Some believe that the bulk of tax evasion is done by the wealthy, a view fueled recently by high-profile leaks from offshore financial institutions such as the “Panama Papers.” Others stress that poorer individuals may be more likely to evade taxes, highlighting fraud by the self-employed or abuse of refundable tax credits. Those 'Others' are wrong.
(include tax revenue figures for various countries inc USA, UK etc - income and outgoings - government accounts and the obvious tax burden and slightly less obvious grift)
- In the United States for instance, the top 0.1% owns about 22% of recorded household wealth, as much as the bottom 90% (Saez and Zucman, 2016).
- Zucman (2013) estimates that 8% of the world’s financial wealth is held in tax havens globally; a similar estimate is obtained by Pellegrini et al. (2016).
- Our estimate of tax evasion at the top (25% of taxes owed) is an order of magnitude larger than the tax evasion detected by random audits in other wealth groups (less than 5% throughout the distribution). Of course, random audits are likely to miss some forms of tax evasion in the bottom and the middle of the distribution. Whenever there is no information trail, it is hard if not impossible for examiners to uncover non-compliance. It is important to note, however, that most individuals in rich countries truly have few possibilities to evade a lot of taxes, for the simple reason that most of their income derives from wages, pensions, and investment income earned in domestic financial institutions—income sources that are automatically reported to the tax authority. By contrast, tax evasion is possible for the very rich because there is an industry that helps them conceal wealth abroad, and most of their income derives from wealth.1 Tax evasion is also possible for the self-employed, and indeed random audits uncover widespread tax evasion among them.
- Two-thirds of New Zealand's richest people are not paying the top personal tax rate, with increasingly complex overseas schemes and bank accounts being used to evade the taxman. Inland Revenue has found that 107 out of 161 "high-wealth individuals" who own or control more than $50 million worth of assets declared their personal income in the last financial year was less than $70,000 - the starting point for the top tax bracket of 33 cents in the dollar. The multimillionaires used a variety of 6,800 tax-planning devices - such as companies, trusts and overseas bank accounts - to avoid paying tax. One had a network of 197 entities.
How can we explain the high rates of evasion we find at the top? The canonical Allingham and Sandmo (1972) model predicts that the very rich should evade little, because they are likely to be (non-randomly) audited by the tax authority. Yet our results show the opposite: in all our leaked and amnesty micro samples, tax evasion rises with wealth at the top; top 0.01% Moreover, Figure 5 only includes evasion on payroll, personal income, and net wealth taxes. It excludes evasion on the VAT, the corporate tax, real estate taxes, and excise duties. These forms of tax evasion are significant (see Skatteverket, 2014, for Sweden), but are harder to allocate across the wealth distribution—a task we leave to future research. 23 households are much more likely to hide assets abroad than households in the bottom of the top 1%. A simple model with a fixed cost of hiding wealth cannot realistically generate this pattern, because it only costs a few hundred dollars to create a shell company (see Findley, Nielson, and Sharman, 2012), and even less to open an offshore bank account.
To explain our findings, it is important to consider the supply of tax evasion services instead of its demand only as in the literature so far. There is an industry that sells wealth concealment services, and this industry primarily targets very wealthy customers. Think of a representative Swiss bank. It derives revenue by levying fees on the wealth it helps concealing and faces penalties in case it is caught helping tax evaders. The more clients the bank serves the more revenue it makes, but the higher the probability it is caught breaking the law (e.g., because the probability that a leak occurs rises). Internalizing this cost, a rational bank will target very wealthy individuals, who are few in number but own a large fraction of world wealth (because of the multiplicative and cumulative processes that govern wealth accumulation). In practice, private wealth management banks typically select customers by requiring them to have a minimum amount of assets (e.g., $10 million, or $20 million), in effect setting an infinite price for less wealthy individuals, while advertising their services to potential high-net-worth clients through by-invitation only events (see, e.g., Harrington, 2016). In the Appendix, we provide a model along these lines that can rationalize why tax evasion is sizable at the top in equilibrium, as observed in our data. The model yields a number of additional insights.
