I have started with a quote from Eeyore in Winnie the Pooh. The gloomy donkey always appeared to be a pessimist, but often he was foreseeing the better option between two choices. Theresa May appears to have chosen for the UK, ruling out scrutiny and approval by parliament and clearance from the electorate for her decisions. Perhaps we need an Eeyore to put this in perspective for us now.
Tuesday 17 January 2017 is an inauspicious day, it was the day Theresa May made her speech confirming that Britain was leaving the single market. She relied heavily on speculation such as there would be a free trade agreement with Europe, which would somehow wondrously be agreed during Article 50 negotiations and then equally astoundingly move straight on to an ‘implementation period’ to enact the changes after April 2019. She needs to agree that free trade deal during what will be a maximum of only around one year but probably considerably less of real negotiating time following the French and German elections which takes her to this autumn and the beginning of the new administrations’ parliamentary sessions. Thus, it may be the end of 2017 before anything actually begins. Before the process is completed she will need to go to both houses of parliament and run the risk of serious problems emanating out of Belfast and Edinburgh. Thereafter any deal reached will need to be subjected to a vote at both the European Parliament and Council. That will take at least another six months. So, she must squeeze negotiations in to that small space in time. Given the amount of time required for even the simplest trade agreement she is banking on miracles that are very unlikely to happen. The rest of her speech depended on rather meaningless sound bites that said either nothing at all or nothing new, then there were memes. A meme is merely an idea, mode of behaviour or style that extends from one person to another within a culture, this case Westminster political culture. The memes are embedded in right wing perception of what is best for what she fallaciously portrayed as a unified UK, they are the bread and butter of the right wing of her own Conservative party and UKIP as the Johnny-come-lately of nostalgia for a Great Britain that once was but is certain never to be again. She wound off her speech by including a blatant lie – which I shall examine in another, shorter piece after this.
The ‘right’ agenda
At present what we are seeing and May is misguidedly representing is that there are right wing nationalist forces at work to undermine, eventually destroy all kinds of alignments between nations that ensure peace between them, as we all know, but the reality is what they are doing is serving the aims and intents of aggressive capitalism. One of the favourite rhetorical weapons of the political forces at work at present is a kind of psychologically clever list of things that seldom directly affect the people who react to them but they are told authoritatively do. The list is topped by globalism, followed by elites, free trade, human rights and even neo-liberalism has been knocked. In fact what is happening is that the things mentioned in that list must be got rid of, so the right wing has stolen that meme that was traditionally left wing idiom and turned it on its head.
Let us start with globalisation. That is the process by which businesses and other organisations develop international influence or start operating on an international scale. It has been regarded a tool of aggressive global capitalism for a long time. Part of the critique is aimed at free trade agreements (FTAs). I think most of us will take for granted that FTAs are not benevolent arrangements between nations to make lives better as their first priority. They are there to make international trade easier, to agree production and consumer standards that are shared and place the taxes and duties that previously existed between nations without any uniformity into a framework for all members. The statements that Donald Trump made before and since his election to President of the USA are almost ironic. He appears to own at least 144 individual companies with dealings in at least 25 countries in Asia, Europe, Africa, South America and North America that range from management deals with golf courses in the UAE, owning golf courses in Scotland, an estate agency that carries Trump’s name in India, clothes carrying a Trump label in Mexico, hotels and office buildings all over the world including Trump Towers Istanbul, Turkey and a company involved with beverage sales in Israel. A large part of an FTA is about movement of money around the world, capital transfers particularly, which are often done in ways that reduce the tax burden, if not often totally avoid it. For Trump to operate in two dozen countries makes his business part of the international flow of capital that is very much dependent on the cooperation between governments that enable not only capital transfer but favourable trading terms. Therefore to denounce globalisation is either a contradiction or very clever deceit. What is clearly meant is along the lines of trading blocs competing with the ‘big players’ are not wanted, they stand in the way of corporate interests where countries have bilateral trade agreements that allow reciprocal tax and customs deals. Therewith governments come out of it well on the back of the support of the corporations that at least pull some of the strings of power. The real winners are the corporations and wealthy shareholders.
