Fiscal Solidarity and Tax Justice

3 Mar

Following recent HSBC tax evasion scandal, I reprint here an article I wrote for Tax Justice Focus in 2012.

Re-conceiving Class War

In 2011 we witnessed two extraordinary international people’s movements: the Arab Spring and the Occupy movement. The Occupy movement followed the Arab Spring, and seemed to draw inspiration from it, to feel a certain affinity with it. On the first day of the Occupation at St. Paul’s one protestor put up a mock London street sign with ‘Tahrir Square EC4’ written on it, whilst Egyptians involved in the uprising against Mubarak ordered pizza for the Occupy Wall Street protestors.

But in what respect do these two movements resemble each other in their aims? To what extent can the Arab Spring and the Occupy movement be seen as trying to do the same thing?

The aims of the Arab Spring at the outset were clear: they wanted an end to dictatorship. Of course, different groups have different strategic objectives, but authoritarian regimes provided a clear point around which to mobilize.

The initial aims of the Occupy movement were less straightforward. It is clear what Occupy is against: the movement was born out of a deep concern with global capitalism, at least in its present form. But what is the movement for? I participated in an early attempt at the St. Paul’s Occupation to draw up demands. It wasn’t easy. Some suggested demanding a tax on financial transactions; others objected that they didn’t believe in finance. Some suggested global government; others the abolishing of government altogether. With such a diversity of convictions and concerns, consensus proved elusive.

However, there is one thing which in my experience all those involved in the Occupation sign up to, and that is democracy. If there is to be one positive goal which unities the Occupy movement, it must be the desire to bring about true democracy: rule by the people rather than the powerful.

Counter-Democratic Forces

This might seem strange. Isn’t the Occupy movement taking place in countries which already have democracy? In UK and USA, you can go in a little booth every five years and tick the person you want to have power. Isn’t that democracy?

Well yes and no. It would be cynical to suggest that universal suffrage is not a significant achievement in the journey towards ideal democracy, and unfair to those who fought hard to get it. But it would also be naïve to think that the political system we have is anything more than a staging post on the way to full democracy. There are significant counter-democratic forces operating, to a greater and lesser extent, in all ‘democratic’ countries, which ensure that the powerful have undue influence in how society is shaped.

We can divide these non-democratic forces into two categories: intra-national and trans-national. The intra-national counter-democratic forces include corporate lobbying, funding of political parties by big business and the wealthy, and the selective information given out by major newspapers in the pursuit of their own political agenda. Democracy is about society being shaped by the people, where each person counts equally. But in all these ways the powerful few manage to have a weighty influence on governance.

But perhaps even more significant are the trans-national counter-democratic forces, and it is here that the aim of enhancing democracy connects with the Occupy movement’s concerns regarding global capitalism. The defining contemporary problem is that (imperfect) democracy operates at a national level, whilst global capitalism operates at a global level. The power of an elected government to run the country as its voters want is severely constrained by the power of markets. Perhaps the most straightforward example of this is in the setting of tax rates. Countries are continually held to ransom by trans-national corporations threatening to leave should their tax obligations be increased. What is an appropriate level of corporate contribution to the public good should be decided by the people. Instead, to a large degree it is decided by trans-national corporations.

In a sense then, we can see the Arab Spring and the Occupy movement as having the same goal: true democracy. While the Arab Spring aims to achieve the beginnings of democracy at a national level, the Occupy movement is trying to perfect democracy within countries, and to attain it at a global level. Both of these things are essential.

How might global democracy be brought about? If the essence of the difficulty is that (imperfect) democracy exists at a national level, whilst global capitalism operates at a global level, there seem logically to be two ways to right this wrong: we can either pull capitalism down from a global to a national level (or get rid of it altogether), or we can pull democracy up from a national to a global level. My preference, at least in the first instance, is the latter approach, which I will now spell out in more detail.

Fiscal Solidarity

Global democracy need not entail global government, but perhaps a kind of ‘fiscal solidarity’ between democratic communities. Marx conceived of the class war as between workers and capitalists. But we might think of the contemporary class war as between democratic communities and unrestrained global capitalism. The ‘collective dictator’ of global capitalism sustains power by pitting democratic communities against each other. As individual nations compete by lowering tax rates and cutting regulation in order to attract capital, more and more wealth is transferred from the 99% to the 1%.

Marx said that workers need to organise to break their chains. Similarly, democratic communities have everything to gain if they organise. If we were to co-operate rather than compete, we could in principle slay the dragon of tax competition by ensuring global capital has nowhere to run to. In the absence of effective global institutions, progress could be made by countries united in fiscal solidarity refusing to trade with ‘scab’ nations, i.e. countries which unilaterally slash their tax rates and thereby put pressure on governments all round the world to spend less on the public good in order to compete.

Here’s the (admittedly very far off) long term goal: If the citizens of the world could choose how to tax big business, finance and the wealthy, free from the need to be ‘competitive’, then we might finally begin to redistribute wealth back from the 1% to the 99%. The days of not having enough to provide the highest standards of health, education and public services to all would be consigned to history.

At the present time, this level of global co-operation seems not to be a realistic option, not least because national democracy is in each country either imperfect or non-existent. But what I am recommending is not overnight revolution but a long term direction of travel, an ideal which could be worked towards in stages. The establishment of a Robin Hood Tax on financial transactions, for which there has recently been enthusiasm amongst the leaders in continental Europe, would be an important first step. Once people see how much they have to gain from getting a grip on global capitalism, they may be inspired to go further.

Democratic communities unite!

This is a long term ideological battle against a powerful and resourceful enemy. Few talk about ‘trickle down’ any more, but the Koch brothers in the USA spend billions promoting the mythical fear of ‘big government’, in order to persuade the 99% to vote against their interests. We need to hit back with the message that freedom for capital and freedom for the great majority of people are diametrically opposed. The new class war is between democratic communities and unrestrained global capitalism, and it is a war we could one day win if we start to organise.

One Response to “Fiscal Solidarity and Tax Justice”

Trackbacks/Pingbacks

  1. The EU and the Democratic Control of Capitalism | Conscience and Consciousness - June 21, 2016

    […] tax rates artificially low. If countries were to co-operate rather than compete –what I call ‘fiscal solidarity’ – we could eliminate these forces, ensuring a vastly greater proportion of profits go to […]

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