Paradise Papers Expose Trump Administration Tax Cheats

10 Minutes: the Paradise Papers

Press TV (2018)

This short video provides a capsule summary of the Paradise Papers, 13.4 million electronic files leaked in November 2017 about the wealthy tax dodgers who use offshore tax havens to avoid taxes and conceal illegal financial dealings.

Although the Paradise Papers scandal has received less publicity than the Panama Papers did in 2015, its list of culprits is far more comprehensive. At the top are the Queen of England, Madonna, Bono, Apple, Nike, the Queen of Jordan, the ministers of finance of Canada and Brazil, US Commerce Secretary Wilbur Ross (who used tax havens to conceal illegal dealings with sanctioned Russian businessmen) and Gary Cohen, who wrote Trump’s new tax law. The EU has slapped a $13 billion fine on Apple for tax evasion, which they refuse to pay.

Analysts who have studied both the Paradise and the Panama Papers estimate that approximately $7.8 trillion is held in offshore tax havens or 10% of global GDP.

The best known tax havens are Ireland, the Netherlands, Switzerland and British-controlled Cayman Islands, Bahama, Jersey and the Isle of Mann. There is growing pressure on the British government to crack down on tax and banking policies in their tax haven colonies.

How Neoliberalism Gave Us Brexit and Trump

Revenge of the Rich: The Neoliberal Revolution in Britain and New Zealand

by Austin Mitchell

Canterbury University Press (2017)

Book Review

Revenge of the Rich, by British economist Austin Mitchell, describes how the neoliberal revolutions of Margaret Thatcher and New Zealand finance minister Roger Douglas virtually gutted the economies of the UK and New Zealand. The result has been years of declining or negative growth rates, virtual destruction of manufacturing, massive job loss, wage stagnation and higher deficits and overseas borrowing.*

As an article of faith, neoliberals maintain that mass layoffs of public service workers will reduce government deficits. The reality, as Mitchell ably demonstrates, is the exact opposite. When you lay off 400,000 public servants (as David Cameron did between 2010 and 2016), they quit paying taxes and increase government costs by claiming unemployment and other benefits.

Britain’s EU Membership: Setting the Stage

According to Mitchell, Britain’s decision to join the EU in 1973 set the stage for the neoliberal revolution that subsequently occurred in both countries. EU membership forced Britain to end their special trading relationship with New Zealand (an other Commonwealth countries), resulting in significant economic decline in both countries. Neoliberal trade liberalization was meant to stem these losses. Instead the loss of tariff and other import protections quickly destroyed manufacturing in both countries.

New Zealand, which was fortunate in having agricultural exports to fall back on, succeeded in developing alternative trade relationships with Australia, China and other Asian countries. Nonetheless, thanks to their 1980s neoliberal experiment, New Zealand has one of the highest levels of foreign ownership (of land, homes and companies) in the developed world. It also has the highest house prices, the second highest prison population and extremely high child poverty levels (1/3 of Kiwi children grow up in poverty). Meanwhile it’s failure to provide jobs for young adults means a sizeable proportion leave New Zealand permanently for other developed countries.

Brexit and Trump: The People Rebel

Mitchell describes the rise of left and right wing extremist groups in Europe, the Brexit vote and the election of Donald Trump as a direct popular reaction to the immense human misery caused by neoliberal policies. In New Zealand the 1996 citizens referendum adopting proportional representation was a direct reaction against both major parties (Labour and National) advancing neoliberal policies.

At this point, the traditionally pro-corporate International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) have both come out against austerity and similar “deflationary” neoliberal policies. Instead they argue strongly for increased stimulus (public) spending to stabilize the world’s developed economies.


*Similar effects under American neoliberals Reagan, Bush Sr and Jr, Clinton and Obama inflicted similar damage on the US.

Demise of the American Empire: Pinpointing the Timeline

 

In the Shadows of the American Century: The Rise and Decline of US Global Power

by Alfred W McCoy

Haymarket Books (2016)

Book Review

Prior to 2001 and the launch of the War on Terror, the US political elite adamantly denied (despite massive evidence to the contrary), that the United States was an empire rather than a republic. Because their sudden about face (ie acknowledgement and promotion of US imperialism) was so recent, there has been little opportunity for scholarly analysis of America’s effectiveness as an empire. It’s this void Alfred McCoy seeks to fill with In the Shadows of the American Century: The Rise and Decline of US Global Power.

Competition for Control of the Eurasian Landmass

McCoy traces America’s serious global empire building to their defeat of Spain in the Spanish-American War in 1898, which won them Puerto Rico, Cuba, the Panama Canal Zone and the Philippines.* He maintains that us strategies for empire-building, like those of the former British empire, have mainly relied on seeking and maintaining control of the “World-Island.” This is a term coined by London School of Economics director Halford Mackinder’s World Island in 1904. Under this concept, the World Island consists of the vast European-Asian landmass that is home to 70% of the world’s population, 75% of its global energy resources and 60% of its current productivity.

