Category Archives: Free Markets

Crisis in British Steel

This week we have seen the Tory government slowly getting engulfed in the crisis caused by Indian company Tata’s threat to close steel works across the UK. As well as meaning that the UK would no longer have a viable steel industry, if this were to happen there would be the awful human cost of 15,000 direct job losses, and potentially 25,000 more in associated industries (with communities in Port Talbot and Scunthorpe being particularly badly affected). The government is desperately trying to get out of this mess, not because they care about the steel industry, or the lives of steel workers, but simply to avoid the political fallout for their own party. The reality is that their belief in ‘Free Markets‘, and their support for business and profit over the lives of ordinary people makes events such as this inevitable.

Britain’s steel industry was privatised by Margaret Thatcher in 1988, and after a succession of business deals was taken over by Indian conglomerate Tata in 2007. Tata, to be fair, haven’t done a bad job of running the company, and have generally retained the support of their workers. However the business environment has changed over the years, and the UK operations are now losing £1m a day, which is clearly unsustainable. Tata have tried to make it work but have now decided to give up.

After 90 years of operation the Port Talbot steel works are now threatened with closure. Picture © Chris Shaw

There are two main reasons for the losses – Britains very high energy costs (partly as a result of Green levies on fossil fuels), and huge amounts of cheap Chinese steel undercutting the market. And this is where Tory (and Blairite Labour’s) belief in the Free Market falls to pieces. It is undoubtedly a good thing to regulate industry for the common good, and things such as employee rights, health and safety, anti-pollution legislation, and Green levies to tackle climate change should all be applauded. However if any company which is burdened with those extra costs then has to compete with companies which are not so tightly regulated, inevitably they will lose out. China has a dreadful record of employee rights, underpays its workers, doesn’t seem to care about pollution at all, certainly doesn’t use Green levies, and as 70% of its industry is nationalised has a very high level of state subsidy. Therefore it is hardly surprising their steel is cheap. The solution to this, even for those who believe in ‘Free Markets’,  is to exclude their dirty industry from our free market until they clean their act up. This can easily be done through punitive tariffs.

Now the problem has been building for some time and the EU, recognising this, and in a bid to protect its steel manufacturers, has already tried to impose such tariffs on cheap Chinese steel imports. The irony is these tariffs were blocked by, among others, Sajid Javid the Tory business minister! The Tories’ belief in ‘Free Markets’ is so strong that they are prepared to sacrifice an entire industry, and ruin the lives of thousands of ordinary people, just to pursue their economic ideology.  They try and justify it by saying cheap steel is good for other parts of the economy – but that shows, yet again, how they believe that profit for business is far more important than the devastating impact on the lives of 40,000 people. It also demonstrates how Free Market ideology leads to short-term thinking – at some point steel prices will rise, and the British steel industry will become financially viable again; however if in the meantime the industry has been completely destroyed, then it will not be able to return, and Britain will be at the mercy of (possibly very expensive) foreign imports. Tory Free Market policy shows a complete lack of strategic thinking, and as well as being awful for the workers directly affected is, in the longer term, awful for the whole country.

Tories (and other Free Market believers) just don’t get this, which is why they are now desperately trying to appear as if they are doing something, when in reality they are quite happy to do nothing at all and let the steel industry collapse.


Greece and The Euro

Over the next few weeks the news will be full of the unfolding Greek tragedy, and if current trends are anything to go by most criticism will be firmly directed either at the Greek people – for borrowing so much money in the first place; or the Syriza government of Alexis Tsipras and his finance minister Yanis Varoufakis – for their reckless handling of the crisis. However the situation is far too complex to paint in such black-and-white terms, and there are so many vested interests at play no-one directly involved can be trusted to give an honest interpretation. One thing is sure though, the Greek government are challenging the very foundations on which the EU, the Euro, and our entire Free Market Capitalist system has been built, and for that they should be applauded.

