How Offshore Tax Havens Enslave the World

The Spider’s Web: Britain’s Second Empire

Directed by Michael Oswald (2017)

Film Review

The Spider’s Web is about the network of secret offshore tax havens that has allowed Britain to financially enslave much of the Third World. The film begins by describing the special status of the City of London corporation, a special enclave within greater London that services as Britain’s financial district.

The City of London has a private police force and private courts, Unable to conquer this area of London during the 1066 invasion, William the Conqueror negotiated a treaty making it virtually self-governing.

After an attack on the British pound during and after the 1956 Suez Crisis (see Suez: Britain’s Illegal War Against Egypt), the British government implemented two important measures to stem the hemorrhage of pounds overseas: 1) it temporarily restricted foreign investment and 2) it created a City of London eurodollar market to accept foreign investments in US dollars.

Keen to escape US regulation, US banks flocked to set up international operations in London. At the same time, City of London bankers augmented their eurodollar market by drafting secret and illegal regulations to make the Cayman Islands (still a British colony) a secret haven for tax evasion and money launderers.

Eagerly creating similar offshore havens in Bermuda, Virgin Islands, Jersey and other colonies, by 1997 City of London banks controlled 90% of all international loans via their eurodollar market. The filmmakers blame the creation of this vast offshore banking network for the “financialization” of both the US and UK economies (ie the decision by US/UK banks in the mid-seventies by major US/UK banks  to invest in financial instruments rather than manufacturing).

Africa is the region most heavily exploited by this illegal financial network. Between 1970 and 2008, African elites in cahoots with multinational corporations moved $944 billion in oil, gold, diamond and rare earth revenues into offshore tax havens. This was five times the amount of global debt ($177 billion) Africa owed in 2008.

The most interesting part of the film is an interview with former Chase Manhattan economist Michael Hudson about the State Department approaching him in 1967 for his help setting up a US offshore tax haven to stem the flow of US dollars overseas for Vietnam-related military expenditures.

The Coming Collapse

Surviving Progress

Harold Crooks and Mathieu Roy (2011)

Film Review

Surviving Progress is based on Canadian Ronald Wright’s 2004 book A Short History of Progress and takes up where the book leaves off. The book’s main focus is the collapse of historic civilizations due to dangerous technological innovation. It introduces the term (originally coined by German economist Walter Kramer) “progress trap,” to designate technological innovations that have dangerous and unforeseen unintended consequences. An example used in both the book and the film is the case of the wooly mammoth – how new Stone Age techniques that vastly improved efficiency caused the species to become extinct.

The film, in contrast, focuses on our present “progress trap,” and the biological determinants that cause civilizations to produce progress traps. It features a broad range of experts in addition to Wright, including psychologists, geneticists, primatologist Jane Goodell, environmentalist David Suzuki, economist Michael Hudson and astrophysicist Stephen Hawking.

The filmmakers start from the premise that humanity has entered a final progress trap. In the past when civilizations collapsed, homo sapiens simply moved on and started new ones somewhere else. Our present civilization covers the entire planet, and this is no longer possible. The technologies we’ve devised over 200 years have become so ecologically destructive the coming collapse could easily spell the extinction of our species.

The case the Stephen Hawking, the psychologists, geneticists put forward is that our Stone Age brains are incapable of dealing appropriately with advanced technology – that the only conceivable way to prevent collapse is through some kind of human genetic engineering. I have a major problem with any hypothesis that blames the failure of capitalist civilization on human nature. In my experience, it’s not human nature that makes people into greedy, individualistic sociopaths, but an economic system that rewards people for being greedy and competitive and punishes them for being compassionate.

I also had a problem with the way the filmmakers left out half of humanity by designating male competitive behaviors as typical of the entire human species. As geneticist Bryan Sykes argue in Adam’s Curse, the Stone Age reptilian traits described in the documentary are extremely rare in human females (and most males for that matter). In fact, it’s extremely rare for women to commit violent crimes, become tyrants or start wars. (I will post a review of Adam’s Curse later in the week).

I found economist Michael Hudson’s contributions far more valuable. He talks about the role oligarchy, extreme inequality and ecological destruction in causing past civilizations to collapse. He gives the example of Rome, in which confiscation of public land by aristocrats led to rapid overgrazing and topsoil depletion. Two hundred years later Rome collapsed, owing to their inability to feed their empire.

Nobel Prize for Walmart

Guest Post by Steven Miller

Walmart deserves the Nobel Prize for economics!

Just consider what the giant retailer has accomplished. Walmart perfected a scientifically designed, electronically based “just-in-time” system of distribution that is maximally efficient in getting stuff to people. This is a tremendous world-historic achievement. Walmart has proven, once and for all, how simple and easy it is to distribute the basic necessities of life to everybody. Perhaps even for free!