How the US Maintains Military Control

After the US became the world’s preeminent superpower after World War II, they have used nine basic strategies to maintain military control of the Eurasian landmass: mass surveillance (based on a system of extensive personal data collection that began during their “pacification”** of the Philippines (1898-1907); CIA covert operations (involving electoral interference, military coups, installation of compliant puppet dictators, targeted assassinations, torture, advanced technological weaponry (electronic senors, satellite imagery, drones, etc) and, increasingly cyperwarfare and space-based weaponry (most information about the latter two is classified).

America Falling Behind China Economically and Militarily

For me the most interesting section of the book examines ways in which the US is rapidly falling behind China – not only economically but militarily. McCoy identifies Bush’s rash decision to invade Iraq as the start of the American empire’s steady decline. While the US has spent the last 16 years mired in unwinnable wars in Afghanistan and Iraq, China is busily building alliances and investing their trade surplus (from selling Americans cheap consumer goods) in Russia and other countries located in the World Island. In Afghanistan alone, they are responsible for 79% of foreign investment.

Meanwhile China is rapidly creating a single economic zone across the Eurasian landmass, with a vast network of high speed trains and pipelines following historical Silk Road and Tran-Siberian Railway routes – and soon a high speed Southeast Asian and Moscow-Beijing line.

Even the Pentagon-linked Rand Corporation predicts China’s will exceed that of the US by 2030 or sooner. In 2010, China became the world’s leading manufacturing nation. In 2014, it took the lead in the number of new patents it awards annually.

Even more concerning is the rapid decline of US educational standards compared to those of China, which has ominous implications for the development of high tech weaponry. Chinese students consistently score first in math, science and reading, while US students score 27th, 20th and 17th respectively.

By 2025, China is expected to have better long range cruise missiles than the US, better air defense aircraft, better electronic sensors, better digital communications capacity, better computer processing power and better cyber-security. At the same time, they have a significant strategic advantage because the US spreads its military resources so thin by fighting so many foreign wars simultaneously.

According to McCoy, they already have the ability to cripple critical US infrastructure (electrical and telecommunications grid and pipelines) via cyber warfare.

Collapse Predicted Between 2030-2040

McCoy predicts (and makes an excellent case for) the demise of the US empire some time between 2030-2040. It could happen gradually, as US economic and military prowess continues its steady decline – or suddenly, if the loss of its privileged status causes the US dollar to collapse. The impending implosion may be aggravated by climate change, especially if the Pentagon is drawn into wars over dwindling food and water resources or control of massive numbers of climate refugees.


*In a separate development, the Kingdom of Hawai’i was illegally overthrown by The Committee of Safety (a group of wealthy American/European businessmen) in 1998. The Committee of Safety used U.S. Marines to detain the Queen while they announced their takeover of Hawai’i.

**”Pacification” is a military euphemism for violently subjugating the indigenous population of an occupied country.

Originally published in Dissident Voice

 

 

China’s Declining Economic Miracle

The End of the Chinese Miracle

Financial Times (2017)

This documentary explores factors behind China’s declining economic growth and the potential effect on the rest of the global economy.

The filmmakers attribute China’s recent economic miracle to an explosion of young workers willing accept low wages in hundreds of thousands of factories manufacturing cheap consumer goods for the West. Over two decades, the lure of jobs has prompted the migration of millions of Chinese youth from the countryside to 88 super cities (the size of London) all over China.

Owing to demographics, this supply of endless young workers has stalled, causing average manufacturing wages to more than double. The global recession and declining demand for cheap plastic has prompted many Chinese manufacturers to move to Southeast Asia, where wages are much lower. Others are are illegally employing undocumented Vietnamese laborers smuggled into China. Not mentioned in the film, is the rapid replacement of Chinese workers with robots (see China Replaces Workers With Robots) .

Owing to the decline in good paying manufacturing jobs, many rural workers are returning to their families to work the land.

Meanwhile commodity exporting countries (eg Australia, China’s main source of coal) are being forced into recession as Chinese manufacturing declines.

 

 

Inside the Banker’s Brain: The Physiology of Greed

In Search of the Banker’s Brain

Directed by Jos de Putter (2013)

Film Review

In Search of the Banker’s Brain is about the biochemical changes associated with greed. Inspired by a Dutch blogger who investigated the “banker culture” that led to the 2008 global economic collapse, it paints a troubling picture about our willingness to place the welfare of the global economy in the hands of 25-year-old ruthless macho hyper-competitive psychopaths.