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Greece’s Prime Minister, Alexis Tsipras, is the first EU leader to challenge the current neo-liberal orthodoxy. Picture © FrangiscoDer

There are undoubtedly many deep structural and cultural problems in the Greek economy: and endemic tax-avoidance, financial profligacy, an unsustainably low pension age, and a bloated public sector all need addressing. However the central part of the current crisis is in fact just a more extreme version of what the UK is currently going through – a corrupt elite controlled and manipulated the financial system for their own gain, and when the system came crashing down, ordinary people were expected to pay the bill through policies of Austerity.  The only difference is that Greece’s government debt is higher than ours (180% of GDP vs 82%) and so the Austerity measures being imposed are that much more severe. So, whereas in this country ordinary people are, so far, taking it on the chin, in Greece they’ve finally had enough. And of course, on top of that, Greece’s membership of the Euro complicates matters even more.

So what is to be done? Well, Greece has two choices. It can either do what its creditors would like – carry on enduring intense pain almost indefinitely (and don’t forget their current economic situation is already worse than America’s was during the Great Depression); or default on its debts, probably leave the Euro (and maybe even the EU), endure even worse pain and  chaos for a year or two before finally getting itself back on some sort of even keel.

But this is where those vested interests come into play. If Greece was a completely independent country it could choose its own path out of this mess (and plenty of other countries have defaulted on their debts or engaged in money printing in response to an economic crisis). However as a member of the EU and the Euro, it is beholden to a whole load of external financial and political interests. And those interests care little for the suffering of the Greek people, only their own financial gain or political ideology. Its creditors want their money back, and will do anything to force the Greek government to pay, even if the Greek people have to live in complete penury for generations. Meanwhile the proponents of the European project are so wedded to the idea of ‘ever closer union’ that they cannot countenance the idea of Greece leaving the Euro. And this is the crux of the matter. Almost everyone is agreed that Greece should never have joined the Euro in the first place (and the Greek government of the time certainly has to bear a heavy responsibility for that).  One way to deal with the problem therefore, would be to plan for some sort of structured exit from the Eurozone. Unfortunately the mandarins in Brussels are so wedded to the concept of the European project that they cannot even consider such a thing, as it would go against everything they stand for. They, unfortunately, would rather see Greece crash out in a mess, for which they can blame the Greek government; than admit maybe they got it wrong in the first place and perhaps the idea of the Euro isn’t so great after all. And that is what will probably happen – the current crisis will escalate, the banking system will collapse, and Greece will descend into a prolonged period of even greater pain – all so that the Eurocrats in Brussels can say ‘wasn’t our fault – it was those damned Greeks who ruined it.’

Time will tell whether Alexis Tsipras and Yanis Varoufakis are clever game-players or well-meaning amateurs, and to what extent they have planned and prepared for the events that are now unfolding. One thing is certain though, the Greek people, for all their faults, are no more to blame for the current crisis, than the British people were to blame for the financial crash we went through in 2008. Corrupt governments, failing democracy, vested corporate interests, blind faith in a broken system, and an out-of-control financial sector have led us all to where we are today.


Non-Dom Tax Avoiders

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Multi-Billionaire Football Club Owner and London resident Roman Abramovich is registered ‘Non-Dom’. Picture © Mark Freeman

This week the Labour Party made a manifesto pledge to abolish the scandalous ‘Non-Dom’ rule, which allows wealthy individuals to avoid paying tax on their foreign earnings, while the rest of us ordinary mortals have to pay all our tax in full. This rule is long-overdue for abolition, as it means that certain people who live here permanently (and in some cases were born here), can enjoy all the benefits and privileges residency in this country brings, but none-the-less dodge tax by shifting their cash abroad and stating that at some unspecified point in the future they intend to leave the country.* (The list of people benefiting from ‘Non-Dom’ status is quite shocking, and includes the Governor of the Bank of England and the chief execs of 3 of the 4 big high street banks.*)

The Labour announcement produced the predictable cries and squeals from the well-off, who now face the prospect of being slightly less well-off. However it also threw up some well-worn arguments about the generation of wealth, which are often deployed by those defending Free Market Capitalism. Namely:

1. If the wealthy are taxed too much they’ll all flee abroad, taking their money and talent with them, leaving us all destitute.

2. We need to attract wealthy foreigners to this country as without them our economy will collapse.

Both these arguments are utterly ridiculous, but show the extent to which Free Market Capitalist thinking has entered our consciousness, and brainwashed large sectors of the population.

