also worked for the oil company back home.

My childish thought recurred: when people have options, why do they not choose ethical work that makes the world more beautiful and just? Why is money and so-called success always the goal?

Having seen At Eternity’s Gate, I now see what Van Gogh was trying to tell us and Julian Schnabel conveys through this moving picture. I see why these two perfectly normal guys I was breaking bread with in Houston are unable to penetrate the screen that lies between them and reality. They have never developed the imaginative tools to go beyond normal modes of perception and conception. Or perhaps they lack the faith to dare, to see the futility and violence in what they are working for and what their companies’ products are doing to the world. They think of themselves as hard at work, travelling hither and yon, doing their calculations, “making their living,” and collecting their pay. It’s their work that has a payoff in gold, but it’s not working in the sense that painting was for Vincent, a way beyond the screen. They are mesmerized by the spectacle, as are so many Americans. Their jobs are perfectly logical and allow them a feeling of calm and control.

But Vincent, responding to Gauguin, a former stock broker, when he urged him to paint slowly and methodically, said, “I need to be out of control. I don’t want to calm down.” He knew that to be fully alive was to be vulnerable, to not hold back, to always be slipping away, and to be threatened with annihilation at any moment. When painting, he was intoxicated with a creative joy that belies the popular image of him as always depressed. “I find joy in sorrow,” he said, echoing in a paradoxical way Albert Camus, who said, “I have always felt that I lived on the high seas, threatened, at the heart of a royal happiness.” Both rebels, one in paint, the other in words: “I rebel: therefore we exist,” was how Camus put it, expressing the human solidarity that is fundamental to genuine work in our ephemeral world. Both nostalgic in the present for the future, creating freedom through vision and disclosing the way for others.

And although my breakfast companions felt safe in their calmness on this side of the screen, it was an illusion. The only really calm ones are corpses. And perhaps that’s why when you look around, as I did as a child, you see so many of the living dead carrying on as normal.

“I paint to stop thinking and feel I am a part of everything inside and outside me,” says Vincent, a self-described exile and pilgrim.

If we could make working a form of such painting, a path to human solidarity because a mode of rebelling, what a wonderful world it might be.

That, I believe, is what working is for.

Degrowth: closing the global wealth divide

Posted on January 23, 2019 by Reid Mukai

Contradicting the dominant paradigm that economic growth equals development, degrowth theorists argue that serious cutbacks are crucial to protect life on our planet.

By Riccardo Mastini

Source: ROAR

Today, some 4.3 billion people — more than 60 percent of the world’s population — live in debilitating poverty, struggling to survive on less than the equivalent of $5 per day (which is the mean average of all the national poverty lines in the Global South). Half do not have access to enough food. And these numbers have been growing steadily over the past few decades.

With these data, Jason Hickel, an anthropology professor and global development expert, starts his controversial book, The Divide: A Brief Guide to Global Inequality and Its Solutions, in which he meticulously and convincingly debunks the narrative told by the UN and the likes of Bill Gates and Steven Pinker. In fact, while the good-news story leads us to believe that poverty has been decreasing around the world, in reality the only places this holds true are in China and East Asia. And these are some of the only places in the world where free-market capitalism was not forcibly imposed by the World Bank and the IMF, allowing these governments to pursue state-led development policies and gradually liberalize their economies on their own terms.

Development agencies, NGOs and the world’s most powerful governments explain that the plight of poor countries is a technical problem — one that can be solved by adopting the right institutions and the right economic policies, by working hard and accepting a bit of help. As Hickel writes: “It is a familiar story, and a comforting one. It is one that we have all, at one time or another, believed and supported. It maintains an industry worth billions of dollars and an army of NGOs, charities and foundations seeking to end poverty through aid and charity.” But it’s against this narrative that Hickel takes aim.

ECONOMIC UNEQUAL EXCHANGE OVER THE CENTURIES

The main argument presented in the book is that the discourse of aid distracts us from seeing the broader picture. It hides the patterns of extraction that are actively causing the impoverishment of the Global South today and actively impeding meaningful development. “The charity paradigm obscures the real issues at stake: it makes it seem as though the West is ‘developing’ the Global South, when in reality the opposite is true. Rich countries aren’t developing poor countries; poor countries are effectively developing rich countries — and they have been since the late 15th century,” argues Hickel.