When people who are among the world’s wealthiest individuals decry elites, it is pure hypocrisy. It simply sounds good but is without substance since it is a contradiction those using it cannot live up to, especially in this case. Human rights have often stood in the way of greed and avarice but when rights are abused or unquestionably violated aggressive capitalism and exploitation is often not far away. The fact that we have recently heard that the eight richest people in the world have as much money as well over three and a half billion then we can quickly establish that inequality is the biggest threat to the global economy and not the globalisation cum free trade that often levels the playing field. It means simply that we live with an economic system in which wealth accrues more wealth; whereby wealth means power and influence, which in turn leads to legislation, agreements and practices that help the rich get richer incessantly, widening the gap between haves and have-nots.
The elite with new clothes
So where does Brexit fit in on this? Recent news items have begun to paint a picture, not yet precise but the outlines are beginning to be clear. Boris Johnson, Britain’s foreign secretary has recently been quoted as having said that it is “…very good news that the United States of America wants to do a good free trade deal with us and wants to do it very fast”. There we have the word of a member of the elite, namely Trump, who says that a bilateral agreement, nonetheless referred to as a ‘free trade deal’, is desirable discussed with a member of the elite, Alexander Boris de Pfeffel Johnson, a descendant of King George II and dignitaries from a mixture of other countries, cultures and religions. Trump is hardly an ordinary bloke either; his grandfather was Frederick Trump who made a fortune operating boomtown restaurants and boarding houses near Seattle and in the Klondike, Canada and whose father Fred Trump’s real estate and development company built and managed single family houses in Queens in New York, built accommodation and leisure facilities for navy personnel near major shipyards along the east coast and over 27,000 apartments in New York. So hardly a man of humble origins, he took over part of his father’s real estate business so never, as he claimed, began from scratch, indeed is also said to have had a considerable start capital from his father as well. He is a political dilettante whose naivety outside of his own environment endorses the fact he says many of the things he does that are led and fed by right wing dogma that is his political life blood. An example of this is that in a recent media interview Trump expressed a view that he believes NATO is ‘obsolete’ and that more member states will leave the 28 nation EU as a consequence of Brexit. Leaders of EU countries and other politicians have spoken out to tell him they do not need his ‘advice’. Another ‘ordinary chap’ who tells Europe what is right and wrong, decrying elitism is a stockbroker who worked in the City, privately educated and formerly a commodities trader, Nigel Farage, who has had more than enough written about him already. However, these people somehow sell themselves to people who are fed up with the elite who they feel have done everything wrong to their detriment. In fact they are playing into the elite’s hands. Behind this façade of anti-elitism is a very powerful, extremely wealthy elite that is the fuel behind what is driving the people we know. One of the people in the front seat at present is Theresa May who is not a very good driver. Her speech and discussion thereof left out part of a more obvious plan that she did not deny when it was raised. That is the suspicion that the UK wishes to become a tax haven.
In a recent interview with Welt am Sonntag, the UK’s chancellor, Philip Hammond, has said that the UK could transform its economic model into that of a corporate tax haven if the EU fails to provide it with an agreement on market access after Brexit. He remarked that if the UK is left closed off from European markets after leaving the EU, they would consider departing from a European-style social model, with ‘European-style taxation systems, European-style regulation systems’ and ‘become something different’. What is being proposed is a tax haven with free trade agreements, exactly the kind of aggressive capitalism that we call neo-liberal economics. Brexit is opening the door to exactly what it stands for. It is an economic system that transfers control of economic factors to the private sector from the public sector, believing that governments must limit subsidies, reform tax law in order in a way that expands the tax base, reduces deficit spending, puts limits on protectionism and opens free markets up to trade. It furthermore sets out to abolish fixed exchange rates, back deregulation, encourage ownership of private property and privatise businesses run by the state. It sees competition as the defining characteristic of human relations, thus redefines citizens as consumers whose democratic choices are best brought to bear through buying and selling, which is a process that rewards merits and punishes economic wastefulness. It maintains the view that ‘the market’ delivers benefits that can never be achieved by centralised or state planning and attempts to limit competition should be treated as detrimental to liberty. Tax and regulation are minimised, public services privatised, organisation of labour and collective bargaining by unions are considered sources of market distortion that obstruct the development of the hierarchy of winners and losers in which the latter are cast off as economic waste. Inequality is recognised as a desirable quality, the reward for efficacy and being a generator of wealth, which is said to trickle down to everyone whose inputs, thus labour and consumption, contribute. Any attempt to create a more equal society is seen as counterproductive and morally corrupt. The laissez-faire approach to economic development of the market makes sure everyone gets what they deserve. Except that people rarely do get a good return, the wealthy entrepreneur or investor is usually the only real benefactor. A tax haven where tax regulation is ‘liberalised’ is the perfect setting. One of the things that is often overlooked when trade is discussed is that of finance which includes movements of all forms of capital; stocks and shares and currency exchange free of restrictive taxes are the clear raison d’être for the new position Hammond has adopted. What he is very clearly saying is that the UK could rather than would transform its economic model into that of a corporate tax haven if the EU fails to provide it with an agreement on market access after Brexit. That is, of course, economic blackmail. What the UK is probably banking on is that by threatening than when (and if) they leave the EU, if the City clearing houses dealing with euro transactions relocate to the Eurozone, therefore many foreign, including of course European and non-European, banks, they will retaliate by becoming a tax haven where the incentives offered by low or zero taxation of capital and assets could attract inward investment. Because the UK has a manufacturing base that could be revived, the same low or zero tax incentives would attract industry back. It may be purely speculation and hollow threat but there would appear to be enough substance in that threat and the obvious support of the USA now veering to the right and clearly encouraging more aggressive capitalism to carry out that threat.