The most important insight is that government policies have a critical role to play to reduce tax evasion. Increasing penalties for tax evaders has not proved to be a very practical way to curb tax cheating so far. There are limits to the penalties that can be applied to persons conducting such crimes; and if the penalties set by law are too high, judges might require a stronger burden of proof from prosecutors, potentially leading to fewer convictions. Large sanctions against the suppliers of tax evasion services (instead of tax evaders themselves) could help overcome this problem. If policy-makers were willing to systematically put out of business the financial institutions found facilitating evasion, then the supply of evasion services would shrink, and tax evasion at the top could be reduced dramatically. In turn, a lower equilibrium level of tax evasion would make it possible, everything else equal, to increase effective tax rates on the rich and hence ultimately may contribute to reducing inequality. While there is a view that taxing the rich is not possible in a globalized world (e.g., Landier and Plantin, 2017), with proper enforcement, progressive taxation might be more sustainable than previously thought.
This insight also shows that tax enforcement and financial regulation policies are intertwined. It is easier to close small financial institutions than systematically important ones. Since 2009, 80 Swiss banks have admitted helping U.S. persons to evade taxes; others have been under criminal investigation by the Department of Justice. But the U.S. government has been able to shut down only three relatively small institutions (Wegelin, Neue Z¨urcher Bank, and Bank Frey). By contrast, in 2014, Credit Suisse was able too keep its U.S. banking licence despite pleading guilty of a criminal conspiracy to defraud the IRS; in 2012, U.S. authorities similarly decided against indicting HSBC despite evidence that the bank had enabled Mexican drug cartels to move money through its American subsidiaries. If financial regulation ensures no bank is so big that it cannot be shut down, then tax evasion could be curbed significantly.
Our model can also explain some of the key observed trends in top-end evasion. In our model, the size and distribution of tax evasion are endogenous to the wealth distribution. The higher inequality, the lower the number of people who evade. The intuition for that result is simple: when inequality is high, relatively few individuals own the bulk of wealth; they generate a lot of revenue for the bank and are unlikely to be detected. Moving down the distribution would mean reaching a big mass of the population that would generate only relatively little additional revenue but would increase the risk of detection a lot; it is not worth it.
This inequality effect could explain why on top of ultra-rich households, we also observe a number of moderately wealthy, old evaders in the HSBC leak and the amnesty data. In the 1950s and 1960s, following the destructions of World War II, nationalizations in Europe, and a number of other anti-capital policies, wealth inequality was at a historically low level. Swiss banks may have chosen to serve a broader segment of the population back then. Conversely, the number of clients of Swiss banks seems to have declined over the last ten years; as shown by Appendix Figure E.6, it has been divided by 3 at HSBC Switzerland over the 2006–2014 period.45 Part of the fall probably owes to improvement in the information available to the tax authorities, to technological change making leaks easier, and to increases in the rewards offered to whistleblowers (see Johannesen and Stolper, 2017). But one other contributing factor might be the rise in global wealth concentration (Alvaredo et al., 2018b). Indeed, while the number of HSBC clients fell, the average account value increased 80%, from $3.7 million in 2006 to $6.6 million in 2014; the offshore wealth managed by Swiss banks has also increased significantly since 2000 (Zucman, 2015). As the world becomes more unequal, offshore banks might choose to serve fewer but wealthier clients—making tax evasion even more concentrated at the top. Looking forward, we hope to study this issue using data from new leaks and tax amnesties throughout the world.
CONVENTIONAL WISDOM BULLSHIT
The following article was prepared to inform Congress about the current state of taxation in the United States. The reality is simple: poor people pay through the nose and suffer, rich people pay very little and prosper. The article does not dispute this dynamic but what's interesting is how much effort is put into burying the lead.
