The Finance Curse. Nicholas Shaxson

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СКАЧАТЬ simply do not go to court for their crimes,” Elmer wearily told me. “They are a protected species.”³⁸

      In tax havens like Switzerland, deference to offshore financial interests becomes reinforced by a ferocious social consensus to make sure everyone does the right thing, which is to keep bringing in the money. The wealthy high-society folk who run these places rarely do anything as crude as to throw opponents of offshore finance in jail. The threat usually lies in more discreet mechanisms, such as the knowledge that if you rock the boat, your employment opportunities will dry up or you will be ostracized. In the goldfish bowl of small-island life, where opportunities are often scant, that is usually enough to silence even the reddest of radicals. John Christensen remembers this pressure from his days as official economic adviser to the tax haven of Jersey. He recalls choking with anger during meetings, yet feeling immense pressure to conform to what offshore finance wanted from the island. “It took real strength to stand up and say, ‘I’m sorry, I don’t agree with this.’ I felt like the little boy farting in church.” Many years after leaving Jersey and setting up the Tax Justice Network to combat tax havens, he says he is still a hated figure in Jersey financial circles, pilloried as a traitor. In such places the capture of the tax haven by offshore financial interests—or financial capture—often extends into family life itself. A few years ago in the Alpine tax haven of Liechtenstein I spoke to a woman who had once spoken out publicly against her country’s financial laws. After that, she said, her own sister crossed to the other side of the street to avoid meeting her.

      These cultural changes have been a direct consequence of the race-to-the-bottom contagion, as countries like Britain and the United States have operated under the assumption that they need to “compete” to attract the world’s hot money and have cleared away the political and cultural obstacles to make this happen. There has been no larger arena for this game than the Euromarkets, which, as one analysis put it, created a giant “transatlantic regulatory feedback loop that stimulated deregulation on both sides of the Atlantic … eroding the regulatory architecture of the postwar Keynesian state in Britain and destabilizing American New Deal regulations.” This feedback loop helped generate a rising global wall of money and debt, which has steadily burrowed into the nooks and crannies of our economies and our political systems, driving a gravitational shift inside the United States toward the needs of finance and delivering a payload of financial techniques and methods that have transformed the way we think about businesses, our homes, our public services, and even the people we love.³⁹

      The hot capital flowing into the countries that played this game the hardest made some local bankers, lawyers, and accountants wealthy. But this hot money inflicted a wave of more invisible damage on the wider US economy and society, through all the different mechanisms of the finance curse: greater financialization and wealth extraction, the brain drain out of productive sectors and into banks and shadow banks in Miami, Chicago, or New York, and greater deregulation and risk-taking at taxpayers’ expense, as American banks flocked to the London playground, then returned home with threats to move out wholesale if they didn’t get what they wanted.

      Worse was to come. As the tax havens and the Euromarkets began to flourish, another set of changes got under way in the United States that would turn out to be just as powerful a crowbar to undo the progressive reforms that had generated such widespread prosperity during the Golden Age of Capitalism. These would deliver a knockout blow not so much to the Bretton Woods system as to an older, yet no less powerful, democratic tradition: antitrust. These changes would help create the wealthiest robber barons in world history.

       CHAPTER FOUR

       The Invisible Fist

      In April 2018 Mark Zuckerberg, of Facebook, facing a grilling from a Senate panel, took about as much care with his own information as Facebook does with your data: he allowed a photographer from the Associated Press to snap a photo of his crib notes. One of his arguments was aimed against anyone suggesting that Facebook should be broken up: “US tech companies key asset for America; break up strengthens Chinese companies.”

      There were other fascinating things in Zuckerberg’s notes, and few people probed this particular tidbit very far. But his argument was odd, if you think about. He was calling for Congress to accept his monopoly, which profitably harvests and sells valuable and sensitive data about American users, in the interest of American competitiveness (and national security). Or, to put it more simply, to improve American competitiveness by restricting competition in America.

      Lawmakers and commentators mostly fell over themselves to flatter Zuckerberg, and with a couple of honorable exceptions, they avoided the elephant in the room: Facebook’s gargantuan monopoly, trapping us in a devil’s bargain where we have no choice but to accept being subjected to secret surveillance if we want to connect with friends and neighbors this way online.¹ And that is because, until very recently, few were paying much attention to the awesome monopolistic powers of big firms like Facebook, Google, Amazon, and Netflix. The Obama administration was so cozy with Google that it may as well have given it the keys to the White House. The Trump administration is even worse.²

      Most people still aren’t paying attention. How did these remarkable blind spots come to exist? The perils of monopoly power have been clearly understood since long before Rockefeller built Standard Oil. “If we will not endure a king as a political power,” said Senator John Sherman, who sponsored America’s first proper antitrust law in 1890, “we should not endure a king over the production, transportation and sale of any of the necessaries of life.” The New Deal program that followed the crash of 1929 had strong antitrust measures—a large and varied body of anti-monopoly laws to tackle big banks and great concentrations of economic power—at its heart. Yet in the modern era this has all been swept away. Who killed anti-monopoly?

      There is, in fact, a clear answer to this question. We can trace the shift back to an ideological insurgency in the 1960s and 1970s, led by a group of Chicago School economists who would, as with a magician’s trick of misdirection, shift attention away from the all-important question of whether corporations have too much economic and political power and toward a far narrower issue: whether the price is right. If the merger of two large companies doesn’t lead to higher prices, the argument now goes, what’s the problem? The services of Facebook and Google are free, apparently, so move along, folks, there’s nothing to see here. This narrowing of focus has blinded us to many deeper issues, which are among the biggest drivers of financialization and the finance curse.

      This revolution was sparked at a dinner party in 1960 at the Chicago home of Aaron Director, an American economist with a small mustache, horn-rimmed glasses, and a lightweight boxer’s wiry frame. Director was a contrarian, pugnacious antigovernment fanatic, a former radical leftist union organizer who had crossed over and now seemed hell-bent on smashing the consensus that once fed his idealism. His politics were completely, purely free-market and even to the right of Milton Friedman, the godfather of libertarian free-market economics, who was married to Director’s sister, Rose. “Family dinners at the Friedmans’ house must have been a bundle of laughs,” said Matthew Watson, professor of political economy at Warwick University in England. “There can’t have been many house guests where Milton would have been accused of being too pro-government and too left wing.” That particular night Director hosted twenty dinner guests, conservative thinkers including not just Friedman but George Stigler (who would go on to make a name for himself attacking government regulation), the British economist Ronald Coase, and a fire-breathing lawyer called Robert Bork.³

      The University of Chicago was a bear pit, an arena of intense macho intellectual combat where academics were constantly struggling to outdo each other with clever theories about efficient markets—theories that often perched on toe-curling assumptions—to defend unconventional, even antisocial СКАЧАТЬ