There is always the element of both contradiction and irony in that. Firstly, the rhetoric against globalisation whilst the proposition is to globally control capital into the hands of the wealthiest elite and their multinational corporations through a system of centralisation of finance through powerful tax havens that exert enormous influence on international relations. Conspiracy theorists very often take their eye off the ball by concentrating on Goldman Sachs, the Bilderberg Group, Rothschild or Putin and Russia. During November 2016 at a meeting of EU finance ministers in Brussels, David Gauke, chief secretary to the treasury, told EU opposite numbers that the UK would oppose proposed attempts to put territories with a zero rate of corporation tax on a list of ‘non-cooperative’ jurisdictions after the EU promised to draw up a blacklist of tax havens following the revelations in the Panama Papers in the leak of files from the database of the world’s fourth largest offshore law firm, Mossack Fonseca. They pledged to expose shady ‘treasure islands’ that help multinational corporations and their clients avoid paying tax. The UK has a number of crown dependencies, Jersey, Guernsey and the Isle of Man and British overseas territories including Bermuda, the British Virgin Islands and Cayman Islands, that are among the jurisdictions that have zero rate corporation tax according to the European Commission, in an analysis of risk factors that set out to show whether a jurisdiction may be promoting tax avoidance.
The pretence that neo-liberal economics of the Adam Smith type so strongly adopted and advocated by Margaret Thatcher in line with her closest political ally Ronald Reagan is over to be replaced by a new and ‘freer’ model comes right at a time when corporate interests steering governments are closest to seats of power. In the UK media empires epitomise that immense influence through a number of daily newspapers that have promoted Brexit and use every possible means of criticising regulation that protects ‘ordinary’ people as diktats from Brussels. Yet evidence for how close the roots of that encroaching dominance of the free market versus benevolent federalism begins at the very top of politics. Theresa May is an example of somebody deeply implicated. May’s husband Philip is a senior executive of a $1.4 trillion investment fund that profits from tax avoiding companies. He works for the Capital Group which has huge stakes in companies that include Amazon, Starbucks, investment bank JP Morgan Chase, Lockheed Martin, Philip Morris International, Merck and Ryanair. The Los Angeles based company have an office in Mayfair in which Philip May, who is a pension fund expert, is a client relationship manager. That is to say, he stays in contact with organisations and institutions in the UK to ensure they are happy with the service being delivered by Capital Group. In other words, he is part of a set of people who controls the means and methods of tax avoidance and has the financial sector’s interests at heart rather than that of the nation his wife should be leading and representing. She is implicated by her marriage alone, let alone what we do not know. She must have very good insights into the advantages of the hard Brexit she appears to be increasingly willing to negotiate and the position her cabinet colleague Hammond expressed. It would be extremely naive to imagine otherwise.
