The South African Civil Society Information Service
A nonprofit news agency promoting social justice. Seeking answers to the question:
How do we make democracy work for the poor?
A nonprofit news agency promoting social justice. Seeking answers to the question:
How do we make democracy work for the poor?
By Glenn Ashton · 7 May 2009
Alan Greenspan was wrong. Free market ideology is rotten to the core. There is mayhem on main streets, with jobs haemorrhaging from every sector. It is not only first world working stiffs who are feeling the pain. The poor and working classes are suffering a great deal more, due to problems created on the other side of the world by a system that may as well operate in a parallel universe.
The self serving greed and accumulative gathering of wealth through nefarious instruments of finance such as speculative trading on futures, derivatives and the unregulated nature of the so-called free market lies at the very root of the problem.
The chair of the United Kingdom Treasury committee John McFall stated in May 2009 that, "Bankers have made an astonishing mess of the financial system." He went on to say that, "The culture within parts of British banking has increasingly been one of risk-taking, leading to the meltdown that we have witnessed."
Whenever a suggestion has been made about regulating the capital markets, the politicians and bureaucrats are stymied by their sponsors. US senator Dick Durbin recently remarked, while attempting to reform bankruptcy laws, that, “...the banks … are still the most powerful lobby on Capitol Hill. And they frankly own the place." So what chance of reform?
Democracy is supposed to mean the devolution of power to the citizenry, government by the people. What has happened instead is the market has invaded and usurped democratic structures and democracy itself from individual players. The interests and influence of capital has trumped individual and collective citizens rights.
If we are to correct this pernicious imbalance, we must regain control of our democratic structures from the lords of the market. Failing this we resign ourselves to a continued feudal role as modern serfs.
If we do not reform the market, promises by the G8 and OECD nations to attain the Millennium Development Goals (MDG's) will never be realised. The MDG's are essential to correct the imbalances between developed and developing nations. That the third world has been – and continues to be - sorely exploited by the first is beyond dispute. The present financial woes stand to affect the dispossessed of the world to a proportionally greater degree than their neighbours in the North.
We cannot condone propping up a failed and corrupt financial system, run by self-interested neo-liberal and free market thugs and gangsters, who are no less merciless, dangerous or malign than any Mafiosi or Yakuza.
As an aside, we should have little sympathy for those nailed by the sort of financial problems that have arisen out of affairs like the Madoff ponzi scheme. These are simply sideshows that illustrate how out of control this deregulated market has become. Should we really sympathise with people who have so much money that they are incapable of managing it and instead willingly hand it over to shysters? Sure, some people will get hurt through these scams but this is only a symptom of the malaise. It may be more useful to link the interests of those ripped off by these ponzi schemes to those of developing nations, who are in turn exploited by a more formalised system of financial exploitation.
The present market instability has occurred because banks and financial institutions have gambled the money of both investors and depositors on questionable bets. Insurance companies have led the charge in reinvesting money they have been ceded in order to maximise their profitability. Mortgage lenders have extended loans to the technically insolvent. Banks have been bailed out of trouble by us, the people. Central banks bailed themselves out of trouble by printing money to suit their own ends. The free market has been shown up as a casino economy.
One possible solution to this excess is to kerb speculation by introduction of a trading tax, along the lines of the Tobin Tax. James Tobin, a Keynesian economics Nobel laureate, suggested that a small tax on currency trading would serve to reduce speculative trading as well as to provide stability for smaller nations and banks. Given that speculative trade in currencies runs at around US$ 3,200 billion per day, there appears to be both a need and a purpose for taxing this short-term speculation. Even George Soros, notorious for almost breaking the Bank of England through currency speculation, feels such a tax would assist market stability.
The more substantial this tax, the more effective it would be. Tobin recommended a rate of 0.1%. Some economists and NGOs suggest a lower rate of 0.005%, which the UK is interested in pursuing. Belgium and France are keener on the higher rate and have passed legislation that would become binding if the EU as a whole accepts the concept.
However, the Tobin Tax was devised to deal with currency speculation. In the real world of global finance, everything is speculated, from pork bellies to gold. Taking the idea of a Tobin tax a bit further, Ignacio Ramonet, editor of the prestigious French journal Le Monde Diplomatique, proposed an association to implement such a tax in 1997. It was entitled the Association for the Taxation of Financial Transactions for the Aid of Citizens, ATTAC.
