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Adventures in Freedomland

By Max Dunbar.


Treasure Islands: Tax Havens and the Men who Stole the World, Nicholas Shaxson, Bodley Head 2011

May last year saw the messy and decisive end of the longest serving Labour government. It was led by an unpopular and unelected Prime Minister whose social difficulties bordered on the sociopathic, it had presided over economic catastrophe and it had been abandoned by most businesses and every national newspaper except the Mirror. Like everyone else, Treasury minister Liam Byrne expected a new government formed by David Cameron’s revitalised Conservative Party. He welcomed them with dark irreverence. Byrne left a note for his Treasury shadow reading: ‘I’m afraid there is no money. Kind regards – and good luck!’

Alastair Campbell, who knows something about government, puts this note in the context of the friendly joshing relationships that ministers build with their opposite numbers. James Callaghan found a similar letter from his Tory predecessor: ‘Good luck, old cock… Sorry to leave it in such a mess.’ The Byrne memo was meaningless, the equivalent of Clinton’s ongoing staff taking all the Ws from the White House keyboards. Unfortunately, a sense of humour is one of many attributes the new coalition ministers did not possess. We were to hear Liam Byrne’s one liner quoted by Tory and Lib Dem politicians as a confession that Labour had bankrupted the country. And in every debate, every press conference, every interview, those ministers repeated again and again that every cut and crime was something the new government had been forced into by Labour’s disastrous legacy.

It was a genius political lie, the line of the decade. It excused every shameful decision from the theft of the mobility benefit which allowed disabled people to enjoy a day away from their care homes every once in a while to the wholesale privatisation of the NHS. The line could even explain broken manifesto promises, because ministers could say they spoke in good faith and didn’t understand how bad the deficit was until they got into power and looked at the accounts. The line allowed anaemic and sheltered politicians to use military language of hard choices and tough decisions without having to bear the consequences of these decisions. To feel the sanctimonious buzz of sacrifice without actually having to make the sacrifices themselves. We had to destroy this country in order to save it.

In Treasure Islands Nicholas Shaxson argues that the current crisis has no one cause, but the role of the banks and their colossal irresponsibility and stupidity has been forgiven and forgotten. There has been no contrition.  The champagne pyramids are flowing again in the Square Mile. Independent journalist Johann Hari summed up the mood: ‘In 1929, the bankers who crashed the global economy committed suicide. Today, they pay themselves even bigger bonuses for crashing us all.’

The new government set a pitiful levy that was more or less cancelled out by its simultaneous cut in corporation tax. Barclays boss Bob Diamond, who received an eight million bonus this year, told a Treasury select committee that ‘There was a period of remorse and apology for banks and I think that period needs to be over.’ The public agreed. A new climate of censorious scrunity towards fiscal waste targeted council policy officers but ignored City plutocrats. Who cares that Barclays paid no more than 1% of corporation tax in 2009? It was more important to go after the benefit cheats and illegal immigrants.

You could blame Labour for not regulating the banks but, as Shaxson shows, this ignores the history that no government has ever had a semblance of control over what happens in the Square Mile. Discussions of tax evasion tend to focus on the small islands where the wealth of dictators, narcotraffickers and war criminals can be hidden and untouched under an elaborate three-card monte of fronts and trusts and shells. There, Shaxson says, elites get not only freedom from taxation but from regulation, accountability – the rule of law. And Shaxson explores these billionaire’s playgrounds: the island of Jersey, the Caymans, Panama, the island of Sark – home to the owners of the Telegraph, the newspaper that kickstarted a national furore with its expose of elected MPs ripping off the taxpayer for post-it notes and pizza wheels.

The IMF estimates that a sum equivalent to a third of the world’s GDP is held in ‘small island financial centres’. These are finance-dependent closed communities with majority poor populations and little or nothing in the way of democracy. It’s in Shaxson’s Jersey chapter that you get a sense of the groupthink that allowed so many bad decisions to be made with other people’s money. An economic adviser recently posted to the island was appalled by the levels of racism and misogyny in Jersey discourse. He ran into ‘an old childhood acquaintance’ who had lived there all his life. ‘I told him about India, Malaysia, trekking and so on, and he switched off immediately. No interest. He was in a bubble. Last night’s party, which car I was driving, who’s screwing whom – that was it.’