Walmart has also become one of the 21^st Century’ greatest teachers. This too should be recognized! Economics these days have become increasingly arcane, maniacally focused on how to make maximum profits for corporations. Walmart has brought economic concepts out of the clouds and made them comprehensible for everyone. Economics is now something we all have basic life-experience with. Now we, the public, can recognize the tools of economics and learn to turn them to our own benefit.

At the same time, of course, Walmart is an odious construct. It abuses and exploits its workers, denies them economic rights, loots public money from every country, plays a fairly large role in the corporate destruction the planet, and it sells more guns directly to the public than any other commercial entity. These are open intentional predatory corporate policies that Walmart even brags about.

Thus arises what is perhaps the historic question that defines our Age: We all like the good stuff, so is the incredible destruction that Walmart produces, a necessary result of the technology or… does it emanate from the corporations that control it?

Everyone can now see that world ecological destruction comes not from a single corporation, but from a system that chooses only to use our wonderful technology for private corporate profits. They make choices in beyond public control that hurt us all. These choices are developed in secret behind corporate firewalls, justified as “private property” and “private profit” and removed from public control. Corporations even go so far as to tell us that fracking chemicals are “proprietary information” and therefor not our business! Thus corporations strive to seize and appropriate all human production away from human society and the very people who made this wealth.

So it’s not the technology that’s the fundamental problem. The negative aspects emanate from the corporate ownership.

Walmart is just a giant 99-cent store on steroids. The corporation receives massive tax subsidies and makes enormous profit, which is then removed from the public and hoarded in banks. Why not eliminate the middleman? Let’s keep the profits for the public and use the subsidies to support the full distribution of everything for free. After all, Walmart’s slogan is “Save money. Live better.” We should take them at their word.

More Teachings

When you walk into a Walmart there is… all this STUFF! Everybody knows that their stuff comes from factories all over the world. While millions of people engage in production, we can also see at Walmart that most of this stuff is machine-made, not made directly be people.

Walmart proves that production in today’s world is completely social. So if production is social, why is its distribution private? Walmart advocates, of course, that economic production should belong to private corporations.

Supreme Court Chief Justice John Marshall explains what a corporation is – and isn’t – in the 1819 Dartmouth College Case:

 “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creation of law, it possesses only those    properties, which the charter of its creation confers upon it…. Among the most          important are immortality, and, if the expression be allowed, individuality….”

So it is clear: a corporation is not an Act of God; it is not a law of nature. It is a legal construct – agreed to by people – that is empowered by law. It then appropriates social production privately and diverts the wealth that society produces together into the hands on a few.

Of course, Walmart’s legal counsel would respond to the court of the people that the corporation has incurred all the expenses to create this wonderful economic infrastructure for society. So therefore it should reap the profits in order to cover expenses and be rewarded for its contribution. What’s wrong with that?

Let’s examine this one.

Unearned Income and Tribute

One of the jobs of government is to create infrastructure. Infrastructure means systems like roads, airports, water pipes, sewers, ports, satellite communication systems, parks, beaches, scientific research, the Internet, health services, etc. These functions are expensive to establish, but, when finished, lower expenses for every individual. Once in place, infrastructure costs are simple maintenance and regular improvements. This is a perfect use for taxes. The public investment makes it up to everyone by providing services that make things easier. Throughout the 20^th Century generally it was the public that built the infrastructure.

What happens in the case of a toll road? Back in 1700s America, government would allow a corporation to form, with private investment money, with the goal of building a road – say, from Albany to Syracuse. Since this combination expended its funds, they were allowed to recoup them by putting a Toll Booth on the Highway. In addition, they were allowed to continue to charge to make a state-limited profit.

The fee you pay at the tollbooth is really a form of rent. Rent is a charge based on monopoly control. Rent, and its evil twin, financial interest, is established without doing any work at all. It is the result of a legal privilege that exists even when there is no cost of production at all. We all know that banks love to charge you for using a different debit card. There are no people involved who do any work on this. Everything is handled electronically. The same with the humungous “service charges” on bounced checks. This is rent. It is unearned income. It is a major source of profit for capitalism these days. It is theft.

Economist Michael Hudson explains:

       “… unearned income is getting money without working for it, getting money simply by lending money or by owning property and putting up a toll booth and  charging people an access price. So the economy is putting up tollbooths for education. If you want an education, you have to borrow from the bank. If you want to drive a car on a road, well, we’re putting up tollbooths on the roads; we’re turning the roads into toll roads. If you want to park your car, we’re now putting  parking meters on the sidewalks and the parking meters’ revenue’s sold off in Chicago to Wall Street for the next 30 or 40 years to get money to pay the interest to Wall Street now.” (1)

 As corporations merge ever more closely with the state, they are seizing control of every kind of infrastructure. President Obama has proposed turning all the publicly built infrastructure of the last 100 years into “public-private partnerships”, where the public supplies the money and the corporations retain the profits. The goal is to build a future where corporations control everything.