ATTAC has since become synonymous with demanding more far-reaching economic reform of the neo-liberal free market. ATTAC champions fair trade as opposed to free trade; it defends the public right to open, transparent access of goods like water, air and information. Perhaps most relevant to this analysis, it demands a cessation of the concept of tax havens.
There is increasingly widespread recognition that the very concept of tax havens is one that needs to be vigorously challenged. That perversely wealthy corporations and individuals are able to squirrel away vast chunks of capital, often questionably gained, (Enron anyone?) in obscure sandpits such as the Cayman Islands or quaint European fortresses like Lichtenstein and Luxembourg, is obscene. The money sucked into these financial black holes is effectively removed from the global fiscus. It is dead capital, until its controller wishes to invest it in a new venture, after which it can be made to disappear again.
Nobody knows how much money is stashed in the numerous global tax havens, but it is certainly a tidy sum. The OECD estimated the amount at between 5 and 7 trillion US dollars. If this money was forced to be repatriated, taxed and put back into circulation there would be little need for the tax paying public to bail out the very institutions that created the crisis we are forced to pay for.
Quite how to crack the tough nut of tax havens is complex. Switzerland, while not quite as shady as some of the global tax havens, has long had opaque banking privacy laws. Seeing the writing on the wall, the Swiss have recently opened up their system to a bit more scrutiny, but perhaps not yet enough. After all how many corrupt regimes, from apartheid South Africa to Mobutu Sese Seko of Zaire, have stashed their ill gotten gains with the gnomes of Zurich?
One way to leverage open the cans of worms that are tax havens, is to bring international pressure to bear by totally reforming the international banking system. Were it not for political support, bought through using public funds to prop up a morally and financially bankrupt banking system, the global economy would probably have gone rather more pear shaped than is presently the case.
The point is that our governments have lent our hard-earned tax money to prop up the banks. The banks in turn refuse to play the game by allowing sufficient transparency in their dealings. Our elected leaders have somehow forgotten to remove the bloody greedy fools who have run ponzi schemes which shame Madoff's little caper into utter insignificance. The system must be reformed, constrained and made to act like a bank that lends and borrows. Banks and financial institutions must be stopped from acting like players in a global casino, where the rules have been re-written to suit themselves.
Real pressure needs to be applied on our governments to remove these out of control financial gluttons from office. The power of banks and speculators to hide their money must be halted. Hidden capital must be returned to our governments where it can allay the massive budget deficits suffered by the global economy.
Philanthropic donations by the Gates' and Buffets' of the world are fine and well, but they wouldn't have been necessary if we had a more democratically regulated economic system that worked to put these obscene profits back under truly democratic control.
A government should be little more or less than an instrument to reallocate financial resources from where they are abundant to where they are needed. The most functional states in the world - the socially aligned Nordic states of Norway, Sweden, Finland and Denmark - do precisely this. They efficiently reallocate resources from where they are abundant to where they are needed. Their societies are more equal than any. The social barometers of education, health and general quality of life are high; corruption and poor governance is almost absent. And they equitably support third world development.
The Nordic states are certainly not perfect, yet they are a powerful argument for strong centralised government and egalitarian socialism. And yes, they are democracies of long standing. But there is no reason that any other nation on earth cannot utilise or adapt the sorts of templates that were forged by these states.
Whilst the concept of a global government is an anathema to many, it is a de facto reality. The International Monetary Fund, The World Bank, The G8 or G20 or G40 or whatever; the United Nations, the OECD, OPEC, ASEAN, the AU are all simply instruments of global governance.
If we manage to reorder the global financial system into some sort of order, opportunities will arise to pursue the MDGs and other instruments to close the gap between rich and poor. Nations like Brazil, South Africa and Botswana, with the highest levels of social and economic inequality, stand to gain most. But in the long run everyone stands to gain.
This will not be easy. The challenges and obstacles thrown up by the most powerful, quasi-feudal corporate lords the world has ever seen will be formidable indeed. Simply put, we have no choice but to force their hands.
Should you wish to republish this SACSIS article, please attribute the author and cite The South African Civil Society Information Service as its source.
All of SACSIS' originally produced articles, videos, podcasts and transcripts are licensed under a Creative Commons license. For more information about our Copyright Policy, please click here.
To receive an email notification when a new SACSIS article is published, please click here.
For regular and timely updates of new SACSIS articles, you can also follow us on Twitter @SACSIS_News and/or become a SACSIS fan on Facebook.
Posts by unregistered readers are moderated. Posts by registered readers are published immediately. Why wait? Register now or log in!
For those who are interested in democratic global govenance and a democratic means of getting there have a look at www.simpol.org.