Centuries of thought and research have been devoted to the relationship between taxes and economic behavior. Classical pioneers explored the price or incentive effects of taxes on the supply of factors and products over 200 years ago. Microeconomists refined the concepts a century later. In the middle of the past century, the Keynesian focus on aggregate demand turned taxes into a demand management tool divorced from price or incentive effects; a theoretical detour that the monetarist school and the neoclassical resurgence have largely corrected.
Today, although more sophisticated work than ever before is being done in the tax field, it appears that the original insights of the classical pioneers still hold true. Strenuous efforts to find exceptions to the "law of demand" have largely come a cropper. It is still the best presumption that, if something is made more expensive, people will buy less of it, and if something is made less expensive, people will buy more of it. This law still applies to work, saving, and investment and to the trade-off between current and future consumption, and between consumption of market goods and leisure. Increase the tax on effort, and less will be supplied. Reduce the tax on effort, and more will be offered. Fewer inputs mean less total output. Factors of production are largely complementary to one another. More of one factor of production boosts the productivity and income of the other factors. Less of a factor limits the productivity and income of all the other factors.
It is well understood in the Economics profession that the current tax system imposes heavier taxes on income used for saving and investment, and on the formation of human capital, than on income used for consumption. Today, most economists would agree that these tax disincentives to save and invest, to work and take risk, have consequences. They lead people to undersave and overconsume and to work less and play more. These modern advances in economic understanding strongly urge us to dispose of the current income tax structure and replace it with a flat-rate tax that is neutral in its treatment of saving and consumption.
The tax biases against saving and investment and steeply graduated tax rates were introduced for the purpose of improving "social equity." In decades past, it was assumed that the added layers of tax on income used for capital formation would do relatively little economic damage, would inconvenience only the wealthy, and would provide significant income redistribution. It is becoming apparent, however, that most of the taxes that seem to fall on those who supply physical capital, intellectual capital, or special talents to the production process may actually be shifted to ordinary workers and lower-income retirees in the form of reduced pre-tax and after-tax incomes.
The adverse economic consequences of non-neutral taxation and graduated tax rates, and the resulting adverse impact on "social equity," are not displayed in the so-called burden tables used to inform the public policy debate or the votes in Congress. With bad information, the public and the Congress are left with a bad tax system and a sub-optimal economy.
A more rational system of calculating and displaying the real tax burden on some that took full account of how taxes are shifted would make it easier to explain and adopt a more rational tax system. A more rational tax system, in turn, would maximize the efficiency of the economy as a whole and would enable every individual to maximize his or her potential lifetime productivity and income.
CONVENTIONAL EXCEPTIONALISM BULLSHIT
The evidence is clear, and especially around April 15. Americans hate everything about taxation—with a passion. We sometimes tell pollsters we are willing to pay higher taxes to get better public services from our governments (schools, roads, and so on), but, in a "read my lips" political culture, no campaign promise works better than the promise to cut taxes. The hatred at issue has little to do with the actual cost of the taxes. We are willing to pay hefty premiums to private HMOs, but not the taxes to finance a national healthcare system. Intermittent rounds of hoopla aside, it has very little to do with the behavior of the Internal Revenue Service either. We tolerate the hardball nastiness of the private collection agency but work ourselves into a rage at the very idea that the IRS will get serious about tax evasion. Most strangely, American antitax attitudes seem unrelated to the distribution of tax burdens. Middle-income people who pay big chunks of their earnings in payroll and sales taxes will support tax cuts for millionaires (estate tax abolition, low capital gains rates), which not only threaten the funding for the services on which they depend—but may even increase their taxes!
Americans are easily persuaded of our desperate need for "tax relief," but the fact is that our taxes are low. According to the Organization for Economic Co-operation and Development (OECD), American governments (federal, state, local) take less of our incomes in taxes than the governments of other countries with comparable economies. In 2002, American taxes amounted to 26 percent of GDP. This was only half the burden in the true high-tax countries, Sweden (50 percent) and Denmark (49 percent), and well below the average for the thirty member countries of the OECD (36 percent). In fact, taxes were lower in the United States than in all except three OECD countries (Japan, Korea, and Mexico)—which means that taxes were higher in countries ranging from Canada, Britain, and Germany to Poland, Turkey, and Greece.
