Tuesday 24 May 2016

Imperialism Today

A date for your diary ... On Monday 27 June 2016, there is a one-day conference on Imperialism Today held in London. Topics covered include the theories of Marx and Lenin, the globalisation of production, the role of finance and profitability. There will be plenty of time for discussion and debate.

The conference is organised by the International Initiative for Promoting Political Economy (IIPPE). Speakers are: Lucia Pradella, John Smith, myself and Michael Roberts.

Tickets are £5 per person, to cover costs.

The location is: SOAS, Vernon Square site, London WC1X 9EW.

For other details and how to register, see here.

Tony Norfield, 24 May 2016

Sunday 22 May 2016

Five Years

Below is a record of the articles and posts on this blog since its inception five years ago on 22 May 2011, although excluding those posts that were just advertisements for other events. The title of the article usually gives an indication of the content, and searching down this list will give a quick means of finding my analyses of various issues.

Tony Norfield, 22 May 2016

18 May 2016, Cocytus Brexit
13 May 2016, Britain's Financial Machinery
10 May 2016, Vice Interview
4 May 2016, Tax Havens in the Imperial Network
29 April 2016, Elaboration
25 April 2016, Economic Power & Corruption
22 April 2016, Fundamentals
20 April 2016, Going Underground
11 April 2016, Book Launch
8 April 2016, A New Crisis Acronym: Brexit
6 April 2016, Offshore? Tax Haven? A Matter of Definition
6 April 2016, 'Offshore' Centres and Tax Havens
1 March 2016, Elsewhere
20 February 2016, The Brexit Vote
5 February 2016, Saving the Whale
1 February 2016, Capitalism, Imperialism, Profit and Finance
25 January 2016, The City: London & Power of Global Finance
22 January2016, Oil Prices, Equity and Debt
14 January 2016, Jerusalem. No, the One in England
13 January 2016, Saudi Arabia and Imperialism
9 December, The Wisdom of Social Media
2 December 2015, The Dogs of War
14 November 2015, Developing Marxist Theory
6 November 2015, Poppy Militarism
27 October 2015, A Modest Proposal for Solving the Tax Credit Crisis
25 October 2015, Bank Nationalisation?
8 October 2015, Origins of the UK Welfare State
27 August 2015, Women and Society
26 August 2015, British Media
25 July 2015, Labour 'Leadership' & British Politics
7 July 2015, Imperial Hypocrisy and Greek Debt Data
28 June 2015, Greek Lessons
12 June 2015, Making Things Does Not Make You Smile
10 June 2015, History and Change
3 June 2015, FIFA and World Power
10 May 2015, A Deeply Conservative Country
29 April 2015, Imperialism and Social Democracy (reply to Anonymous)
22 April 2015, The Dead Sea
20 April 2015, Euro Labour Costs
11 April 2015, Immigration and the Imperial Mentality
9 April 2015, Britannia Needs a Trident
26 February 2015, Jack Straw, Social Hero
5 February 2015, Body Language: Germany, ECB, Greece
22 January 2015, Europe Gets Even More QuEasy
20 December 2014, How Much Do Santa's Helpers Get Paid?
14 December 2014, Bush and the Brazilians
7 December 2014, Labour's Colonial Policy
12 November 2014, Rosetta and Ebola
28 October 2014, Hard Road
26 October 2014, Moribund Capitalism
14 October 2014, Absolute Airheads
11 October 2014, Financial Trouble
9 October 2014, The Wages of Sinn and the Euro crisis
25 September 2014, Obama at the UN
24 September 2014, T-Shirt Economics Update
20 August 2014, Palestine, 'Israel' and Justice
16 August 2014, The Scotland Debate
8 August 2014, The Moon Dog Cannot Bark
20 July 2014, Ukraine, Gaza, Imperial Hypocrisy
15 July 2014, BRICS Building
6 June 2014, Bitcoin: A Digital Alternative?
3 June 2014, Robots and the Organic Composition of Capital
10 May, Pfizer's Bid for AstraZeneca