And yet London itself is an onshore tax haven. The Square Mile has always been run by the ‘City of London Corporation’ – a strange pre-democratic entity that has somehow survived into the new world, a feudal palace that continued even as the industrial city sprang up around it, like an ancient monster thriving in a carapace. Businesses can vote in the Corporation and have 17,000 votes compared to 6,000 for the Corporation’s human residents. It predates elected parliaments and Labour governments failed time and time again to bring it into unitary control. Even the Queen has to ask the Corporation’s Lord Mayor before she can have a state visit. It is less a ‘municipal authority,’ Shaxson explains, than a ‘hugely resourced international lobbying group pushing for international financial deregulation, tax cutting and tax havenry around the world.’ He interviews an Anglican priest called Father Taylor who became involved with the Corporation when he was campaigning against a property developer in Spitalfields. After he had spent ‘years pondering the City of London Corporation’ Taylor told Shaxson that ‘We are in the grip of something quite demonic. Institutions keep it alive, and it’s part of all of us.’

The refusal of the elite to contribute to the society that nurtures it is one of the great unknown stories of our times. The hedge fund manager who paid less tax than his office cleaner was big news five years ago. Now it’s old news. Shaxson gives examples of tax gathering executives and even civil servants tasked with cracking down on tax evasion who use tax havens. Meanwhile the tax burden shifts to the middle and working classes. His analogy is of a supermarket with a VIP checkout. You queue at the regular checkout and find that your bill has a large ‘extra expenses’ item that subsidises the VIP purchases. I’m not paying this, you say. You have to, says the checkout guy – otherwise the rich people won’t shop here anymore.

Once you break above a certain level of wealth all things are possible. For thirty years this behaviour has been excused by the well-named ‘voodoo economics’ – the idea that the vast amounts of money made by financiers will somehow become the people’s wealth as well, via a kind of osmosis. You don’t need to be an economist to see the flaws in this. The poor and middle class put money into the system because they need to spend income as soon as they get it, on rent, food, utilities and other things. The rich are more inclined to store new income in a savings account or trust. The Financial Times noted in 2009 that the proceeds of growth had ‘gone into the pockets of plutocrats rather than the bulk of the population’ and asked: why no revolution? Because the banks were now willing to lend to anyone, including people who could not repay and would not repay. A fascinating Guardian piece from 2006 featured people with bipolar disorder who had run up six-figure debts after taking out credit cards and loans while in the grip of hypermanic frenzy. As well as threatening collection calls they received offers of further loans, often from the same banks, often addressed to the ward to which they’d been sectioned.

Or take international development. Discussions of aid to developing countries are constructed around the level of money Western governments should pledge. That so much of this money is creamed off by the local kleptocratic elite is rarely mentioned. Debts incurred by poor countries are bought by vulture funds, small groups of investors who purchase the debt for sometimes as much as a ninety per cent discount. Vultures will work with local elites to make sure GDP goes into servicing vulture debt rather improving living standards. It’s not just a question of corrupt local powers – it’s the offshore system that makes the corruption possible. ‘Having watched people die before my eyes in Angola,’ Shaxson writes, ‘having seen an otherwise pretty six-year-old Angolan girl who, without access to basic medicine, was losing a fight with an infection that had rotted a hole in her cheek the size of a golf ball, I am personally acquainted with some of the way Africa’s people ‘bear’ their public debt’.

The old line of meritocracy is that men like Bob Diamond are the most talented that humanity can produce and that people are poor because they ‘are stupid, corrupt, or just didn’t flagellate themselves hard enough’. But there are encouraging signs that these old lies are losing their power. A growing protest movement is targeting the tax dodging billionaires of the high street. They are not winning – yet – but they have made an impact and they are getting people talking. It’s events like UK Uncut’s peaceful sit in at Barclays branches, and the squatters towing a grand piano into Guy Ritchie’s Fitzroy mansion, that give a sense that, finally, we’re all in this together.


Max Dunbar was born in London in 1981. He recently finished a full-length novel and his short fiction has appeared in various print and web journals. He is reviews editor of 3:AM.

First published in 3:AM Magazine: Wednesday, February 23rd, 2011.