Most Americans would probably agree that our hatred for taxes has something to do with a more profound aversion to government in general—an aversion with deep roots in our history. A nation founded in a tax revolt, we are told, is true to itself only when it is "starving the beast." Yet the original revolutionary objection was never to taxes in general, much less to government in general. It was to taxation without representation and government by a faraway empire. The Boston patriots who threw the tea chests into the harbor were not calling for cheaper tea. They were demanding the right to decide for themselves, in their own colonial assembly, how to tax their own tea—and refusing to let somebody else's parliament decide for them. They would have been stunned to see their protests interpreted two centuries later as attacks on taxation in general. They had no interest in renouncing their own power to tax themselves.
Nevertheless, Americans are right to think that our antitax and antigovernment attitudes have deep historical roots. Our mistake is to dig for them in Boston. We should be digging in Virginia and South Carolina rather than in Massachusetts or Pennsylvania, because the origins of these attitudes have more to do with the history of American slavery than the history of American freedom. They have more to do with protections for entrenched wealth than with promises of opportunity, and more to do with the demands of privileged elites than with the strivings of the common man. Instead of reflecting a heritage that valued liberty over all other concerns, they are part of the poisonous legacy we have inherited from the slaveholders who forged much of our political tradition.
This surprising conclusion is one of the major findings of my new history of taxation in the early United States. American Taxation, American Slavery is the first modern study of the tax policies and debates of early American history. Taking its story from the original founding of the colonies through the Revolutionary War, early republic, and antebellum period, this book exposes the powerful impact of slavery on the structure of American government and rhetoric of American politics. Despite a burst of recent studies exploring the ways our founding fathers thought about slavery, political historians still often treat the persistence of slavery as a kind of exception in stories about the growth of liberty and democracy in the United States. This is a serious mistake. Slavery was a major institution in the American economy, slaveholders were major players in American politics, and major political decisions, such as tax decisions, always had to take these facts into account. To tell a story about early American political history that ignores slavery is to miss what often was the very heart of that story.
It might seem strange to trace our antitax and antigovernment ideas to slavery instead of to liberty and democracy. Isn't it obvious that a democratic society where "the people" make the basic political decisions will choose lower taxes and smaller governments? The short answer is no. In this democratic society, the people might decide to pool their resources to buy good roads, excellent schools, convenient courthouses, and an effective military establishment. But slaveholders had different priorities than other people—and special reasons to be afraid of taxes. Slaveholders had little need for transportation improvements (since their land was often already on good transportation links such as rivers) and hardly any interest in an educated workforce (it was illegal to teach slaves to read and write because slaveholders thought education would help African Americans seize their freedom). Slaveholders wanted the military, not least to promote the westward expansion of slavery, and they also wanted local police forces ("slave patrols") to protect them against rebellious slaves. They wanted all manner of government action to protect slavery, while they tended to dismiss everything else as wasteful government spending.
But the crucial thing was the fear. Slaveholders could not allow majorities to decide how to tax them, even when the majorities consisted solely of white men. Slaveholders occasionally supported lavish government spending, but they would never yield the decision-making power to nonslaveholding majorities. Recognizing that the power to tax was "the power to destroy," they could not risk the possibility that nonslaveholding majorities would try to destroy slavery—even when the nonslaveholders insisted on their loyalty to the "peculiar institution." This was a totally different problem from whether to allow the British Parliament to tax American tea. Far from a democratic demand for local political autonomy, it was an antidemocratic rejection of all public power and public decision making. As a Virginia planter phrased it in 1829, opposing a reform that would have granted a nonslaveholding majority its fair share of seats in the state legislature, this was a flat-out rejection of anything that "put the power of controlling the wealth of the State, into hands different from those which hold the wealth." It was a flat-out rejection of democracy.
