Offshore

The on-going global financial crisis of 2007-8 has been transformed through ideological sleight of hand into a public sector debt crisis. The underlying causes of this economic turbulence — the criminality, negligence and irresponsibility of the banking and finance sectors — have been occluded by a renewed political assault on the public realm. Momentary political commitments towards more effective global regulation have faded away as power elites regroup to protect their self-interest.

Pivotal to this crisis is the existence of a shadowy second global economy into which ever more resources flow against a background of fiscally starved national economies that are politically prevented from raising their tax bases. The haemorrhage of capital from the global economy out of productive circulation into offshore tax havens is conservatively estimated at about a third of global GDP. This enormous loss of wealth undermines the possibilities for greater investment in infrastructure, health care, education, science and all those other fields essential for human well-being. As the journalist Nicholas Shaxson argues in Treasure Islands, “tax burdens are being shifted away from mobile capital and corporations, onto the shoulders of ordinary folk”.1 In the United States, for example, the political impasse faced over raising taxes is contributing towards a long-term slide in global competiveness because of stymied resources for investment in those critical areas essential for future prosperity. Indebtedness and declining competitiveness become ever closer entwined generating further economic woes and political polarization.

The causes of this global political and economic crisis are interrelated. News Corporation, for example, now mired in scandal for criminal activities, also has more than 150 overseas subsidiaries set up to avoid paying tax (located principally in the British Virgin Islands, the Cayman Islands and Hong Kong). The unravelling of News Corporation’s political influence in the UK is welcome but beware their quiet return in eighteen months or so to make another attempt at gaining control of BSkyB to further extend their control of British media by stealth. Note also that they and their political acolytes are committed to undermining the BBC and public sector broadcasting in order to increase their market share.

Shaxson argues persuasively that it is time to tackle the “offshore system” but this will require a reshaping of the political Left as a coherent global force to be reckoned with, capable of championing the public interest whether this be Tsetse control in sub-Saharan Africa or the closing of tax loopholes in the Caribbean. In the mean time we should remain sceptical of charitable foundations and other forms of corporate responsibility that mask the real dynamics of wealth and power in the global economy until there is true accountability and transparency.

1 Nicholas Shaxson, Treasure islands: tax havens and the men who stole the world (London: the Bodley Head, 2010).