In the book it is laid bare for all to see that underdevelopment in the Global South is not a natural condition, but a consequence of the way Western powers have organized the world economic system.

It’s not that the $128 billion in aid disbursements that the West gives to the Global South every year doesn’t exist — it does. But if we broaden our view and look at it in context, we see that it is vastly outstripped by the financial resources that flow in the opposite direction.

If all of the financial resources that get transferred between rich and poor countries each year are tallied up, we find that in 2012, the last year of recorded data, developing countries received a little over $2 trillion, including all aid, investment and income from abroad. But more than twice that amount, some $5 trillion, flowed out of them in the same year. In other words, developing countries “sent” $3 trillion more to the rest of the world than they received.

What do these large outflows from the Global South consist of? “Well, some of it is payments on debt. Today, poor countries pay over $200 billion each year in interest alone to foreign creditors, much of it on old loans that have already been paid off many times over, and some of it on loans accumulated by greedy dictators,” states Hickel. Another major contributor is the income that foreigners make on their investments in developing countries and then repatriate. Think of all the profits that Shell extracts from Nigeria’s oil reserves, for example, or that Anglo American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with capital flight. A big proportion of this takes place through “leakages” in the balance of payments between countries. Another takes place through an illegal practice known as “trade misinvoicing.” Basically, corporations report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions. A similarly large amount flows out annually through “abusive transfer pricing”, a mechanism that multinational companies use to steal money from developing countries by shifting profits illegally between their own subsidiaries in different countries. But perhaps the most significant loss has to do with exploitation through trade.

Hickel explains that “from the onset of colonialism through to globalization, the main objective of the North has been to force down the cost of labor and goods bought from the South. In the past, colonial powers were able to dictate terms directly to their colonies. Today, while trade is technically “free,” rich countries are able to get their way because they have much greater bargaining power.” On top of this, trade agreements often prevent poor countries from protecting their workers in ways that rich countries do. And because multinational corporations now have the ability to scour the planet in search of the cheapest labor and goods, poor countries are forced to compete to drive costs down. As a result of all this, there is a yawning gap between the “real value” of the labor and goods that poor countries sell and the prices they are actually paid for them. This is what economists call “unequal exchange.”

Since the 1980s, countries of the West have been using their power as creditors to dictate economic and trade policies to indebted countries in the South, effectively governing them by remote control, without the need for bloody interventions. “Leveraging debt,” argues Hickel, “they imposed “structural adjustment programs” that reversed all the economic reforms that Global South countries had painstakingly enacted in the previous two decades. In the process, the West went so far as to ban the very protectionist and Keynesian policies that it had used for its own development, effectively kicking away the ladder to success.”

DEGROWTH FOR SUSTAINABLE AND FAIR LIVELIHOODS

Hickel then ponders over how — if these unfair trade and business practices were amended — poor countries could actually go about developing their economies following the same path as the one embraced by the Global North over the past two centuries. He references a study by the economist David Woodward in which the latter shows that given our existing economic model, poverty eradication can’t happen. Not that it probably won’t happen, but that it physically can’t. It is a structural impossibility.

He explains that:

Right now, the main strategy for eliminating poverty is to increase global GDP growth. The idea is that the yields of growth will gradually trickle down to improve the lives of the world’s poorest people. But all the data we have shows quite clearly that GDP growth doesn’t really benefit the poor. While global GDP per capita has grown by 65 percent since 1990, the number of people living on less than $5 a day has increased by more than 370 million. Why does growth not help reduce poverty? Because the yields of growth are very unevenly distributed. The poorest 60 percent of humanity receive only 5 percent of all new income generated by global growth. The other 95 percent of the new income goes to the richest 40 percent of people. And that’s under best-case-scenario conditions.