In the long period of American history before the Civil War, the demands of slaveholding "masters" often dominated the political terrain. This was true even when the masters themselves believed "that all men are created equal" and endowed with "unalienable" rights to "life, liberty, and the pursuit of happiness." It was no accident that the first southern representative to threaten that his state would secede from the Union was a signer of the Declaration of Independence. On July 30, 1776—less than a month after the adoption of the declaration—Thomas Lynch of South Carolina issued an ultimatum on behalf of his constituents. "If it is debated, whether their Slaves are their Property," Lynch warned, "there is an End of the Confederation." Unless the rest of the members of Congress agreed to stop talking about slavery, Lynch was saying, the United States would survive for a total of only three weeks!
Congress was not talking about slavery in 1776 because its members were abolitionists who wanted to act on the promise of the declaration. That was not the problem at all. Congress was talking about slavery because its members were framing a national government for the new nation—what would become the Articles of Confederation. Trying to figure out how to count the population to distribute tax burdens to the various states, the members inevitably faced the problem of whether to count the population of enslaved African Americans. Since slaves were 4 percent of the population in the North (New Hampshire to Pennsylvania) and 37 percent of the population in the South (Delaware to Georgia), this decision would have a huge impact on the tax burdens of the white taxpayers of the northern and southern states. Predictably, northerners wanted to count the total population (including slaves) while southerners wanted to count only the white population. As the members jostled with each other over this basic conflict of interest, they began to justify their positions by making claims about whether slavery was profitable and therefore made a state able to pay higher taxes (northerners said yes, southerners said no). The important point, however, is that once this issue had been opened it was impossible to prevent discussions of the injustice of slavery itself—in a Congress that had just declared that "all men are created equal."
Variations on this problem would recur over and over again. Every time northerners and southerners had to make a national decision together, they found themselves forced to talk about the practical implications of a sectionalized institution of slavery. There was no common ground here in either the profound racism of most northerners or the moral qualms of some southerners. These were debates about the implications of slavery for whites rather than about the liberation of African Americans. The problem was institutional rather than ideological—built into the very structure of the nation itself because the United States was half slave and half free. Every time a discussion of this kind began, slaveholders worried that nonslaveholders would try to abolish the institution of slavery by imposing prohibitive taxes on slaves. Thus, at the Virginia convention that debated the ratification of the U.S. Constitution in 1788, Patrick Henry worried about a federal slave tax hefty enough to "compel the Southern States to liberate their negroes." Ten years later, another Virginian (John Taylor of Caroline) expressed the same fear: that Congress could "effect a general emancipation, by imposing upon the property thus intended to be secured [the slaves intended to be freed], an excise or duty so exorbitant as to deprive it of its value."
Whether they were worrying about the federal government or about the governments of their own states, slaveholders developed three solutions to this general problem. First, they tried to guarantee that they dominated the legislative process by manipulating the representation rules. Second, they demanded weak governments that would make few of the decisions that provoked discussions of slavery. Third, they insisted on constraining the tax power through constitutional limitations on its use. Regardless of which of these strategies they were pursuing at a particular moment, slaveholders were always trying to prevent nonslaveholding whites from talking about how the institution of slavery harmed them. The goal was always to prevent situations in which the nonslaveholders would think about taxing the institution of slavery out of existence.
Yet the real slaveholder victory lay in a fourth strategy—persuading the nonslaveholding majorities that the weak government and constitutionally restrained tax power actually were in the interests of the nonslaveholders themselves. Proslavery representation rules—the infamous three-fifths clause of the U.S. Constitution and similar devices within southern states—became necessary compromises with slavery, but the other two solutions to the slaveholders' political problem became protections for the "common man." Majorities voluntarily renounced the right to regulate their society by majority rule. Giving up the essence of democratic self-government, they celebrated the outcome as democracy. The consequences would outlive the slaveholders who played such a large role in establishing this attitude toward government and taxation. Long after slavery was gone, a regime forged around preferential treatment for the slaveholding elite came to favor very different elites—commercial and industrial elites who shared little with their slaveholding predecessors except a demand that majorities renounce their right to govern what ostensibly was a democratic society.