Firstly, it is nonsensical to believe that this country needs foreign money in order to thrive. The people of this country have a long and proud history of success, and have for centuries succeeded in generating wealth through their own talent, effort and hard work. To now suggest that we need wealthy foreigners to guide us is to somehow suggest we’ve all suddenly become useless, lazy and incompetent.

Secondly, the idea that a few ‘talented’ people are the ones who generate all the wealth is also complete rubbish. The wealth of this country is generated by the combined efforts of every man, woman and child who contributes their labours to the general good and well-being. To suggest otherwise is to dismiss the priceless contributions so many of us make. And even though it may be true that we need bright brains to drive industry, technology or become entrepreneurs, this country has never been short of such talented people, and if a few of them do up-sticks and leave there are plenty more to take their place. In fact, personally speaking, if a few selfish individuals do put their own personal wealth ahead of any care for the society they live in, then I don’t want them here anyway.

Two more points it’s worth bearing in mind. This argument about ‘Talent’ forgets to mention that it was our ‘Talented’ bankers who led us into the financial crash of 2008. So ‘Talented’, but apparently they never saw that coming (or maybe they did but were too busy filling their boots to care). And many corporate disasters have been overseen by management who afterwards claimed the business was too big or complicated for them to fully understand what was going on. Again, talented? Or just enjoying the privileges and good fortune of being part of the wealthy elite.

Finally, in recent years the massive influx of foreign money has been a huge contributor to the increase in house prices, and consequently rents. That may have benefited property owners, but for the majority of the population all it’s done is lead to increased hardship, and in the case of central London, a form of social cleansing.

This argument that we somehow ‘need’ the rich is a complete lie put about by, not surprisingly, the rich (and those they’ve brainwashed) to justify them increasing their wealth while the rest of us are forced to suffer endless Austerity.

* Non-Dom fully explained: Bank Chiefs:


Free Markets Just Mean Corporate Corruption

This week we saw yet another scandal involving our banking system, when it turned out that HSBC have not only been facilitating large-scale tax avoidance and tax evasion via their Swiss subsidiary, but have even been advising their wealthy clients on how is the best way to go about it.* It is estimated that up to $21.7bn has been sheltered from the treasury in this way, at a vast cost to the British taxpayer.

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HSBC: Yet another massive banking scandal. Picture © Danesman1

This all came to light as the result of a leak from a whistleblower in 2007, details of which were passed to the Inland Revenue in 2010. However, despite an estimated 1100 individuals being guilty of underpaying their tax, to date there has only been one prosecution. Even more scandalous, the man in charge of HSBC during this period, Lord Green, was made a Conservative peer and appointed to the government as minister for Trade & Investment 8 months after the Inland Revenue was made aware of wrongdoing at the bank. Far from being punished for his misdemeanors, Lord Green was handsomely rewarded with a position in the heart of government. HSBC’s response to all this is to admit to ‘past failures’ but assures us all that things have now changed. Lord Green himself has consistently said ‘no comment’. Full details of the scandal are in this BBC Panorama documentary.

Of course we all know this is far from being a one-off, as it comes hot on the heels of various other banking scandals including fiddlng interest rates (Lloyds, Barclays, Royal Bank of Scotland); fixing foreign exchange rates (HSBC, Barclays, Royal Bank of Scotland); money laundering (HSBC); sanctions busting (Standard Chartered); ‘dark pool manipulation‘ (Barclays); and fiddling precious metal prices (Barclays, HSBC).

The reality is that the priority of companies, and in particular banks, is to make money for themselves, and to do it they will employ whatever dodgy practices they think they can get away with. The less regulation there is the more corrupt they can become, so this idea that ‘light touch’ regulation and free markets is the best way to run things is a complete nonsense, and is in effect just putting the foxes in charge of the chicken coop. Given the chance, the clever and the unscrupulous will just fleece us all, and that is exactly what they are doing.