Given this distribution ratio, Woodward calculates that it will take more than 100 years to eradicate absolute poverty at $1.25 a day. At the more accurate level of $5 a day, eradicating poverty will take 207 years. To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size. In other words, we need to extract, produce and consume 175 times more commodities than we presently do. It is worth pausing for a second to think about what this means. Even if such outlandish growth were possible, the consequences would be disastrous. We would quickly chew through our planet’s ecosystems, destroying the forests, the soils and, most importantly, the climate.

According to data compiled by researchers at the Global Footprint Network in Oakland, our planet only has enough ecological capacity for each of us to consume 1.8 “global hectares” annually — a standardized unit that accounts for resource use, waste, pollution and emissions. Anything over this means a degree of resource consumption that the Earth cannot replenish, or waste that it cannot absorb; in other words, it locks us into a pathway of progressive degradation. The figure of 1.8 global hectares is roughly what the average person in Ghana or Guatemala consumes.

By contrast, Europeans consume 4.7 global hectares per person, while in the US and Canada the average person consumes 8 — many times their fair share. To get a sense of how extreme this overconsumption is: if we were all to live like the average citizen of the average high-income country, we would require the ecological capacity equivalent to 3.4 Earths. Hickel elaborates:

Scientists tell us that even at existing levels of aggregate global consumption we are already overshooting our planet’s ecological capacity by about 60 percent each year. And all of this is just at our existing levels of aggregate economic activity — with the existing levels of consumption in rich and poor countries. If poor countries increase their consumption, which they will have to do to some extent in order to eradicate poverty, they will only tip us further towards disaster. Unless, that is, rich countries begin to consume less.

If we want to have a chance of keeping within the 2°C threshold — which the Paris Agreement on climate change sets as an absolute cap — we can emit no more than another 805 gigatons of CO2 at the global level. Now, let’s accept that poor countries will need to use a portion of this carbon budget in order to grow their incomes enough to eradicate poverty; after all, we know that for poor countries human development requires an increase in emissions, at least up to a relatively lowish point. This principle is already widely accepted in international agreements, which recognize that all countries have a “common but differentiated responsibility” to reduce emissions. Because poor countries did not contribute much to historical emissions, they have a right to use more of the carbon budget than rich countries do — at least enough to fulfill basic development goals (as I also argue in this article). This means that rich countries have to figure out how to make do with the remaining portion of the budget.

Professor Kevin Anderson, one of Britain’s leading climate scientists, has been devising potential scenarios for how to make this work. If we want to have a 50 percent chance of staying under 2°C, there’s basically only one feasible way to do it — assuming, of course, that negative emissions technologies is not a real option. In this scenario, poor countries can continue to grow their economies at the present rate until 2025, using up a disproportionate share of the global carbon budget. That’s not a very long time, so this strategy will only work to eradicate poverty if the gains from growth are distributed with a heavy bias towards the poor.

As Hickel writes: “The only way for rich countries to keep within what’s left of the carbon budget is to cut emissions aggressively, by about 10 percent per year. Efficiency improvements and clean energy technologies will contribute to reducing emissions by at most 4 percent per year, which gets them part of the way there. But to bridge the rest of the gap, rich countries are going to have to downscale production and consumption by around 6 percent each year. And poor countries are going to have to follow suit after 2025, downscaling economic activity by about 3 percent per year.” This strategy of downscaling the production and consumption of a country is called “degrowth.”

Hickel describes this visionary idea as follows: “All it means is easing the intensity of our economy, cutting the excesses of the very richest, sharing what we have instead of plundering the Earth for more, and liberating ourselves from the frenetic consumerism that we all know does nothing to improve our wellbeing or happiness.” And since the book first came out in 2017, Hickel has been developing an increasingly clearer position on how we can go about making such changes happen.

His thinking on degrowth was recently encapsulated in a captivating blog exchange he had with Branko Milanović, another global development expert. But Milanović still maintains that economic growth should be at the core of poverty relief. Paraphrasing a passage from Kate Raworth’s Doughnut Economics, we could summarize Milanović’s position as “economic growth is still necessary, and so it must be possible,” while Hickel argues that “economic growth is no longer possible, and so it cannot be necessary.” I side with the latter, simply because the laws of physics trump the laws of economics.