May is now attempting to deflect from the outcome for a large part of the population by offering bribes like protection of workers’ rights by adopting the existing EU legislation into the post-Brexit UK. However, given reservations the UK has often expressed when employment laws were made there are good reasons for doubt about the provenance of these loose promises. That is where the Labour party should come out of their apparent political stupor and oppose her whilst warning the ‘workers’ she is promising to protect that the opposite is almost inevitable under her regime. Immigration was promoted as the main concern of the population at large and promoted politically and disingenuously by pro-Brexit forces convincingly enough to gain their 52% majority of the referendum turnout. It cost Cameron his premiership and opened the door to a further right leaning leadership. Now May and her people will have a free run at getting rid of a lot of people and inevitably creating exemption, exceptions and other means of allowing people in the financial sector to live and work in the UK just like a large scale version of Liechtenstein where two thirds of the workforce are foreign and close to completely in finance or the Virgin Islands where over 50% of all workers on the islands are foreign and mainly engaged in finance. The government knows very well that so-called ordinary people will not understand any of this and that anybody who speaks out will be countered by denials and called mad or words to that effect. It is therefore not in the interest of the country the UK is threatening to become to continue to have labour laws and protections that continue to allow the organisation of the workforce and collective bargaining by unions that are considered sources of market distortion that obstruct the growth of wealth. If the unions realise that this could be their final stages of demise and that the moves to rid the UK of generally expensive EU workers in order to supplant them with cheaper people then there should be action on their part and a push for opposition to work for those it supposedly represents. It has been reasonably obvious for some time that some EU countries suspected what might happen and that the UK wants to leave the controls the EU exerts over finance in order to become an offshore finance and tax haven, especially with EU measures still being discussed in terms of being in place during this year. There is an advantage being close to the European mainland in many respects that include proximity of financial markets within hours, close to each other within time zones and have existing links between financial institutions around the world.
Those who suspected what is happening have been saying the USA does not like economic competition for many years, but since Trump’s election his supporters in the financial sector have become emboldened. They, through him, are expressing a wish to kill the EU and most recently have had Trump say explicitly that they will use the UK and Brexit to do that. May must know that, if she does not then she is doubly unfit to lead the UK. She is in effect using the result of the referendum to steamroller the UK into the position US finance wants. The rhetoric Trump used regarding immigrants has been transferred to the UK’s propositions regarding EU people who stand to continue a close relationship between the continent and UK. They are, despite their skills and experience, expendable. This is not the kind of thing that the ‘man/woman in the street’ is aware of and since nobody anybody believes either experts or ‘paranoid’ finance watchers, they have free licence to walk over the UK and then watch all the promises to workers about protection dissolve and people be delivered into the pits of economic misery. Now the way May is determinedly pushing ahead with Brexit although there is no clear ‘majority for it and going for the total ‘hard Brexit break at that, the likelihood of a ‘new’ economic model is very likely.
A big risk
It is highly probable that the question of ‘ever closer union’ that was projected as being at the forefront of UK dissonance with the EU has simply been used as a convenient cover to hide economic ambitions. In 1973 when the UK joined the EEC, the UK was economically depressed to the point of collapse. The City was potentially bleeding business to other financial centres. The years in the EEC and EU have seen the UK thrive but moreover the City grow exponentially. Although manufacturing industries have dwindled and died, some hi-tech both otherwise service and finance sectors have thrived. The UK is thus now a services economy and at that mainly a financial services economy. Some EU states will be cautious about giving the UK a good deal since Brexit provides an opportunity to boost their financial companies who will be only too happy to enter into close at hand offshore deals and others might purely be motivated by political anger. Closer union would sooner or later have demanded a more equitable distribution of what has become concentrated in one square mile of London throughout the entire EU and some centres have already grown in importance to the point that they posed a threat already. The UK proposition is designed to draw back the financial concerns that were looking at Frankfurt, Paris and Dublin as future bases. In that respect the UK would no longer be concerned about and almost hope to be on the proposed EU blacklist of tax havens. What the UK is doing is setting another step in the agenda for making itself a pariah state in order to enrich itself, at least its wealthiest rather than the entire population. As an outsider it will no longer be subjected to the critical appraisal of its partners but have a free hand in sharing the delights of a modern Mammon offered by the corporations who will drive their capitalist machine into the heart of Europe by a side door.