16 April 2014, Marx and the Princess
2 April 2014, Rational Paranoia
27 March 2014, The Tactical Unity of Thieves
25 February 2014, Ukraine & the EU
6 February 2014, A Brief Note on Scottish (British) Imperialism
3 February 2014, US Rate of Profit, 1948-2012
6 January 2014, Capitalist Production Good, Capitalist Finance Bad
14 December 2013, Imaginary Power
13 December 2013, Sitting on the Dock of the Bay
29 November 2013, Destroying the Evidence
30 October 2013, Cameron's Sharia Bond & British Parasitism
22 October 2013, Bad News for British Finance
15 September 2013, Information Flows
31 August 2013, Saudi vs Syria: Imperial Policy Crisis
23 August 2013, The Australia-Hong Kong War of 1994
22 August 2013, Understanding the Syrian Situation
21 August 2013, The Economics of Spying
19 August 2013, Monopoly #2
23 July 2013, Unto Us a Child is Born
17 June 2013, 99% vs 1%, or 40% & 50% vs 10%?
14 June 2013, Monopoly
9 May 2013, Cats, Dogs & People in the Imperialist World Economy
22 April 2013, Reflections on Reinhart & Rogoff
22 March 2013, UK FDI Profits
4 March 2013, A Private Chat About Provoking a War
23 February 2013, Running Out Of Rope
26 December 2012, Churchill, Keynes, Gold & Empire
4 November 2012, Union Jacked
1 November 2012, Index of Imperialism - Amendment
3 October 2012, The City of London: Parasite of the World Economy
14 September 2012, Ben and the Flood
12 September 2012, Imperial Balances
3 September 2012, Idealism & Debt
27 August 2012, Debt, Society, History, Morality & Imperialism
19 August 2012, Deep Crisis
18 August 2012, Tattoo Nausea
31 July 2012, Olympic Imperialism
30 July 2012, Rate of Profit, Finance & Imperialism
21 July 2012, Global Working Class
19 July 2012, Loving Lehmans
2 July 2012, Fixing LIBOR
29 June 2012, Merkel's Money
13 June 2012, Geometry of Imperialism
27 May 2012, Bankiarupt
22 May 2012, Stubborn Facts
1 May 2012, Imperialism by Numbers
24 April 2012, The Commodities Business
2 April 2012, The Circuit of Capital
22 March 2012, The Composition of Capital
18 March 2012, Eurocentric Angst
13 March 2012, The Number of the Beast
20 December 2011, Europe's Crisis Measures
12 December 2011, Cameron, Merkozy & Europe
3 December 2011, Imperialism & the Law of Value
23 November 2011, Bunga Bunga Bund
8 November 2011, Law of Value vs Berlusconi, Papandreou
24 October 2011, British Imperialism Today
21 October 2011, Capitalism & Slavery
7 October 2011, Steve Jobs: Apple Monopolist
5 October 2011, Dimensions of Dollar Imperialism
22 September 2011, It Can Always Get Worse
21 September 2011, Operation Twist
20 September 2011, Collaborate Against Imperialism
15 September 2011, Darling, We Have a Crisis
7 September 2011, Capitalists Don't Like Markets
5 September 2011, Capitalist Crisis, Keynesian Delusions
25 August 2011, Bank Profits & Leverage
22 August 2011, Libya is for Everyone?
16 August 2011, US Constitution: 'We, the Capitalists'
8 August 2011, Debt & Austerity
6 August 2011, US Credit Downgrade
4 August 2011, Pirates of the Caribbean: Sugar & Slavery
2 August 2011, Foxconn & Organic Composition of Capital
1 August 2011, Tea Party Antecedents
26 July 2011, The Real US Debt Problem
22 July 2011, The Euro Deal
15 July 2011, The Murdoch Mafia
5 July 2011, Anti-Bank Populism in the Imperial Heartland
1 July 2011, Ireland’s Imperial Tithe
24 June 2011, Origins of the Greek Crisis
7 June 2011, Value of Labour-Power & Wage Differentials
4 June 2011, What the ‘China Price’ Really Means
2 June 2011, Winston Churchill Told It Like It Was
29 May 2011, America’s War with China
22 May 2011, The Economics of British Imperialism

Wednesday 18 May 2016

Cocytus Brexit

Apologies, this is very derivative. However, it highlights the moribund nature of UK politics.