In light of this, perhaps we should regard countries like Costa Rica not as underdeveloped, but rather as appropriately developed. We should look at societies where people live long and happy lives at low levels of income and consumption not as backwaters that need to be developed according to Western models, but as exemplars of efficient living — and begin to call on rich countries to cut their excess consumption.

“It’s Crucial to Break Up Facebook”

Posted on January 21, 2019 by Reid Mukai

By Asher Schechter

Source: ProMarket

Four decades ago, writes Tim Wu in the introduction to his recent book The Curse of Bigness, the United States and other countries entered into a sweeping experiment that radically transformed their economies and politics. The experiment in question consisted of abandoning most checks on anticompetitive conduct, thus allowing concentrated corporate power to grow undisturbed.

The result: an increasingly concentrated global economy marked by historic levels of inequality and extreme concentrations of economic and political power, with disaffected voters being lured by radical far-right nationalists across the West. “We have managed to recreate both the economics and politics of a century ago—the first Gilded Age,” Wu writes.

Now, he warns, liberal democracies risk making yet another grave historical error by ignoring the well-established link between the concentration of economic power and the rise of authoritarianism. That monopolization poses an existential threat to democracy has been widely known throughout history: Louis Brandeis famously referred to this threat as the “curse of bigness”; in Germany, the rise of fascism was partly facilitated by monopolists and industrial cartels.

Yet in recent decades, explained Wu in an interview with ProMarket, much of this history has been forgotten. The legacy of Brandeis, America’s leading defender against bigness, has been “neglected, almost forgotten,” along with the greater antimonopoly tradition that has been an integral part of US politics for over 200 years. Which is why he decided to write The Curse of Bigness, a slim book that is equal parts historical polemic and urgent call to action.

Wu, the Julius Silver Professor of Law, Science and Technology at Columbia Law School and also the author of The Attention Merchants and The Master Switch, is perhaps best known for coining the term “net neutrality.” In his interview with ProMarket, he discussed the parallels between the monopolies of today and those of the first Gilded Age and explained why breaking up dominant companies is crucial, particularly when it comes to Facebook.

[This conversation has been edited and condensed for length and clarity]

Q: I want to start with Brandeis, who famously coined the phrase “curse of bigness.” In the book, you write that Brandeis “has been done a disservice.”

Yes, I think he has been. I think his economic vision has been forgotten. There are powerful ideas in it, very appealing in our times, very appealing through much of American history. So I wanted to try to do justice to and resurrect the Brandeisian strain of thought when it comes to economic policy.

Q: You point to many parallels between Brandeis’s time and ours, but one that especially haunts the book is the rise of neo-fascist movements around the world and the potential link between large business groups and aspiring authoritarians. Did you feel a certain sense of urgency in writing this book and making this link at this particular moment in time?

There is something alarming about the rise of extremist governments around the world. It has something to do with a sense of discontent as to how the economy functions for people, and that did give the writing of this a sense of a sense of urgency and a sense of a historic moment.

It’s a dangerous moment around the world and in the United States. I don’t think we have a complete understanding of what causes fascist uprisings, but I have a strong instinct, and I think many people do too, that there are economic origins to fascism that are very important and that, among other things, we really need to understand how to prevent people from turning to fascist, neo-nationalist, and extremist answers. I would suggest that has a lot more to do with economic policy than people think.

Q: That is something many of the “big is beautiful”-type arguments about private monopolies seem to ignore: the historical precedents of concentrated economic power contributing to the rise of authoritarian regimes.

I think that’s right. Also, it ignores [the fact] that there’s more to people’s lives than their lives as customers. People are also workers, and it’s one thing to face scale when you’re buying things and another thing to face scale when you’re an employee looking for a job and in a difficult bargaining position.

To take this further: I don’t like excessive pricing or price gouging, but the vision of antitrust over the last 40 years has been that the best of all possible worlds is one where you have relatively mild reductions in prices for consumer goods. Let’s just say there’s more to life than that. It’s not always clear that economics can get at it, but the focus on price in antitrust yields very narrow results.