In addition to several former investment bankers, the film also features a Dutch psychologist who treats Wall Street bankers and a former trader turned neuropsychologist who investigates how greed affects the brain. He begins by describing the rigged reward system that rewards traders to take enormous risks with other peoples’ money – they get massive bonuses if they’re successful and no consequences at all if they fail.

In response, they begin to crave risk, which feels just like a narcotic when it floods their brain with adrenaline and cortisol. They become cunning like heroin addicts looking for their next fix and show traits (loss of conscience and scruples) virtually indistinguishable from psychopaths in a prison environment.

Like psychopaths, they also tend to burn out around age 40, which is when they are at high risk for “econocide.”*


* Term coined by psychologists term for banker suicide.

 

Homelessness: The Low Income Housing Scandal

Poverty in America

Frontline (2017)

Film Review

Poverty in America is about the massive corruption scandal behind homelessness and the dearth of affordable housing for low income Americans.

Despite the nearly ten years that have passed since the 2008 economic crisis, 2.5 million Americans are made homeless through home eviction every year. The limited stock of affordable housing has no way of absorbing this many new renters. This, in turn, drives up rents at a time when real wages are decreasing. In many cities, families are forced to pay over 50% of their income in rent – a precarious situation leaving them one family emergency away from the streets.

This documentary focuses on two grossly inadequate federal programs dedicated to increasing access to affordable housing. The first is the Section 8 voucher program enacted in 1968. Under this program, the Department of Housing and Urban Development (HUD) awards vouchers to low income renters that pay the different between the rent a landlord charges and the rent a tenant can afford based on income.

There are currently 2 million Americans on the waiting list for Section 8 vouchers and only 25 percent will ever receive vouchers. The filmmakers follow three women who have waited six years or longer to qualify for Section 8 vouchers. None of them can find a landlord willing to accept their voucher within the 90 day limit they are given.

The second federal program Frontline explores is one in which the IRS allocates tax credits to states to grant to developers – who, in turn, sell the credits to investors. An entire tax credit industry has grown up around this scheme. Owing to inadequate IRS monitoring (only seven companies have been audited in 29 years), the scheme has been plagued by bribery and kickback scandals.

In Florida, for example, developers routinely cheat the program by over inflating the cost of development projects and either pocketing the difference of siphoning it off to shell companies (including one in Costa Rico specifically created for this purpose).

Despite heroic efforts of a handful of Department of Justice attorneys and Senator (R) Charles Grassley from Iowa, there seems to be little interest on the part of federal or state authorities to end this corruption. The IRS and HUD declined to be interviewed for this program.

Understanding the Current Economic Crisis

The ABC’s of the Economic Crisis: What Working People Need to Know
Fred Magdoff and Michael Yates

Monthly Review Press (2009)

Book Review

In the ABC’s of the Economic Crisis, Magdoff and Yates use stagnation theory to explain the origins of the current global economic crisis. Karl Marx predicted that overproduction and stagnation would be inevitable under monopoly capitalism once market demand has been saturated. Magdoff and Yates use the auto industry as an example. Immediately after World War II, consumers bought a lot of cars and trucks which were unavailable between 1941 and 1945. By 1970 there was a surplus of cars – all the Americans who wanted cars and trucks had already bought them. Meanwhile the world’s poorer nations didn’t have a mass market large enough to reduce this surplus.

The same was true of other durable goods (refrigerators, washing machines, dishwashers, vaccuum cleaners, etc). And as consumer buying slowed, so did profits and GDP growth.

Why Capitalism Didn’t End With the Great Depression

Many Marxists (including John Strachey in The Coming Struggle for Power) believed the Great Depression signaled end stage stagnation and the imminent death of capitalism. According to Magdoff and Yates, it was only the massive economic boost of World War II military spending that saved capitalism in the thirties and forties.

There was also a brief post war boom in the fifties and sixties, as consumers rushed to buy goods that were unavailable during the war. When the sixties ended, stagnation set in again, accompanied by a marked slowing of profits and growth. However neither declined to 1930s levels, thanks to the “financialization” of the US economy.

The Financialization of the US Economy

The term “financialization” describes the process of creating profits without producing products or services. In the US, finanancialization injected money into the economy in three ways: via massive government spending and indebtedness (to private banks), via massive consumer indebtedness and via an explosion in the trade of derivatives and similar financial products.

Between 1980 and the 2008 crash, the banking, insurance and investment sector became the largest growth sector of the US economy. Beyond financing unprecedented levels of consumer, business and government debt, this sector also engaged massively in speculation (ie gambling).

Financialization: A Giant Ponzi Scheme

As Magdoff and Yates describe, the enormous “wealth” created by the financial sector helps to drive the “real” productive economy. The main problem with financialization is that it’s basically a Ponzi scheme – it can continue only so long as economic growth continues. If it goes on too long, the speculative bubble will burst, resulting in financial collapse, as it did in 1929 and 2008.