The irony is that the slaveholding elites of early American history have come down to us as the champions of liberty and democracy. In a political campaign whose audacity we can only admire, charismatic slaveholders persuaded many of their contemporaries—and then generations of historians looking back—that the elites who threatened American liberty in their era were the nonslaveholders! Today, this brand of politics looks eerily familiar. We have experience with political parties that attack "elites" in order to rally voters behind policies that benefit elites. This is what the slaveholders did in early American history, and they did it very well. Expansions of slavery became expansions of "liberty," constitutional limitations on democratic self-government became defenses of "equal rights," and the power of slaveholding elites became the power of the "common man." In the topsy-turvy political world we have inherited from the age of slavery, the power of the majority to decide how to tax became the power of an alien "government" to oppress "the people."
Why do Americans hate taxes? Because we are truer to our political traditions than we would want to admit if we agreed to identify those traditions correctly.
THIRD SECTOR - SERVICES
The service sector - third of the traditional economic sectors - consists of the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, access, experience, and affective labor. The production of information has been long regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector.
Much of the capital and labour flow in the service (third) sector can be loosely defined as rent-seeking. Strictly speaking, economists define rent-seeking as pursuing an advantage (deriving income) from government policies. It's a more useful term define as profit that comes from taking advantage of others (labor, expertise, construction, engineering, whatever) to add cost without adding value. Rent-seeking doesn't contribute in a productive sense, except insofar as the money earned from rent-seeking is inevitably a catalyst for economic activity as the rent-seekers spends their lolly.
The tertiary (service) sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution, and sale of goods from producer to consumer, as may happen in wholesaling and retailing, pest control, or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people by interacting with people and serving the customer rather than transforming the physical goods.
THE FIVE ECONOMIC SECTORS
- Peasant Labour - "raw materials" via extraction, mining, agriculture, farming, livestock
- Blue Collar - "manufacturing" via industrial processing, construction, engineering, turning raw materials into finished products
- Rentseekers - "services" via supply chains, support, transport, distribution, retail, wholesale, entertainment, value-added services
- White Collar - "information technology" via computing, media, research and development, financiers, science, civil service
- Gold Collar - "executive apex" via government, large charities, CEO and CTOs, senior businessmen, research scientists, barristers, judges and other decision makers defining policy impacting lives at scale
UK - USA - RECIPROCAL GRIFT
The Conservative manifesto made a clear promise. It pledged that in the government’s trade talks, “we will not compromise on our high environmental protection, animal welfare and food standards”. Just six months after the election, the promise has been ditched. Our government is now proposing that chlorine-washed chicken, beef treated with growth hormones, pork from animals injected with ractopamine and scores of other foods produced in the United States by dangerous, cruel and disgusting means will be allowed into this country, as long as higher trade taxes (tariffs) are applied to them.
The trade secretary, Liz Truss, has made it clear that any such tariffs would be removed within 10 years. It’s impossible to see the US negotiators allowing them to pass in the first place. The US intends to secure “comprehensive” access to our food markets, while “reducing or eliminating tariffs”. This nonsense about higher tariffs is a blatant attempt to soften us up, to sugar the toxic pill of US imports that don’t meet our standards. When I say sugar, I mean high fructose corn syrup.
It’s not as if our standards are wonderful. But by comparison to the revolting practices in the US, our food rules, laid down by the EU, are a haven of sanity. As well as washing chicken flesh with chlorine, to compensate for the filthy conditions in which it is raised and processed, and injecting dangerous substances into cattle and pigs, Big Farmer and Big Food in the US use 72 pesticides that are banned here and food colourings that have been linked to hyperactivity in children, impose no limits on the amount of sugar baby food contains, and permit cow’s milk to contain twice the amount of pus that the UK allows.
What this means is that we will bring into this country food whose production is banned here. Either our farmers and food processors will be outcompeted, or our domestic production standards will be brought down to match. Some Conservative MPs attempted to insert an amendment into the Agriculture Bill, to uphold the manifesto promise. But it was decisively slapped down by government loyalists.