“I don’t like excessive pricing or price gouging, but the vision of antitrust over the last 40 years has been that the best of all possible worlds is one where you have relatively mild reductions in prices for consumer goods. Let’s just say there’s more to life than that.”

Q: Unlike many people involved in the antitrust debate, even those that support vigorous enforcement, you don’t shy away from what Robert Pitofsky called the “political content of antitrust.” In fact, you seem to embrace it. What would you say is the political role of antitrust?

Ultimately, antitrust is a kind of constitutional check on private power. You can’t understand antitrust law without understanding its relationship with power. This is the centerpiece of the book and the original soul of antitrust law. It wasn’t so concerned with the details with price. It just had a sense that there needed to be some kind of outer limit on private power, much like there’s a limit on public power set by the constitution.

Q: What do you say to criticisms that you’re leading antitrust through uncharted waters, and that reinstilling political values into antitrust risks turning antitrust into a blunt political tool, much like what Trump is threatening to do with tech platforms?

I think this is confusing two meanings of the word “political.” There’s a narrow political sense in which a law can be used to punish your opponents or save your friends—consumer welfare antitrust can be used to do that already. But there’s also the broader sense of the law informed by constitutional values or concerns about power. That is also political, but in a much broader sense. That is the best sense in which the law has been enforced in the best moments of its history—the sense that a firm has become too powerful and too dominant to be tolerated in a land which calls itself free. It’s important not to confuse those two ideas of the term “political.”

Q: You compare the first Gilded Age to our own. Where do you see parallels between the monopolists of the Gilded Age, people like John D. Rockefeller and Andrew Carnegie, and present day dominant firms? Google and Facebook are not shooting workers, after all.

There’s some traces of the same ideology. Peter Thiel is a prominent example: He calls his [ideology] libertarianism, but it’s not much different than 19th century social Darwinism, which worships the monopoly form and holds the idea that we should see our society as a winner-take-all, survival of the fittest, “The strong shall rule, the weak shall serve them” kind of undertaking. Google and Facebook have much kinder public faces, but—particularly with Facebook—I’m not sure underlying it they think that much differently.

There are other parallels as well, particularly levels of individualized personal wealth that the world has never seen before. In the concentration of wealth is a glorification of wealth, and almost a fetishization with accumulating amounts of money that no person could spend in their lifetime. A lot of projects in Silicon Valley get bent to the need for monstrous payouts and it ends up getting in the way of what would otherwise be good projects or better ways to run companies.

Obviously, as I explore in the book, the economic structure is also similar, where you have an overall economy dominated by fewer entities and greater levels of inequality.

Q: Another parallel seems to be this belief in the goodness of monopolies and the benefits they bring humanity. The ruthless robber barons, who threatened to crush rivals who didn’t submit to their will, genuinely believed they were doing the good, moral thing, for the betterment of humankind.

That’s right. But I think this has less to do with Silicon Valley and more to do with Wall Street today, this very fragmented morality, the idea that somehow the right thing to do is not exactly what we would usually call the ethical thing: It’s right to destroy your rivals, it’s right to lie and cheat so long as you get away with it.

“If you’re looking for the one big signal failure of the last 20 years, it’s got to be merger review. There has been an inexplicable allowance of so many industries to merge down to four or three players, sometimes two, sometimes even a monopoly. Europe is as guilty of this as the United States.”

Q: You write that the priority for neo-Brandeisian antitrust would be reforming the process of merger review. Why is merger review the top priority, and how should it be reformed?

If you’re looking for the one big signal failure of the last 20 years, it’s got to be merger review. There has been an inexplicable allowance of so many industries to merge down to four or three players, sometimes two, sometimes even a monopoly. Europe is as guilty of this as the United States. In many cases, it seems like the question was not how are we going to stop this [merger], but what kind of conditions are [merging companies] going to agree to, which is not the way merger review was intended. Merger review is not intended to be a big set of commitments that companies make, but rather the actual blocking of mergers. There’s been some recovery from that, particularly in the United States near the end of the Obama administration, but merger review has been in a crisis point.