If, which is highly unlikely, manufacturing revives then the people will be pacified by the security of jobs, even if terms of employment cease to be as generous, superficially their lives will be better whereas in fact they will be no more than the servants of a grotesque moneymaking machine. As it is the government has cut a deal with Nissan in Sunderland, they have also not released details of what that arrangement is and Nissan is saying nothing. There is both political and legal pressure being exerted to have that made public, the suspicion being that under EU legislation it is illegal. That may mean it will find its way to the European Court of Justice, something the UK government is anxious to avoid and is therefore under pressure from some parts of the right to immediately leave the EU, thus the auspices of the ECJ, without negotiations. That would subject the UK to the wrath of the EU as a body, thus the risk is not worth taking. As, when and if the Nissan deal is made known, it will be clear what incentives are being offered to industry to keep them in place. As it is, in fact the UK is not literally a manufacturing nation any longer but largely where products are assembled from imported parts, the cost of which will go up as levies increase accompanied by higher export duties. As prices thus increase, UK made products will lose competitiveness thus attract companies away to where production costs are lower in order to regain that edge. The only actual edge there is at present is the knife edge May and her Brexit team are placing the future of the UK on.
The pound exchange rate rose slightly after her speech, possibly reflecting investors buying sterling in order to come out in profit once it drops back. It is too early to say what the exact outcome will be, but when food prices rise due to sterling’s inevitable fall, with the prospect of even higher prices when post-Brexit tariffs take over, as banks start to transfer operations overseas in a attempt to keep the passporting that has proven so profitable thus far, May will become increasingly weak and the victim of her own belief in powers she does not possess and the self-illusory ability to decide for an entire nation. That is where she finished her speech with a lie, something I shall follow up with a subsequent piece that examines her ineptitude as a political liar and thus exposes her vulnerability to those who continue to oppose Brexit. She is not actually dealing just with the EU as a bloc, but also each member state as a part of the whole in which each country still gets a veto on the outcome of the negotiations and most important of those is trade deals. It requires only one country that may even have hardly any trade with the UK to scuttle the whole plan.
Her so-called plan puts the living standards of every UK citizen in the hands of the UK with troubles in her own backyard given the threat of deadlock caused by the prospect of a Sinn Féin gaining majority control of the Assembly in Northern Ireland and a very real prospect of provoking a successful independence referendum in Scotland, in either or both cases undermining the unity and standing of the UK. Indeed, almost immediately Nicola Sturgeon accused May of pursuing a hard-right, divisive agenda, that quitting the single market could be ‘economically catastrophic’ and was against Scotland’s national interests, thus raising fundamental questions about what kind of country the UK would become. David Davis poured oil on the fire by stating that parliament will not vote down the deal struck by May with other EU leaders when MPs are given their say on the outcome of negotiations and will also not get the option of reversing Brexit either. In her speech May had warned European leaders that the UK is prepared to ‘crash out’ of the EU if she cannot negotiate a reasonable exit deal, leading key figures in Brussels to say that the UK was clearly on track for a hard Brexit. The 24 hours following her speech began to look like a bonfire of the vanities, in this case hers. Boris Johnson has warned François Hollande against trying to ‘administer punishment beatings’ as though in ‘some world war two movie’ to any country that tries to leave the EU. Irrespective of the fact that Hollande will be leaving office in a couple of months, the UK’s most senior minister for negotiations with foreign powers just added insult to injury by stating that the UK will not put up with bullying by using the threatening tone of a bully. Guy Verhofstadt, the European Parliament’s chief Brexit negotiator, has criticised Theresa May’s ‘threatening’ tactics and warned the days of the UK cherry-picking its relationship with Brussels are over. HSBC have already announced 20% of its operations will now go to Paris. Ken Clarke made one of the most meaningful attacks overall on her speech by saying that it will be hard for the UK to enter into trade agreements when only the UK is making the rules. May is steering the ship onto the rocks, now on the financial services
So, what she set out to be her moment in the spotlight on an auspicious day when she presented her plan, has turned out to be quite the opposite since she delivered a speech that actually offers nothing, omits some details that should be spelled out but many of us are anticipating already and autocratically told parliament what 65 million people are thinking which so evidently a vast majority of them have not and never will. It has been followed by dissent, bullying, threats and diktats. Before parliament has any opportunity to discuss her plan they were effectively told the definitive outcome, diplomacy was thrown to the wind before negotiations begin and the tone of those governing will possibly even create such doubt in the trustworthiness of the UK that any dreams of becoming a tax haven may just remain a dream. Perhaps to say it was an inauspicious day is wrong, catastrophic may be more appropriate and based on the developments in less than 24 hours worse is clearly yet to come. For some people all is lost, for others they have lost the battle but not the war. They will fight on.