Fighting the inequality pandemic: the case for a super-tax

Keval Bharadia argues for a super-tax on financial markets to curb extreme inequality in the wake of Covid-19

May 29, 2020 · 7 min read

The Gold Vaults of the Bank of England [Credit: Bank of England] The Gold Vaults of the Bank of England [Credit: Bank of England]
The Tory government’s handling of the Covid-19 pandemic will go down in history as a lethal display of immorality and wilful negligence putting all of us – but especially ill-resourced healthcare workers – at risk. Post-lockdown, the government will no doubt squeeze workers, not the wealthy, to pay back debts, just like in 2008. If Covid-19 doesn’t kill, inequality will.

I know this because I was Head of Product Development at the London Stock Exchange during the 2008 financial crash. I resigned in 2010 when the Finance Lobby and government forced austerity onto vulnerable people instead of the finance sector, resulting in up to 130,000 preventable deaths.

Reducing inequalities and the corporate-capture of our democratic spaces are urgent tasks given that 71 of the world’s richest 100 entities are corporations, not governments. Covid-19 has given many of us fresh impetus to fight for our rights strategically and systemically: here’s how a 400-years-in-the-making tax on wealth can be demanded, and who we’ll be up against.

The inequality pandemic

The Gini Coefficient is a measure of inequality used by the Office for National Statistics. It measures wealth distribution among a population, ranging from zero to one. If every Briton had the same wealth, the Gini coefficient would be zero. If one Briton had all the wealth, the Gini Coefficient would be one. Wealth in Britain, valued at £14 trillion, has a Gini Coefficient of 0.63 – the same levels of inequality as South Africa.

At the core of our rotten economic system is financial wealth (including financial market assets), valued at £2.1 trillion. This subset is the most unequal of the four types of wealth (property, financial, physical and private pensions) at 0.91 – almost perfect inequality.

Financial wealth is used to buy other assets for a passive income: more houses, shares, land, businesses and political influence, widening inequality and undermining democracy. Many owners of such assets and their descendants live entirely off dividends, interest and rent payments. COVID-19 has thrown into sharp focus these drastic inequalities in UK society, including between landlords and renters.

GB Wealth 2018 Trillions of £ Gini Coefficient

Property wealth

£5.1 0.66
Financial wealth £2.1 0.91
Physical wealth £1.3 0.47
Private pension wealth £6.1 0.72
Total £14.6 0.63

Total Wealth in Great Britain, 2018. Source: Office for National Statistics (ONS)

More than 50 per cent of Tory Party funding comes from the finance lobby. Negligent corporations and banks escaped punishment and received bailouts after 2008; CEOs and bankers became Government advisors and civil servants. Instead of dismantling tax havens that hid trillions, the Tories dismantled the NHS.

The Covid-19 bailouts will similarly see the government introduce cruel policies to extract wealth, rights and freedoms from workers and vulnerable people. We can expect a rise in racism, xenophobia and imperial wars – inevitable tactics used to maintain an unsustainable economic system.

The financial markets super tax

But Covid-19 has also highlighted the startling capacity for community self-organising in response to crisis, with mutual aid initiatives and widespread campaigns for rent justice.   Building on this momentum, we can take the fight for a just society to high finance with a concrete policy proposal for a transformational alternative.

In the absence of a nationalised banking and finance industry (which should be a long-term goal of any society) we can rebuild an anti-capitalist movement demanding a super tax on the £8 trillion-a-day financial markets. This would cut speculation in London on precious commodities being plundered from around the world, halting the accumulation of infinite wealth by billionaires. The political power of the financial lobby must be stymied to achieve a democracy that works for people, not profit.

Ever since they were first used to raise capital for 16th-century slave and colonial voyages, the financial markets have continued to commit acts of imperialism, plunder and waste. Trades and bets on financial and physical commodities – including shares, bonds, currencies, gold, wheat, sugar, oil and gas – take place between the world’s biggest organisations and high net worth individuals. Most trading happens right through London; a result of Britain’s dominance in colonial exploitation.

The proposed tax would apply to every major trade in financial markets. Recent robust estimates suggest this could raise nearly £9 billion annually that could go directly to those most in need in the UK, and towards reparations for slavery and colonialism. With a proposed tax rate of just 0.01% of the trade’s value, the finance sector would pay around one hundredth of a penny on each trade. Compared to VAT (charged at 20 pence on the pound), the super tax is miniscule.

Fossil fuel companies, pharmaceutical giants, the military-industrial complex and the agribusiness industry all heavily rely on financial markets to finance and legitimise their operations. Fighting the finance lobby means fighting each of these industries by default. That means we’re going to be up against the most powerful private sector lobbies.

A rallying cry

Neoliberal politics now dominates both sides of the House of Commons. Losing the chance of a socialist government was a major blow to reducing poverty and inequality in the UK and abroad and reclaiming democracy. The super tax is unlikely to be the hill that Shadow Chancellor Anneliese Dodds is willing to die on, despite being a component of the 2019 Labour manifesto. We must fight to get it back on the political agenda.

Covid-19 has taught us that the structural class and race inequalities of our political and economic system – exacerbated by power and resource exploitation – can only be fought through mass movements on the scale of the community organising initiatives built during the pandemic. This means urgent de-growth, wealth redistribution and democratic ownership of plundered resources and illicit corporations, not an untaxed trillion-pound casino where political influence is concentrated among a few.

The super tax campaign must be part of the war against imperialism, capitalism, climate change, racism and patriarchy. It needs organisational capacity, funding and mobilisation. Covid-19 must be the catalyst. Building this movement together has never been more urgent.

Keval Bharadia is a political economist specialising in transformational international development and justice, and co-designer of the comprehensive financial transactions tax proposal.

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