It’s possible Congress could act and reaffirm that it meant what it said when it passed the 1950 Merger Act. It’s possible you could add greater burdens for larger mergers, or mergers that pass some structural threshold. Another way would be to open merger review to more public scrutiny. I understand some of the arguments in favor of secrecy, but I think that in the case of really big blockbuster mergers there’s just too much at stake. Having more public awareness and more groups involved would be good actually, given the important political consequences.

Q: What’s interesting about European antitrust is that although they’ve taken on several big cases in recent years, in terms of mergers European competition authorities don’t put up a lot of a fight.

I agree. I think that Europe, if anything, has been worse than the United States for the last ten years. The beer merger of Anheuser-Busch InBev and SABMiller was inexplicably approved, creating a monopoly. Telecom mergers across Europe have been allowed, bringing multiple markets down to three [competitors].They allowed the Monsanto-Bayer merger—I’m not sure what they were thinking with that one.

Overall, I think consent decrees appeal to academic economists, but they have a bad track record. One problem with consent decrees is that you have the most talented attorneys and economists negotiating these on the government side, but once they’re done, they’re given to an enforcement bureau which is typically not heavily staffed. And sometimes it can be forgotten, and certainly not enforced with any kind of vigor.

Structural separation is self-executing. The blocking of mergers is self-executing. You don’t have to have the government constantly trying to make sure the thing is working. I think Europe has really gone down the wrong path in that direction.

Q: Another solution you explore in the book is breaking up dominant companies. One company you point to in this regard is Facebook—you call for breaking up Facebook, separating it from Instagram and WhatsApp. Why single out Facebook? And what would breaking up Facebook accomplish, considering its business model is at this point shared by the majority of online platforms?

I think it’s crucial to break up Facebook, particularly from WhatsApp and Instagram. In some ways, I think the burden should be on Facebook to explain why they shouldn’t be broken up.

Will that make a difference? I think it will. I have faith in improved competition. I don’t think there’s strong evidence of great efficiencies that come from having all of the major social networks under one roof. It’s hard to see any real loss of so-called efficiencies, at least ones that matter to consumers.

People are looking for somewhere to switch, but they don’t have anywhere to go. WhatsApp can easily be that platform, and its leadership has different values, or at least had different values before they left.

“I think it’s crucial to break up Facebook, particularly from WhatsApp and Instagram. In some ways, I think the burden should be on Facebook to explain why they shouldn’t be broken up.”

Q: In a recent post in Medium, you laid out ten antitrust cases the government should be investigating. Which ones would you say are the most pressing?

Someone has to stop the T-Mobile/Sprint merger. Maybe it will be the states, but someone has to stop that merger. I already mentioned the Facebook breakup, which I think is big and symbolically important.

I think the Justice Department actually is already working on this, but the Live Nation-Ticketmaster matter has been sitting there for a long time. It’s not the biggest industry, but it’s still a case with a lot of anticompetitive conduct.

And I would like to take a look back at the airline mergers and ask whether we should consider breaking down the triopoly. The state of the airlines is really unacceptable.

Q: It’s been roughly a year since the repeal of net neutrality. You, of course, famously coined the term net neutrality. What would you say is the importance of net neutrality, in terms of competition and the bigness debate?

It’s really a parallel discussion but the same issue, which is: When you have monopolies that don’t seem to be going anywhere, should they be completely unconstrained? Or should there be some rules as to how they conduct themselves? It’s always been a parallel to this question of antitrust, but they’re part of the same discussion. For some reason, we’ve moved in the direction of extreme, radical, laissez faire [responses] for all of these questions. But people are starting to move in different directions now, and the backlash is inevitable.

The Recession Will Be Unevenly Distributed

Posted on January 17, 2019 by Reid Mukai

By Charles Hugh Smith

Source: Of Two Minds

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper.

The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”

I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).

These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards are generated will be reaped by a few.

One aspect of the uneven distribution is that sectors that were relatively protected in recent recessions will finally feel the impact of this one. Large swaths of the tech sector (which is composed of dozens of different industries and services) that were devastated in the dot-com recession of 2000-02 came through the 2008-09 recession relatively unscathed.