The US government argues that these matters should be left to consumers. We should each be allowed to decide whether we buy cheap vegetables containing residues of pesticides that are banned here. But I suspect that, rather than having to read and interpret the labels on everything we buy from shops, takeaways and restaurants, most of us would prefer to know that all the food on sale is safe to eat. Anyway, just in case we did try to exercise such choice, the US also insists that all useful labelling be banned.Perversely, it has argued that warning labels are “harmful” to public health.
This doesn’t end with food. In the same section of their manifesto, the Conservatives promised that “in our trade talks … the NHS is not on the table. The price the NHS pays for drugs is not on the table. The services the NHS provides are not on the table.” The leaked dossier of trade documents released by the Labour Party last year revealed that the US is seeking “full market access” to the NHS. If the promised food and farming standards were a lie, how long will it be before we discover that the NHS pledge was also worthless?
I suspect this has been the agenda all along. The neoliberal extremists who populate the front benches have long sought to rip down our public protections, rip down our public services, rip down everything that stands in the way of the most vicious form of capitalism. A trade deal with the US allows them to do so while disclaiming responsibility for the consequences. Once they have signed it, they can claim that, sadly, their hands are tied. Unfortunately, the rules don’t allow us to maintain food standards, and force us to open the NHS to competition. Perhaps mistakes were made during the negotiations, but it’s a done deal now, enforced by legal instruments. There’s nothing we can do. They know they could never obtain public consent for these policies. A US trade deal would impose them without consent.
Even parliamentary consent is unnecessary. The Trade Bill, in its current form, makes no provision for parliamentary scrutiny of any deal. Parliament has no legal right under this bill to debate or vote on a trade deal, or even to know what it contains. The bill also grants the government Henry VIII powers to change the law on trade agreements without parliamentary approval. The governments of Scotland, Wales and Northern Ireland are granted no formal role in negotiating or approving trade treaties. In other words, nothing is being left to chance. This is not democracy. This is elective dictatorship.
To make matters worse, the US is likely to insist that the deal is enforced by an offshore tribunal, which allows corporations to sue governments if domestic law affects their “future anticipated profits”. This mechanism has been used all over the world to punish nations for laws their parliaments have passed. It ensures that, over time, legislation everywhere has to be tailored to the demands of corporate power. Far from taking back control, a trade deal on these lines with the US involves a massive renunciation of sovereign power.
The government knows that accepting such a deal means no deal with the EU. US food rules are incompatible with EU standards. In the leaked documents, US officials remark that “there would be all to play for in a No Deal situation”. I suspect our government sees it the same way. The pigheaded obstructionism of the UK in the current EU talks is at stark odds with its willingness to prostrate itself before US power. Dominic Cummings says he intends to stay in his post for the next six months. In other words, he will stay for long enough to ensure that the transition period is not extended, making a no deal Brexit more likely.
Just as Trump seeks to erase Obama’s legacy, Johnson and Cummings seek to erase Clement Attlee’s much deeper legacy. It’s not about sovereignty. It’s not about taking back control. It’s not about British values or British autonomy. It’s about locking deregulation and the demolition of public services in place, by means that cannot be challenged by either people or Parliament. The combination of a no deal Brexit and a coercive US trade agreement will allow the government to rip down a wide range of rules and protections, creating a paradise for the disaster capitalists funding the party, and hell for the rest of us.
They intend to pursue this agenda regardless of the pandemic, regardless of a petition that has already gained 800,000 signatures, regardless of the economic and political harm it might do. This is their game, and we must use every democratic means to stop it.
GAME OF CHICKEN
"Global trade once made us rich. Now it unleashes a full-spectrum assault on our well-being." - George Monbiot (26th July 2017)
What’s wrong with chlorinated chicken? It’s not as if chlorine is absent from our lives: we drink it in tap water every day. Surely it’s a small price to pay for the trade deal with the US the British government seeks? There are several answers to this question, that range from the instrumental to the existential. Let’s begin with the immediacies.
