Protecting growth at all costs means lining the pockets of the wealthy

Deregulation and tax loopholes are justified by saying that they 'protect growth'. But really, they just protect the wealthy, writes James Fox

November 21, 2017 · 7 min read
The Charging Bull of Wall Street

The recently released Paradise Papers show the breathtaking scale and intricacy of the ways in which the rich keep their money hidden. They showed us the bald-faced hypocrisy of some of the people doing it. But, we already knew about the existence offshore tax havens. We already knew the rich hide and circulate their money to avoid paying taxes. These leaks were less revelations than reminders; but nonetheless important for that. They shine light on a system which survives by remaining out of sight, in the ‘private’ domain. 

We’re told that if we tighten even slightly the loopholes allowing the wealthy to wriggle out of paying their way, they will flee the country entirely. When it comes to justifying our deregulated economic system, which encourages offshore tax havens, governments often claim that the policies they pursue are necessary to keep our economy growing. This, they claim, is the wisest way to run an economy. It’s used so ubiquitously and unflinchingly by economists and politicians that many of us never question its purported value. National economic growth is used by governments, the UK’s in particular, as perhaps one of the key measure of a healthy economy is supposedly nothing more or less than a growing economy. Recession is bad because the economy shrinks. The economic downturn we experienced can be resolved only by getting our economy to grow again, and this growth is what the people should be hoping for, since it is bound to lessen their economic anxieties.

Influential government and economists’ voices assert that a growing economy is a healthy economy, an unhealthy economy is one in recession and deep debt. It is true that growth can be an important indicator in economics, but it is by no means a guarantee of wellbeing or stability. Growth can be negative or positive depending on how it is sought. But so often, all other concerns are sidelined in the pursuit of keeping GDP figures up.

We know what caused the 2008 crash, we know what put the global economy in jeopardy, and it wasn’t a shrinking economy or our enormous debt. It was irresponsible and often illegal trading which manufactured a fraudulent market and inevitably ending up crashing and causing catastrophe. This was a direct result of the deregulation of finance, which has been pursued and sustained by every Prime Minister in the UK since Thatcher, for the apparent reason of creating ‘growth’ and ‘prosperity’ in the economy.

It has become clear that growth is woefully insufficient to resolve our economic hardship since our latest ‘recovery’ got underway. The health of the UK’s economy has not recovered from the crash in the slightest. Amongst the vast majority of the population, economic insecurity has become the new norm. A small bump in GDP of 0.4% has done nothing to change that.  The growth we have gained since the crash has gone almost entirely to the richest 1%, while the lowest income families have been hurt by rising interest rates, and the savings rate has taken an unprecedented dive since 2016. Indeed, we are the only country in Europe to have seen positive growth whilst most people see a drop in real-terms wages. This is supposedly the precious phenomena we’re protecting when we let millionaires and billionaires wriggle out of taxes.

Then again, we’re told that growth is necessary to improve the standard of living and quality of life of the population, it is essential for the betterment of people’s lives. Why else would we allow growth to be one of our utmost goals in economics? The answer of course being that the government’s first loyalty is not to the citizens for whose wellbeing it should, in any democratic settlement, be responsible.

A BBC article entitled ‘Why do we need economic growth?’ published in October 2008, just after Lehman Brothers collapsed, put it perfectly. It pictures a young boy, playing with a football on a council estate, close to an abandoned shopping trolley. The caption says ‘If he’s going to get richer, without the rich getting poorer, we need growth’. It goes on to say ‘Imagine trying to alleviate poverty without growth. Income would have to be distributed from the rich to the poor. But this doesn’t go down well with the rich.’ I couldn’t have said it better.

Growth is encouraged by incentivising investment: lowering the cost of investment. To do that, you need to reduce taxation and regulation, among other things. That’s taxation which should be funding our hospitals, and regulations which protect us from being harmed by irresponsible companies and corporations. These economic processes, sold with the language of growth, syphon social prosperity and safety into the hands of massive financial investors, whose products and services often have no hope or intention of improving people’s lives. Deregulation gives to the rich while austerity takes from the poor; part of the same system draining social wealth into the pockets of the richest. This is why 95% of the recovery going to the richest 1%.

Growth, today, is used as a means of promoting the uninhibited flow of capital. The accumulation of more and more capital between fewer and fewer hands. It is used as a symbol for ‘managing’ people’s responses to the economic turmoil they experience. It justifies their suffering with cold scientific necessity. We are falsely told that we must have deregulation because we must have growth.

According to the BBC, the offshore financial centre’s defence against the Paradise Papers was to proclaim that they ‘do not sit on hoards of cash, but act as agents that help pump money around the globe.’ This isn’t far from the truth. The purpose of economic entities such as theirs is to both sit on cash and to circulate it around the globe.

In this case, that circulation was done with the express intent of allowing the rich to avoid contributing back to the society which allows them to live the way that they do. A society which doesn’t just allow the rich to rig the rules, but doesn’t even require that they play by them.

After the virus: no return to the old economy

As the Covid recession hits, Adam Peggs lays out alternative economic proposals the Labour left should be demanding

From dole to gold

Today’s welfare system is notoriously punitive, but in the 1980s it provided the basis of future Olympic success, argues Peter Goulding

Lower league football needs democratic ownership, not a salary cap

It is only through fundamental reform of how clubs are owned, bought, and sold that we can begin to return football to the fans argues Jonty Leibowitz

Debt cancellation is vital for global recovery

Cancelling debt for poor countries is desperately needed to shore up public health systems, social protections and address global structural inequality writes Claudia Webbe MP

Swords into ploughshares; planes into ventilator parts

The speedy switch in from producing airplane wings to ventilator parts at a north Wales factory holds out an example for a transition to a low-carbon economy, writes Hilary Wainwright

The Gold Vaults of the Bank of England [Credit: Bank of England]

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

Only fearless, independent journalism
can hold power to account

Your support keeps Red Pepper alive