This time it will be different. The build-out of mobile telephony merging with the web has been completed, social media has reached the stagnation phase of the S-Curve and many technologies that are widely promoted as around the corner are far from profitability.

Then there’s slumping global demand for mobile phones and other consumer items that require silicon (processors) and other tech components: autos, to name just one major end-user of electronics.

The net result will be mass layoffs globally across much of the tech sector.Research is nice but it doesn’t pay the bills today or quiet the restive shareholders as profits tank.

The public sector is also ripe for uneven distribution of recessionary impacts.Local government and its agencies in boomtowns such as the SF Bay Area, Seattle, Los Angeles, NYC, etc. have feasted on soaring tax revenues and multi-billion dollar municipal bonds.

The Powers That Be in these boomtowns are confident that the good times will never end, and so the modest rainy-day funds they’ve set aside are widely viewed as immense bulwarks against recession when in reality they are mere sand castles that will melt away in the first wave.

A $1 billion reserve looks impressive in good times but not when annual deficits soar to $10 billion. Local governments depend on various revenue streams, and most rely on a mix of property, sales and income taxes, both wages (earned) and capital gains (unearned). All of these will be negatively impacted in the next recession.

Local governments are especially prone to The Ratchet Effect, the dynamic in which expenses move higher as revenues climb but the organization is incapable of shrinking, i.e. it only knows how to expand. This defines government as an organizational type.

Inefficiencies (including low-level corruption and fraud) pile up and are offset with higher revenues. When revenue crashes, the system is incapable of eliminating the inefficiencies or reducing benefits and headcount.

I call the endgame of The Ratchet Effect the Rising Wedge Model of Breakdown:

The Ratchet Effect is visible in organizations of all scales, from households to sprawling bureaucracies. The core of the Ratchet Effect is the ease with which the cost basis of an organization rises and the extreme resistance to any reduction in funding.

The psychology of this resistance is easy to understand: everyone hired in the expansion will fight to keep their job, regardless of the needs of the organization or the larger society. Every individual, department and division will fight with the fierceness of a cornered animal to retain their share of the budget, for their self-interest trumps the interests of the organization or society.

Since each “ratchet” will fight with desperate energy to resist being cut while those attempting to do the cutting are simply following directives, the group that has pulled out all the stops to resist cuts will typically win bureaucratic battles.

Broad-based cuts trigger Internecine Warfare Between Protected Fiefdoms as entrenched vested interests battle to shift the cuts to some politically less favored fiefdom. Bureaucracies facing cuts quickly shift resources to protecting their budget, leaving their mission on auto-control. (The Lifecycle of Bureaucracy December 2, 2010)

These dynamics create a rising wedge in which “minimum” costs continue to rise over time even if modest cuts are imposed from time to time. The eventual consequence is a cost basis that is so high that even a modest reduction collapses the organization.

In other words, incremental reductions and reforms have zero impact on the endgame. The organization has become so brittle that any structural reform triggers a breakdown.

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper. Those with high debt loads, high fixed expenses and inflexible responses will find incremental reductions and reforms will have little impact on the endgame of breakdown and collapse.

This is one of the core topics of my latest book, Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic.

Here’s a household example of the type of organization that won’t just survive but thrive in the recession: a household with $100,000 in revenues from multiple income sources and fixed expenses of $35,000, no debt and a management team (the spouses/adults) that’s willing to implement radical changes in lifestyle, expenses and work at the first disruption of revenues. The household that doesn’t just survive but thrives sees crisis / disruption as an opportunity, not a disaster to be mitigated with denial and wishful thinking.

	You Don’t Have To Wa… on You Don’t Have To Wait For Hal…
	ALL OUT WAR ON THE L… on ALL OUT WAR ON THE LIFE F…
	Pacific.scoop.co.nz… on Killing the Biosphere to Fast-…
	Reid Mukai on Saturday Matinee: Wizards
	Lara/Trace on Saturday Matinee: Wizards

After the Crash

Dispatches From a Long Recovery (Est. 10/2024)

Category Archives: Oligarchy

“It’s Crucial to Break Up Facebook”