A cartoon by Steve Bell in The Guardian makes an amusing point about the opposing sides in the UK Brexit debate. The cartoon, based on an image by Gustave Doré, depicts the ever more corpulent and bombastic Boris Johnson, ex-Mayor of London and now Conservative member of parliament for Uxbridge and South Ruislip on the 'Leave' side, together with David Cameron, UK prime Minister and leader of the Conservative party fronting the 'Stay' campaign. The principal claim to fame of the latter is that he can talk to the Queen in her own accent. Unless you are brought up correctly, you just carnt say 'house' proper, like.

Cocytus is the name of Doré's image, and Wikipedia notes that Cocytus, or Kokytos, means "the river of wailing" or "lamentation" in the underworld of Greek mythology. Cocytus flows into the river Acheron, across which is the mythological abode of the dead.

Many may nevertheless survive the Brexit debate and the UK vote on 23 June, rather than perish. The debate will open up a panoply of misconceptions that offers sustenance to purveyors of all kinds of degenerate imperial nonsense.

Tony Norfield, 18 May 2016

Friday 13 May 2016

Britain's Financial Machinery

In 2004, Labour Chancellor Gordon Brown inaugurated the opening of Lehman Brothers’ London headquarters and gave Lehman fulsome praise for its contribution to ‘the prosperity of Britain’. Coming four years before Lehman’s implosion and a debilitating financial crisis, that statement now looks, how to put it, less than well judged. However, it was just one of the many accolades for the City given by successive British governments. It also reflects a longstanding reality: the City plays a key role in the world financial system and that system benefits British capitalism.
One sign of the financial system’s importance to Britain’s economy is shown by the balance of payments data for 2015. While the UK trade deficit in goods was £125bn – nearly seven percent of GDP – this was offset by £41 billion of net financial services revenues and another £15 billion from insurance and pension services. The current account still recorded the biggest ever deficit, a little over five percent of GDP, but it would have been much worse without these factors.
These points help explain UK government policy. While massive debts, bailouts and examples of financial excess lead people to see an injured ‘real’ economy as the victim of a ‘financial’ perpetrator, that perspective fails to understand how modern capitalism inevitably takes on a financial form. The City is better understood as a nerve centre of a troubled mechanism rather than as a cancerous tumour in an otherwise healthy body.
Britain has long had a trade deficit, even in the nineteenth century when it was the ‘workshop of the world’. Before 1914, these deficits were far more than offset by large revenues from shipping, insurance and other financial services, and by a huge income from foreign investments. The latter resulted in an annual current account surplus of some five percent of GDP from 1850-1914. However, two world wars, a reduction of foreign assets and a falling back of Britain’s position in world trade and finance destroyed that ascendancy.
In the decades after 1945, the City’s business slowly recovered, but it was principally through the newly developing ‘euromarkets’ for international loans and bonds, and by the City using the US dollar. The City was no longer the major provider of capital to international markets as it had been before 1914, but a dealing intermediary using other people’s money denominated in other countries’ currencies. Even after the removal of exchange controls in 1979, the sterling share of this business stayed small, and was less than 20 percent in 2013.
The US is the major power in world finance, with Fed policy driving global interest rates and US stock markets the largest and most influential. However, not many recognise that the UK is the biggest centre of international banking, the principal foreign exchange market, with more than twice the volume of US-based trading, and that it has close to half of the world’s trading of interest rate derivatives between banks and their customers.
London’s role as a major hub of global financial dealing was boosted by government policies from the 1980s, including the ‘Big Bang’ of 1986. This reflected wider trends in the world economy as other major countries were also liberalising their financial markets. The boom in dealing was not limited to financial companies. All big corporations are players in financial markets, managing their interest rate and foreign exchange exposures, issuing bond and equity securities or doing mergers and acquisitions to consolidate their market power. Demand for large-scale funds not easily available in domestic markets, the growth of international investment and the exigencies of today’s economy underpin such financial developments. While the deals clearly benefit financial companies, the underlying rationale is driven by the nature of modern capitalism.
Financial markets today mediate the ‘law of supply and demand’ for goods and services. A company’s market status is more readily shown in the value of its equities, the yield on its bonds and its access to finance, than in the demand for its products. Having financial clout is critical. In 2014, for example, Facebook bought WhatsApp, a company that had never even made a profit, for more than $19bn, largely paid for with its own shares. This was the price Facebook was able to pay to absorb a potential rival, given its existing market position. Such is the nature of contemporary markets. It is a mechanism that the City facilitates and from which the British economy profits.