The Link Between Declining Profits and Low Wages

Despite the life support provided by “financialization,” economic stagnation continued between 1970 and 2008. As Magdoff and Yates point out, GDP growth dropped from 4.4 to 3.3 percent in the 1970s, to 3.1 percent in the eighties and nineties, and 2.2 percent between 2000 and 2008.

A significant decline in wages and purchasing power accompanied this decline in profits and growth. In order to keep workers consuming, the corporate sector compensated by giving them credit cards – lending them money at 18-20% interest they were no longer paying in wages.

The End of Oil

end-of-oil

The End of Oil

by Paul Roberts

Houghton Mifflin Harcourt (20014)

Book Review

Although fourteen years old, The End of Oil offers an invaluable historical analysis about the absolute link between cheap fossil fuels and the development of industrial capitalism. Roberts starts his analysis with the first century Persians who first distilled surface petroleum for use as lamp fuel. According to Roberts, widespread use of oil as a fuel was impossible until drill technology became available in the 19th century to drill for it at deep levels.

Roberts identifies coal mining as the first really capital intensive industry requiring extensive external funding. Building the infrastructure to mine and process all three fossil fuels is always extremely capital intensive. The fact that a coal or gas-fired power plant takes three or four decades to pay off is one of the main reasons fossil fuel companies, and the banks and governments that subsidize them, are so reluctant to replace them with renewable energy infrastructure. The End of Oil also emphasizes the absolute importance of cheap fossil fuel to the economic health of industrialized countries, Between1945 and 2004 (when the book was published), there were six big spikes in the price of oil – each was accompanies by a major economic recession.

Roberts maintains the cheap, easily accessible oil is all used up, explaining its steady price increase since the late 70s. Russian oil, which is fairly costly to mine, only became economically viable when the price of oil hit $35 a barrel in 1980.

Prior to the final chapters, which review the economics of various forms of renewal energy, the book also discusses the geopolitics of oil. Roberts leaves absolutely no doubt that the US invasion of Iraq in 2003 was an effort by neoconservatives Dick Cheney, Donald Rumsfeld, Paul Wolfowitz et al to control the volatile price of oil and the devastating effects of this lability on the US economy. Although the US wars in Libya, Syria, Pakistan and Yemen occurred after the book’s publication, Roberts’s analysis left me with no doubt whatsoever they were driven by similar geopolitical objectives.

Roberts also discusses the geopolitical threats posed by China, India and Southeast Asian countries as their growing middle classes put pressure on a finite supply of oil. He also explores the threat the growing political/military alliance between Russian and Iran creates. Between them, the two countries control half the world supply of natural gas. He leaves no doubt, in other words, that the current US military threats against China, Russia and Iran are also about fossil fuel security, just like the war on Iraq.

An Insider’s View of the 1%

The 1%

Directed by Jamie Johnson (2006)

Film Review

The 1%, produced and directed by Johnson and Johnson heir Jamie Johnson, offers a rare insider perspective on the dangers of extreme wealth inequality for contemporary society. Johnson favors using major tax reform, ie requiring the wealthy to pay more tax, to reduce inequality.

The film devotes more or less equal emphasis to the psychological insecurities underlying greed and the sordid efforts of the 1% to corrupt democratic institutions.

It includes interviews with late conservative economist Milton Friedman, Ralph Nader, arms dealer Adnan Kashoggi (who brokered the Irangate arms for hostages deal), Robert Reich, sugar barons Alfie and Pepi Fanjul,* Chuck Collins (the Oscar Mayer heir who gave away his wealth), Bill Gates senior (who also supports higher taxes for the rich), and Nicole Buffet (her grandfather Warren Buffet cut her off from the family when she appeared in an earlier version of the 1%.

The film has some great archival footage of Katrina victims during their five day struggle, in the hurricane’s aftermath, to find food and water.

I was also struck at the major role professional financial advisors play in protecting the wealth and power of the 1%.


*Who largely owe their wealth to a quaint US law (and subsidy) that sets the wholesale price of sugar at 23 cents a pound while the rest of the world pays 7 cents.

**See A 1%er Looks at Inequality

Children of the Insanely Rich

Born Rich: Children of the Insanely Rich

Directed by Jamie Johnson (2003)

Film Review

Born Rich is the first documentary of Johnson and Johnson heir Jamie Johnson, who also directed The 1%.

The film mainly consists of interviews with Johnson’s fellow heirs and heiresses about their feelings about being rich, their lifelong dependency on their parents, their struggle finding something meaningful to do with their lives and their sense of loneliness and isolation from wider society.

Despite Johnson’s effort portray his interviewees in an objective light, most  appear to live incredibly superficial and shallow lives. Nevertheless a few, like Johnson, are openly critical of a lifestyle based on accumulating fabulous luxuries and ostentatiously spending money.