Washing chicken carcasses with chlorine allows farmers and processors to save the money they might have spent on systemic sanitation, throughout the chicken’s life and death. You need only dunk the meat in a chlorine bath to kill any accumulated germs. Does it work? It is true to say that rates of foodborne illness are similar between the EU and North America*. But chlorine-washed chicken, remarkably, could be the least offensive of the US meat regulations a trade deal might force us to adopt. It has been pushed to the fore because it’s less politically toxic than the issues hiding behind it.
While European Union rules, that currently prevail in the UK, take a precautionary approach to food regulation, permitting only products and processes proven to be safe, the US government uses a providential approach, permitting anything not yet proved to be dangerous. By limiting the budgets and powers of its regulators, it ensures that proof of danger is difficult to establish.
An investigation by Reuters discovered that chicken companies in the US use a wide array of antibiotics as routine feed supplements, both to prevent disease and as growth promoters. Among these drugs are some listed by the US Food and Drug Administration as “critically important” in human medicine. They’re administered to the chickens in low doses, creating perfect conditions for bacterial resistance and the emergence of new superbugs.
Further reports reveal that chickens are dosed with antihistamines, to make their meat more tender. Some carcasses contain steroids and ketamine. A hormone injected into US cattle to fatten them more quickly, according to the latest scientific paper on the subject, “promotes breast cancer cell growth”. And all this is before Trump completes his assault on the US regulatory system.
Trade agreements today have little to do with reducing tariffs, most of which have already been eliminated. Now they have two principal functions. The first is to extend intellectual property rights, that tends to raise prices and help the biggest corporations eliminate smaller competitors. The second is to “harmonise” regulations. When you have an asymmetric deal – between a very large country with low standards and a smaller one with higher standards – there is going to be only one outcome. We will end up with US standards. How many people in this country, offered a vote on the matter, would accept such a deal?
But there are still bigger issues in this game of chicken. On Monday, the Guardian carried an article by a consultant called Colin Cram, complaining that the UK is not engaging sufficiently in China’s Belt and Road programme: a series a vast infrastructure schemes the Chinese government is funding to facilitate its exports (Manchester’s Airport City is one component). The UK, Mr Cram claimed, “must” become a full participant in this programme, “massively revitalising its infrastructure so that all parts of the country, not just the south-east, can engage with these huge markets”. That’s because we suffer from a deficit of air pollution, noise, climate change and plastic waste. We must accelerate the Gadarene rush over the environmental cliff.
A study published by researchers at the London School of Economics last year discovered that the regions that voted most strongly for Brexit were those that had been hit hardest by “the Chinese import shock”. Anger towards immigration, they argue, became a proxy for the loss of manufacturing jobs and incomes: many of the strongest Leave votes were in places with the least immigration. Their data suggests that Brexit was globalisation’s blowback. But our government wants to seize this opportunity to accelerate the process. So much for taking back control.
So the existential question the chicken issue raises is this: why do we want more trade? What is it for? The old promise was that trade led to prosperity. But what if we have enough already? What if enhanced global trade, far from promoting well-being, now undermines it?
To people of Mr Cram’s mindset, rainforests and ancient woodlands, coral reefs and wild rivers, local markets and lively communities, civic life and public space are nothing but unrealised opportunities for development. Where we see the presence of beauty, tranquillity and wonder, they see the absence of palm oil plantations and soybean deserts, container ports and mega dams, shopping malls and 12-lane highways. For them, there is no point of arrival, just an endless escalation of transit.
Nowhere is a place in its own right: everywhere is a resource waiting to be exploited. No one is a person in their own right; everyone is a worker, consumer or debtor whose potential for profit generation has yet to be realised. Satiety, well-being, peace: these are antithetical to globalised growth, which demands constant erasure and replacement. If you are happy, you are an impediment to trade. Your self-possession must be extinguished.
So this is where the chickens come home to roost. Enhanced global trade now threatens our health, our sovereignty, our democracy. Once, it made us rich. Today it impoverishes us.