Having set up a valuable infrastructure, Walmart as a corporate entity or a corporate person contributes nothing to the process. All the work is actually done by Walmart workers who are considerably abused and exploited. In essence, what the corporation does is function like a tollbooth on the distribution system and demand rent as a monopoly. We simply pay for access. That is rent.

Walmart as an entity could easily be abolished without harming its distribution system in the slightest. The big lesson is that so could every corporation. This is the direct implication of John Marshall’s comment above. If a corporation is a legal fiction, rent is a legal fantasy that can be undone by the same process of public agreements that created it. So sorry, Walton Family billionaires, you do no work; you don’t get paid.

Move to Amend (www.movetoamend.org) is a national organization that is striving to amend the Constitution to clarify that corporations are not people and money is not speech. They sum it up nicely this way, “Slavery is the legal fiction that a person is property. Corporate personhood is the legal fiction that property is a person.”

Rent is Metastasizing

Rent evolved beyond the toll road with the rise of the insurance industry. Once again, a corporation squats on the infrastructure and demands a tribute, a “profit”, for adding nothing, simply for allowing you the next step of access to what you need.

The next step was Cable TV. This monopoly claims to provide special services through wires, but they really just block you from accessing a program unless you go through them. Comcast claims monopoly control of an infrastructure and charge you rent for using their infrastructure.

The newest monopoly form of rent is being created right before our eyes – the Cloud. This newest form of electronic superstructure is based on distributing relative limited and stupid devices to the public, while keeping all the “intelligence” in centralized computers. Once again, you will pay rent for access for what you could get for free.

It gets worse. The World Economic Forum is an organization of the planet’s biggest capitalists. They hold a policy summit in Davos, Switzerland every year. These elite capitalists are well aware that capitalism is not sustainable and is beginning to devour its own base. Thus they are scheming up what they consider is a kinder, gentler version of private corporate property.

Out of this year’s profit fest, Frans Van Houten, CEO of Royal Philips, floated the ultimate extension of rent:

“Instead of selling products, businesses would retain ownership, selling the use of the goods they make as a service. Selling a product’s benefits instead of the product itself would create a powerful incentive for producers to design for longevity, repeated reuse, and eventual recycling, which would enable them to optimize their use of resources.”

Capitalism is already devouring public property and turning it into private corporate property. Now they are planning to do the same with the only other form of property there is – your personal property. Personal property is what a person actually uses individually on a daily basis. This can include a house, cars, computers, clothes etc. Van Houten’s idea is that all your personal property would be rented, not owned! Personal property would become corporate property.

The future is becoming clearer:  Either corporations will take control of everything in life, or the people will take over the corporations.

So let’s give Walmart the Nobel, recognize its historic achievements, and then take it over, in the name of the public, in order to serve the public. Those nice Walton folks can each keep one of their several estates to live in. But they will have to clean it themselves!

Notes

1) Michael Hudson: Trade Advantage Replaced by Rent Extraction. 18 Dec 2013. See his website: http://michael-hudson.com

2)  Frans van Houten. The Circular Revolution. January 20, 2014

Steven Miller

Oakland, California

Nanodog2@hotmail.com

photo credit: takomabibelot via photopin cc

Originally published in The Daily Censored

Speculators

Guest blog by Steven Miller

(This is the second of 6 guest posts by Steven Miller describing the financialization of capitalism and the takeover of the global economy by bankster speculators)

Speculators – Part II

Today the financial industry makes far more profit than any other sector of capitalist production. In 1973, they made 16% of total US profits; by 2007, financial profits reached 41% of all profits. (2) Since credit and debt control the levers of the economy, the financial industry has become politically dominant. The planning function of government increasingly devolves to their control. Finance – producing money from money – produces no value; it simply moves money around, but it does centralize even more wealth in the hands of speculators.

Once Wall Street speculators realized, after the 2008 Crash, that their new “financial instruments” were actually weapons of economic mass destruction, they understood that these tools could be employed to attack national and public wealth. Speculators get richer by seizing your wealth.

They do this today with hedge funds, among other things, which are completely private, completely unregulated and completely hidden from the public. But you can make wild speculative bets with their expert staff. Because they are “private”, we are supposed to accept whatever negative effects they have on society. Though the results are highly destructive to society, this is not up for debate.

Today the financial industry in the US is sitting on the largest mountain of cash in human history, over $2 trillion. Why? This is perceived as strange behavior, since they received over $16 trillion in the 2008/9 Bailout. In addition, the US government for at least two years has been dutifully sending them $85 billion a month, over a trillion dollars a year, in free money. (3)

So why don’t they spend it?