Tony Norfield, 13 May 2016

Tuesday 10 May 2016


I was interviewed by Yohann Koshy of Vice magazine recently, a transcript of which is here.

Tony Norfield, 10 May 2016

Wednesday 4 May 2016

Tax Havens in the Imperial Network *

“We don’t pay taxes. Only the little people pay taxes.” Leona Helmsley
The motto of the ineffable billionairess came to mind with the publication of the Panama Papers. This huge set of files leaked from a Panamanian law firm, Mossack Fonseca, documented the tax haven dealings of the world’s richer denizens. While the law firm’s name sounds like a toxic cocktail, the information revealed in its files has also been toxic for Iceland’s Prime Minister Gunnlaugsson, who had to resign. So far, there have been no other scalps, but there have been sleepless nights for many and plenty of work for their PR companies.
I would venture to predict that there will be no more casualties from the revelations. Although there will doubtless be more expressions of anger from those who believe an influx of previously elusive tax revenues into the national pot might cushion the iron heel of austerity, this elaborate tax haven-offshore network is entrenched in a capitalist system that most critics do not venture to criticise.

Avoidance and evasion

There is an important distinction, of which many people are unaware, between tax ‘avoidance’ and tax ‘evasion’. Tax avoidance is legal; it just means you arrange your affairs in a way that lowers how much tax you have to pay. However, that also includes putting money in a tax haven, having your revenues accounted for there, and paying their lower tax levels. Evasion, on the other hand, is illegal. It involves not paying the taxes due to the authority in the relevant jurisdiction, for example, not declaring that you have an income to the government and so not paying the tax on it. The distinction between avoidance and evasion can be complicated. Making sure you have the correct set up involves expensive advice, afforded only by the rich, and this is a source of income for tax lawyers like Mossack Fonseca. But this is not the only rationale for the existence of tax havens.
Tax havens rose to prominence largely in the post-1945 period, when income taxes in major countries were often very high for the rich. Havens offered lower rates of tax and, as a result, a flood of rich people from around the world began to park their financial assets, and the income flowing to them, in these welcoming climes, even if they did not move there themselves. This was often done by setting up shell companies that owned the assets. Directors of the shell companies may have been residents of the particular haven, but they were usually acting on instructions from the real owners of the assets and recipients of the income. It was not long before capitalist corporations began to see how they could also play the game, for example, by channelling revenues from the rest of the group that appeared as their ‘costs’ paid into a special company set up in a haven where little or no tax is paid. The subsidiaries doing the channelling could then argue that their ‘costs’ meant they earned little or no profit in the higher-taxed countries in which they were based.
These havens were not necessarily islands or ‘offshore’. Although many were islands, since this was a way for a one-dimensional economy to branch out, when it was otherwise dependent upon seasonal tourism or a single crop or mineral, there was also Monaco, Andorra and Luxembourg in the heart of Europe, plus Ireland and others, including Delaware in the US. In Switzerland, for example, the tiny lakeside canton of Zug is reputed to host 27,000 companies, about one for every four inhabitants! No, Swiss people do not have an unusually high degree of entrepreneurial spirit; this was many foreign people and companies taking advantage of local tax laws. The havens get important revenues – from financial fees paid to the local government, as money paid in the employment of locals who would be ‘directors’ of these companies, and in other ways, including the business generated by a rich elite who might like to go shopping, sail in a yacht or stay in a nice hotel.

Rich people, but powerful companies

Essentially, tax havens are a commonly used release valve for the burden on the revenues of rich people, and companies, from the costs of maintaining the state and public services financed from taxation. In more recent decades, especially from the 1980s as international financial flows became less regulated by the key powers, these offshore and other centres grew dramatically in size, attracting vast volumes of funds. In 2004, when the US Congress passed a Homeland Investment Act that gave corporations a tax break if they repatriated funds held overseas, nearly a thousand US companies later repatriated more than $300bn of cash! This is one indication that the individuals named in the Panama papers are really a side issue: big corporations are the main holders of the international funds.
Ironically, Panama, at the centre of the latest revelations is a relatively small-scale offshore centre. A good measure of size is given by the volume of funds going into and out from these centres. Panama, with $106bn of funds outstanding in 2015, is less than a twentieth of the size of the largest one, the Cayman Islands, which has $2,610bn of liabilities plus claims. This stupendous sum for the Caymans is made up from roughly $1,300bn coming in as liabilities (or deposits and other lending from overseas) and $1,300bn going out as claims (or loans and other investments outside the Caymans). This reflects the fact that the money is doing more or less nothing in the Caymans itself – apart from the hotel and shopping bills and paying some fees to the government and a small proportion of the population of less than 60,000 people. As you might expect, the locals do not actually own the $800bn or so of US equities and bonds that are registered in the name of Cayman Island corporate entities.
Another interesting detail of the Cayman Islands is that this is the main offshore location to which the UK banking system sends a net volume of funds, amounting to $53bn at the end of 2015. While the UK-based banking system obtains around a net $100bn from its own local offshore islands – Jersey and Guernsey, especially – it also plays a big part in redirecting funds to other locations. A theme song of the movie Cabaret, ‘Money makes the world go around’, very much applies to the role that tax havens/offshore centres play in the global capitalist system. The UK-based banking system is at the core of this international network and, not surprisingly, the UK economy accrues big revenues from doing the in/out deals involved.

God Save the Queen

The location of the Cayman Islands in the Caribbean Sea might make one think that they have little or nothing to do with far away Britain. Nevertheless, at official occasions they sing ‘God Save the Queen’, although, as far as I am aware, it is not a widely downloaded itunes song and has never won any music awards. The reason is that the Caymans, while not technically being part of UK territory, are given a special status by the UK authorities as a British Overseas Territory. Similarly, other offshore islands are members of the British Commonwealth (the Bahamas) or are British Crown Dependencies.
UK officials do not like to talk about them very much and, at most, only propose measures that would have little effect on the tax avoidance/evasion taking place, such as calling for a ‘central register’ of who owns the more than two million companies and partnerships registered in these havens. The proposal is not expected to make much difference. The UK has been heavily involved in establishing this financial network. UK-linked havens, particularly the Cayman Islands, the Bahamas, Jersey, Guernsey and the Isle of Man, not only sing the same national anthem, if added together they would rank as the sixth largest international banking centre, just behind Germany, despite their minuscule populations. Why should the UK bother to do anything about this, when the US and many other European countries are also involved in the same kinds of deals, and when all the capitalists benefit?
All offshore centres are closely linked to the interests of the major capitalist powers. Britain has the closest links with the largest number. My experience of working for London-based banks included several business trips to Jersey, and some contact with other centres. When it comes to hanging out as a member of the rich elite, Jersey has some way to go in competing with the ‘offshore’ centres in the Caribbean and Central America. Nevertheless, like other centres, it plays an important role in allowing the capitalist class to do what it likes. Such is the exercise of their freedom. They have been free to exploit the working class worldwide. Surely they should also be free to do what they want with the proceeds?

Who are you?

Another feature of these havens is that the identity of who owns the funds is usually hidden. Interestingly, that is not necessarily to avoid tax. For example, one of the individuals cited in the Panama Papers is King Salman of Saudi Arabia. Presumably, he has no reason to avoid taxes set by the rules of the government he controls. The rationale here was instead to use the offshore accounts as a means of hiding the fact that a Saudi-owned company was doing a particular investment. So ABC Corp registered in Offshore Island X, but owned by the ruling Saudi family, would be a shareholder in a major US, European, or Asian, etc, corporation, but nobody would be any the wiser.
The publication of the Panama Papers has been amusing for the embarrassment they have caused to usurpers of wealth, in particular to those whose hypocrisy is shown by their former public pose. But little or nothing should be expected to change in society if people are critical only of individual excesses, and not of the more systematic crushing of the life chances of those oppressed by capitalism, in which tax dodging is a relatively minor issue.

Tony Norfield, 4 May 2016

* This article puts in a broader context some points made previously on this blog. A copy of this article first appeared in the New York journal, BrooklynRail, in the Fieldnotes section. Further details of the role of tax havens in the international financial system are given in my new book, The City: London and the Global Power of Finance.