Even more evidence of how corrupt our system has become was produced a couple of weeks ago when it was announced that Price Waterhouse Coopers (PwC), the accountancy firm, has also been facilitating corporate tax avoidance on ‘an industrial scale’.* PwC is also a major corporate donor to both the Labour and the Conservative parties. Why would anyone support both the major parties? Ah yes… that’ll be a bribe, so that whichever party gets into power lets them carry on with their corrupt business practices. What a rotten system we live in, that allows such things to go on while poor people are forced to undergo ever-increasing Austerity.

And the government’s response? At a business leaders’ meeting recently David Cameron pathetically asked bosses if they would give their staff a pay-rise, and so spread their ever-increasing wealth around*. I thought in a Free Market Economic system wealth was supposed to naturally ‘trickle down’ anyway? Clearly not, and if Cameron thinks his desperate pleas will make any difference to their behaviour, he clearly has little understanding of the business community he claims to represent.


* PwC:

* David Cameron Speech:


Defenders of the Free Market

Yesterday a post was made on the website of the Centre for Policy Studies*, a right-wing think-tank that was set-up by Keith Joseph in 1974 to promote ‘Economic Liberalism’ – now more frequently called neo-Liberalism or Free Market Capitalism. Also counting Margaret Thatcher as one of its protagonists, this group of course proved to be very successful, and its policies were subsequently adopted by most Western governments and political parties. For many years, from Margaret Thatcher becoming Prime Minister in 1979 until the Banking Crash of 2008, these economic doctrines were pretty much unquestioned  – I myself was an advocate of free markets during that time.

Margaret Thatcher was Deputy Chairman of the Centre for Policy Studies. Picture © US Govt

However the crash of 2008 changed all that, and many people saw that free markets, far from benefiting everyone, only actually benefit the narrow elite at the top. The privileged few use corporate structures to ensure the wealth that capitalism generates does not trickle down, but instead remains in their hands, which also means that ‘competition’ only really exists at the bottom of society, where workers have to compete for who will work for the lowest wage. Any attempt by the government to redress this wealth imbalance is thwarted by tax avoidance, and in particular hiding money offshore in tax havens. The result is endless grinding poverty at the bottom and ever-increasing wealth at the top. Privatisation of public services of course accelerates the process, and then when you add into the mix the inevitable economic crises (as the financial sector takes greater risks to increase its wealth even further) and the subsequent government bailouts (state funds being use to support private industry) we get to see that, remarkably, Socialism is still alive and well – but only for the wealthy and the world of business. Paid for by yet harsher Austerity, these bailouts serve to accelerate the transfer of wealth from poor to rich, and lead to an ever-more unequal society (hence 500,000 people are now using foodbanks while at the same time Executive Pay soars higher than ever.)

So, to get back to the post from the Centre for Policy Studies, Matthew Rees was commenting on the recent Occupy protests in Parliament Square, and said that if the protestors really were interested in Civil Liberties they should be supporting Free Trade, not opposing it, and highlighted the forthcoming TTIP treaty as an example of this. This was an extraordinary statement.  The TTIP treaty, if it goes through, will allow corporations to sue governments over anything which causes them financial loss. The possibilities here are terrifying. The government wants to stop the use of genetically modified food? Biochemical companies could sue them for potential ‘lost trade’. We decide we don’t want to take the environmental risk of fracking? Fracking companies could sue us for lost business. The government proposes changes to the NHS? Health companies could sue if they think that will cost them money. The government wants to encourage people to cut down on smoking? Tobacco companies could sue for lost revenue. The welfare of ordinary people will come second to the profits of multinationals, and all these disputes will be settled behind closed doors, with only lawyers and corporate cronies having a say in the outcome.

If Matthew truly does believe that such legislation serves democracy, civil liberties, and the will of the people (and if he is not being paid to say such things by the corporations who will benefit) then I can only say that he must be so blinded by his own ideology, that he is unable to accept the evidence of how badly society now operates for millions of ordinary people. 


Banking – The Corrupt Core of a Rotten System

Yesterday it was announced that Lloyds Bank was being fined £218m for fiddling interest rates in order to manipulate the market for its own benefit*. The particularly shocking thing about this incident – the latest in a long line of corrupt practices by the banks – is that the offence happened after the crash of 2008, and involved abuse of the very fund the government had set-up to help the banks survive. (The government was providing emergency cash for when banks were in difficulties, and by fiddling interest rates Lloyds was able to reduce the fees it paid to use this cash). This effectively meant Lloyds was stealing money from the government.
LLoyds – The latest bank to be fined for manipulating the market. Picture © TubularWorld

Mark Carney, the governor of the Bank of England called the offence ‘reprehensible’, and in reply Lord Blackwell, chairman of Lloyds, described it as ‘truly shocking conduct’ (though whether he was referring to the fact they fiddled interest rates, or just the fact they were careless enough to get caught doing it, is of course open to debate). All were agreed that it amounted to criminal conduct for which individuals ‘could’ face prosecution (don’t hold your breath).

This scandal of course follows other scandals involving Barclays* (fiddling interest rates; fiddling the price of precious metals;  ‘dark pool’ manipulation); Royal Bank of Scotland* (fiddling interest rates); HSBC* (money laundering, fiddling the price of precious metals); and Standard Chartered* (sanctions violations). There is also an ongoing investigation into the fiddling of foreign exchange rates involving, not surprisingly, Barclays and the Royal Bank of Scotland*.

After all the events of the last few years, it’s quite clear that Free Market Capitalism is a completely broken system, whose only purpose is to enrich the clever and the unscrupulous at everyone else’s expense. Banking is at the rotten heart of this corrupt system, and rather than providing a service to the rest of society, it has become an enormous leech whose only function is to accrue as much wealth for itself as it can. Greed and selfishness rule, leading to corrupt and frequently criminal activity, which the criminals then either cover up, or if they can’t do that they try to pass the buck in endless circles, so that no one individual is ever held accountable or responsible. It is now obvious to any decent person that if the private finance sector is to continue at all, it should only be under tight regulation, with severe penalties for those who step out of line. Unfortunately there are still people around who believe in ‘light touch’ regulation, and more importantly the banking sector does its damnedest – through lobbying and the financing of political parties – to fight any changes that might diminish its vast wealth and power (the Tory Party gets over half its funding from the City of London). Which is why we must fight the system as hard as we can from the outside, because it will never reform itself from within.

* Refs: Lloyds: Barclays: and and  Royal Bank of Scotland: HSBC: and Standard Chartered: Foreign Exchange:


Multinational Corporations Threaten Democracy

STOP PRESS 04/09/15: Canadian miner sues Romanian govt for $4bn – Widespread public protests against cyanide contamination and the loss of historic sites led to the Romanian government refusing to allow Gabriel Resources to mine for gold in the Carpathian mountains. So the company is now suing Romania for a sum of money equivalent to 50% of its entire annual public health budget.

STOP PRESS 22/05/15: Tobacco companies British American Tobacco and Phillip Morris have now filed legal action against the British Govt – As previously threatened, two tobacco companies have now filed legal proceedings in the High Court against the UK Govt’s plans to introduce plain packaging on cigarettes.

STOP PRESS 27/02/15: UK tobacco company British American Tobacco has threatened to sue the British Govt –  British tobacco company B.A.T. has confirmed it will definitely sue the British government if it tries to introduce plain packaging on cigarettes. Despite research   proving that plain packaging reduces the incidence of smoking, with all the subsequent health benefits, and despite widespread support for such a ban, B.A.T. becomes the latest company to show that its profits are more important than people’s health, and proves once again that corporations need to be strictly regulated, as they have no interest whatsoever in public well-being

STOP PRESS 11/09/14:  Oceanagold is suing El Salvador because of their refusal to grant them a licence to mine for gold. Since this blog was written there has been yet another example of corporations exercising power over governments: Australian mining company  Oceanagold has launched a  $301m lawsuit against the govt of El Salvador, even though the refusal of a mining licence was in direct response to overwhelming public concerns over environmental damage, pollution of the water supply, and the impact on public health.

STOP PRESS 13/08/14: US tobacco giant Phillip Morris is now threatening to sue the British Govt – American tobacco company Phillip Morris has said it will sue the British government if it tries to introduce plain packaging on cigarettes – figures in the region of £9-11 billion have been mooted. Even though research has  irrefutably shown that plain packaging reduces the incidence of smoking in children, Phillip Morris is showing that corporate profits are more important than people’s health, and gives complete proof, if any were needed, that corporations need to be strictly regulated, not given free rein to destroy our lives.

We like to think that we live in a democratic society, where the laws and conditions that we live under are set by the government, which is in turn elected by us. The reality of course is that we live under a corrupted system, which is fixed to return the same two (incredibly similar) parties, and whose policies are controlled more by their financial backers and corporate lobbyists than they are by any desire to serve the people. However, in this era of globalisation, there is now emerging an even greater threat to the democratic process – the rise of the multinational corporation.

In this globalised world so much trade is carried out between countries that national legislation is often insufficient to control what’s going on. However there are also great difficulties in achieving any level of international co-operation, and the international bodies that do exist (the UN, the EU, G8, G20 etc) are often incompetent, dysfunctional, corrupt, undemocratic and inspire little confidence among the people. Consequently there  is a huge democratic gap which multinational companies are currently exploiting for all they’re worth.

One final problem from globalisation is the issue of Regulatory Arbitrage. This is when multinational companies play countries off against each other in order to get the most preferential deals. An obvious way is tax, where companies will offer to set up in whichever country has the lowest tax rates. Countries will then ‘compete’ to see who will charge the least tax – the so-called ‘race to the bottom’, where the only losers are ordinary people, who have to suffer austerity to make up for the lost tax-revenue. However there are also some far more insidious things that happen. For example many corporates like to set up factories in third world countries where employee protection and health-and-safety legislation is weakest, as it’s cheaper for them. The welfare of the workers is of course to them irrelevant – profit before people is all that they care about. This leads to situations such as the recent deaths in Bangladesh, where hundreds of people died in fires and building collapses at dangerous factories, all so that Western companies can manufacture clothes more cheaply and increase their profits. – See more at:
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Bangladesh factory collapse – multinationals will operate wherever is cheapest, regardless of human rights. Picture © Rijans

One way they do is through the use of Regulatory Arbitrage. This is when multinational companies play countries off against each other in order to get the most preferential deals. For example in the area of tax, companies will often offer to set up in whichever country has the lowest rates. Countries will then ‘compete’ to see who will charge the least tax – the so-called ‘race to the bottom’, where the only losers are ordinary people, who have to suffer austerity to make up for the lost tax-revenue. Governments will often say they want to increase tax rates, but claim their hand is being forced by multinationals threatening to move elsewhere if they don’t get the deal they like – a form of corporate blackmail. A similar situation occurs in the area of employee protection and health-and-safety legislation, which is why many corporates like to set-up factories in third world countries where  such legislation is weakest, as it’s cheaper for them. (The welfare of the workers is of course to them irrelevant – profit before people is all that they care about.) Again this puts intense pressure on governments to then cave in and weaken the legislation in order to ‘attract business’. Other areas where corporates will head for whichever jurisdiction benefits them the most include animal welfare, use of dangerous chemicals, anti-pollution legislation, and environmental destruction. Again in all these areas governments are pressured into minimising their legislation in order to attract investment, to the benefit of the multinationals and to the detriment of ordinary people and the world around us.

However now we are being faced with an even greater threat – the proposed Transatlantic Trade and Investment Partnership (TTIP). This is a free-trade agreement currently being negotiated between the US and the EU, and its implications are truly chilling. While its supporters claim that more free-trade lowers costs and so makes us all wealthier,  the fact that the negotiations are being carried out in secret should set the alarm bells ringing. And not surprisingly – one of its clauses threatens to give multinational corporations vast power over sovereign governments.

In the interests of the environment Germany stopped nuclear power, and is now being sued. Picture © Avda

The intention is to set up ‘investor-state dispute settlement’, which  would allow businesses to bypass normal courts, and sue governments directly over anything which caused them financial loss. The possibilities here are terrifying. The government wants to stop the use of genetically modified food? Biochemical companies could sue them for potential ‘lost trade’. We decide we don’t want to take the environmental risk of fracking? Fracking companies could sue us for lost business. The government proposes changes to the NHS? Health companies could sue if they think that will cost them money. The government wants to encourage people to cut down on smoking? Tobacco companies could sue for lost revenue. The welfare of ordinary people will come second to the profits of multinationals, and all these disputes will be settled behind closed doors, with only lawyers and corporate cronies having a say in the outcome.

And if you think this is all scaremongering and conjecture, then just consider that between countries where similar bilateral agreements already exist, such extraordinary cases are already being brought: both Australia and Uruguay are currently being sued by Phillip Morris over anti-tobacco legislation* ; Egypt is being sued by Veolia for increasing the minimum wage*;  Costa Rica is being sued by Infinito Gold for its decision to limit mining activity to protect the environment*; Canada is being sued by Lone Pine Oil over its ban on fracking*; and Germany is being sued by Vattenfall for deciding to abandon nuclear power*.

What all these cases demonstrate is that if the TTIP, and other agreements like it, go through, we can wave goodbye to any notion that we live in a democracy or the people have any control over their own laws. Multinational corporations will have total power, and corporate executives, lawyers, and no end of faceless men in grey suits will control how we live, what we can and can’t do, and they will use this power to extract ever-more of society’s wealth for themselves at all our cost.

* Refs: Australia: Uruguay: Egypt: Costa Rica: Canada: Germany:


The Injustice of Free Market Capitalism

This year there has been a flurry of excitement with the release of the book Capital in the Twenty-First Century, written by the French economist Thomas Piketty . In it Piketty explains how the inevitable result of Free Market Capitalism is ever-greater levels of inequality in society – and after a couple of centuries the only reason levels of inequality are not higher now than one might expect, is because two world wars effectively hit the ‘reset’ button on our economic system. However, nearly 70 years after the end of World War II, levels of inequality are now approaching the levels they were prior to the outbreak of World War I.

Piketty provides plenty of statistical evidence to support his claim – however we only need to look around us to see everything he predicts happening before our very eyes.  So what have we got? The government is currently claiming that the economy is on the up (annual GDP growth of 3.1%), the job market is vibrant (unemployment down to just under 2.2m),  the number of people in poverty is falling, and the booming property market is adding to the (theoretical) wealth of millions of homeowners. Everything is therefore great – except of course it’s not.

Deepening inequality is not incompatible with a booming economy, it just means the wealth is being ever-more concentrated in the hands of the privileged. The economy growing? Well if the wealthy get wealthier faster than the poor get poorer then of course overall wealth is going up. Job market vibrant? Well 2.2m still don’t have a job, and with 1.4 million people now on zero-hours contracts one has to seriously question the validity of those statistics anyway. Number of people in poverty falling? Well the poverty rate is still near 20% (over 12 million people) and new Food Banks are still opening every week to feed  a need which is growing not diminishing. Booming property market? Yes, great if you’re a home-owner, awful if you’re a renter who is seeing increased property prices once again feeding through into higher rents.

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Martin Sorrell – one wonders how he can justify paying himself a salary of £30m/year. Picture © Eirik Solheim

We’re a country of two halves, and nowhere is this more apparent than in some of the news items this week. Firstly Freshfields, the law firm, has announced that  last year its partners earned an average salary of an extraordinary £1.5 million each. Even more extraordinary, WPP, the advertising agency, has just announced that its boss, Martin Sorrell, has been given a pay-rise – and he now takes home (I can’t bring myself to say ‘earns’) £30 MILLION per year! And then last week the yacht manufacturing industry gleefully announced that at the luxury end of the market business is once again booming, with a record number of super-yachts on order (presumably as all those ridiculously rich people like Martin Sorrell and the Freshfields lawyers have to decide what to do with all their money.)

However at the same time as all this is going on, the government has confirmed that there will be no above-inflation pay-rises for public sector workers for the next four years, citing the perilous state of government finances. Coming after several years of pay-freezes, this means that many key workers (eg firefighters, teachers, care-workers etc) have seen a sustained fall in leaving standards since the recession, and are now, on average, £2,245/yr worse off than when the coalition came to power. As a result of this the TUC has called a one-day strike* – and the response of the coalition, rather than address the issues being raised, has been to condemn the strike and confirm further planned tightening of anti-union legislation.

Anyone with any sort of moral compass whatsoever has to seriously question a system that allows some people to earn many millions of pounds per year, while vast swathes of the population are in poverty and visiting foodbanks. You also have to question what sort of a society it is that justifies inflicting austerity on nurses and teachers, while heaping ever-greater rewards on bankers, lawyers and advertising executives. However as long as we have a system of government where lobbying and party funding mean the levers of power are controlled by those with money, I guess little will change.



The ongoing takeover battle for British Pharmaceutical giant AstraZeneca shows the inherent contradictions in Free-Market Capitalist thinking, and in particular the conflict between what is good for the people, and what is good for the massive corporations that bestride our planet.

Free Market theory is unequivocal – you let businesses do what they want, and competition will ensure they generate vast wealth which will benefit us all. Except of course it doesn’t work that way, which is why the government is in such a quandary over whether to let the takeover by Pfizer go ahead.

If the takeover goes ahead none of AstraZeneca’s operations will be safe. Picture © Erik031

It is obvious to everyone that the only thing that matters to Pfizer is making money for themselves, and that they will stop at nothing to achieve that. If it benefits them financially then you can guarantee that jobs will be lost, research operations will be closed down or moved abroad, communities will be destroyed, and a major part of the British Pharmaceutical industry decimated. The British government also knows full-well that any guarantee it gets from Pfizer in advance of the takeover won’t be worth the paper it’s written on*.  Just as with the takeover of Cadburys by Kraft a few years ago, once the deal is complete they will go ahead and do whatever they want. (And in any case what is the use of a ‘five year’ guarantee – what Pfizer are currently offering – compared to the decades it has taken to build AstraZeneca into the company it is today).

In addition, Pfizer’s promise to move its headquarters to the UK for tax purposes (as the UK currently has lower corporation tax than the US) will of course only last until another country undercuts our rate of tax, at which point they will be off. (This is the so-called ‘race to the bottom’, where countries compete to offer the lowest tax rate to businesses: with the only winners being the corporations who play countries off against each other, and the losers being ordinary people who see their public services relentlessly cut as a result of the lost tax-revenue).

So the politicians stutter and prevaricate, unable to admit that the  economic philosophy  they sell to us is fundamentally flawed, while business leaders rub their hands in glee at the prospect of yet more wealth being transferred into their greedy hands from the impoverished masses . Until we have a political system that truly speaks for the interests of ordinary people, and an economic system that shares wealth equitably, takeovers like this will continue, and the increasing division of our  society between the haves and the have-nots will only get worse.



A Tidal Wave of Inequality

Figures out this week show just how divided our society is becoming, a trend which is ever more extreme and shocking. It was revealed yesterday – by Oxfam* – that the 5 richest families in the country have as much wealth between them as the poorest 20% (12.6m people). This came hot on the heels of a report in January – also by Oxfam – that the 85 richest people in the world have as much wealth as the poorest 50% (that’s the poorest 3.5 billion people). It’s actually difficult to comprehend such vast figures, though they clearly show just how very wrong our society has become.

File:Buckingham Palace, London - April 2009.jpg
Land near Buckingham Palace forms a large part of the Grosvenor Family Wealth. Photo by DAVID ILIFF. License: CC-BY-SA 3.0

There are many different reasons for such vast wealth accumulating in the hands of a few: inherited land wealth (The Duke of Westminster’s family and the Cadogan family); buying up natural resources (the Reuben Brothers); or just being successful businessmen (the Hindujas and Mike Ashley’s family) but one thing is certain – in our current system of ‘free market’ capitalism and light-touch government regulation, such vast treasures of wealth will never filter down to the population at large, as the wealthy will continue to use all means at their disposal to keep it to themselves. That means a mixture of employing lawyers to exploit legal loopholes, using every tax-avoidance measure they can think of, using off-shore tax havens to stash their cash away and out of the sight, and using a mixture of lobbying and party-funding to ‘buy’ favourable regulation from their friends in government. While they do that the rest of the population continue to suffer Austerity and poverty, which has now got so bad that, for the first time ever, more working households are living in poverty than workless ones.

Any right-thinking person knows what’s going on is wrong, but not everyone realizes just how corrupt is the system which sustains it. All our main political parties are in on this, and until we get rid of them nothing, sadly, is going to change. For some ideas of how we can instigate change click here.