Every modern industry, especially finance, is based on extending credit; the debt is then “leveraged” to takeover companies and engage in various forms of speculation. As financial companies began to collapse in 2008, every one that was “solvent” lied and minimized how much of their holdings were based on toxic assets. Since each one knew that the others were also lying, they began to curtail how much credit they would extend. Without credit, modern capitalist commerce was on the verge of collapse. This is why the form of the Bailout was for the government to buy up toxic assets. This situation still prevails today.

Michel Chussodovsky, professor of economics at the University of Ottawa, and organizer of the Center for Global Research describes how this was rigged:

“In a bitter irony, while the Wall Street institutions were the recipients of the bailouts, they are also the creditors of the federal government, which has been precipitated into a structure of debt financing controlled by Wall Street. This deficit financing… is controlled by the creditors. It does not create employment. It is not expansionary.” (4)

This reality illuminates the dangerous instability of the times. In essence, the public is financing its own indebtedness and funding its own privatization. The banks collapsed the economy in 2008 because they had been counting their various toxic assets as part of their wealth. Money is now generated, loaned and invested by clicking a computer keyboard. The monthly $85 billion gift, of course, is not put into gold bars and moved into the bank vaults by elves. The financial industry uses public money to offer increasingly shady loans, essentially organized criminal activity against the public.

Every day the value of one-year’s GDP in the US – about $14 trillion  – passes through Wall Street and other financial institutions! This is the Casino Economy. Most of this vast wealth is put into play as speculative bets, driven by computer-driven programs, on anything from water to debt to fracking. Just like mortgages, anything that can be financialized – entire electrical grids, school districts, pensions, and medical credit – almost anything at all – can also be securitized and bundled as fodder for speculation.

It is important to recognize that none of these vast transactions are taxed at all. Real people pay a large sales tax on almost everything in the US; corporate people pay ZERO on their schemes to increase their great wealth. A simple tax of 2 cents on the dollar would generate $28 billion a day, enough revenue to solve every financial issue that America faces.

Numerous people have proposed this idea, since it would end Austerity and usher in an era where governments could provide incredible resources to real people for free. The fact that this “reform” will never be permitted is a telling sign of a system that is approaching its demise.

The immediate result of the Crash was that the banks, hedge funds, insurance companies, private equity firms, real estate interests, etc. simply reprogrammed their computers to speculate on food and petroleum. Hence the mega-jump in food prices in the Fall of 2008. But money that doesn’t circulate produces no profit, so the financial industry has begun to invest in solid, material assets, tangible properties that cannot be wiped out with a click of a keyboard. Meta-money is the cousin of the NSA’s meta-data. Its use by corporations is equally malign.

Thus today we are in the midst of a tsunami of privatization, as the banksters are seizing and privatizing everything they can get their hands on. They are seizing public assets and a rate never before seen. Everything is financialized – given a monetary rating; then it is securitized – turned into speculative assets, which are quickly privatized; then your access to it without money is eliminated and thus criminalized. (5)

This trend has been noted by a number of observers:

Michael Hudson, professor of economics, University of Missouri Kansas City,:

“This financial engineering is not your typical bubble. The key to the post-2000 bubble was real estate. It is true that the past year and a half has seen some recovery in property prices for residential and commercial property. But something remarkable has occurred. This new debt-strapped low-interest environment has seen Hedge funds and buyout funds doing something that has not been seen in nearly a century: They are buying up property with cash, starting with the inventory of foreclosed properties that banks are selling off at distress prices.” (6)

Ellen Brown, Web of Debt Blog:

“Giant bank holding companies now own airports, toll roads, and ports; control power plants; and store and hoard vast quantities of commodities of all sorts. They are systematically buying up or gaining control of the essential lifelines of the economy.”  (7)

Michel Chussodovsky again:

“The privatization of public monuments, museums, national parks, the post office, etc., has been raised in recent media reports as a possible ‘solution’ to the debt crisis. But let us not be misled: the process of acquisition of federal public property including the infrastructure and State institutions is likely to go much further. The public sector is up for grabs. Wall Street will eventually go on a buying spree picking up State owned assets at rock bottom prices.” (8)

References and Resources

 2)  Dave McNally, Global Slump, 2011. P 86

 3)  Harding. “Bernanke takes plunge with QE3.” www.ft.com

4)      Chussodovsky. “The Shutdown of the US Government  and ‘Debt Default’. A dress Rehearsal for the Federal State System?”. Center for Global Research

5)       5)  “Debt As a Class Weapon”. Rally Comrades, October 2011

 6)  Michael Hudson. “The Bubble Economy as a 2 Part Play for Privatisation”. July 4, 2013

 7) Ellen Brown. “The Leveraged Buy-out of America.” Center for Global Research, August 26, 2011

 8)  Chussodovsky. Op sit

photo credit: nromagna via photopin cc

To be continued.

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored