Dec 06 2011

Felix Salmon misses the point on #Occupy and the global elite

Posted by: Nick Shaxson in: Thoughts

Felix Salmon is a respected and interesting Reuters blogger, and in a recent post entitled American Plutocracy he makes some good points which are exactly in line with what I write about in Treasure Islands. I hope he won’t mind my pasting quite a lot of his blog:

Michael Lewis puts his finger on something important:

“Ordinary Greeks seldom harass their rich, for the simple reason that they have no idea where to find them. To a member of the Greek Lower 99 a Greek Upper One is as good as invisible.

He pays no taxes, lives no place and bears no relationship to his fellow citizens. As the public expects nothing of him, he always meets, and sometimes even exceeds, their expectations. As a result, the chief concern of the ordinary Greek about the rich Greek is that he will cease to pay the occasional visit.

That is the sort of relationship with the Lower 99 we must cultivate if we are to survive. We must inculcate, in ourselves as much as in them, the understanding that our relationship to each other is provisional, almost accidental and their claims on us nonexistent.”

That tongue-in-cheek article by Lewis leads Salmon to point to Chrystia Freedland’s widely read (and very good, as far as it goes) article about this rootless, tax-(and other law-)skirting global élite. Freedland says:

“They are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves…

The business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting “their” taxes to paying down “our” budget deficit.”

Indeed. Just as Treasure Islands explains, in great detail. Then Salmon makes an important point, where I still agree with him:

“Chrystia quotes Silver Lake’s Glenn Hutchins as saying of the super-elite that “we are much less place-based than we used to be”, which is true. But the US has, historically, been behind this particular curve. It tends to import talent rather than export it: I don’t have exact numbers, but I’m sure that there’s an order of magnitude more foreign-born billionaires living in the US than there are US-born billionaires living abroad. For all that hedge-fund managers, in particular, are constantly threatening to leave the country if they get taxed more, the fact is that the US is so big and so rich that it actually does an extremely good job of retaining its billionaires, roping them in to the social compact whether they like it or not.”

Yes, he is quite right, and I have always believed something along these lines.  I put it slightly differently in Treasure Islands:

“After the Great Depression, Wall Street, diluted in a large and diversified industrial economy, had relatively little political clout to veto progressive New Deal-style legislation. By contrast, the City of London’s position at the centre of the globe- spanning British empire gave it the domestic political heft to sabotage any British version of the New Deal.”

It’s not quite what Salmon is saying, but the underlying factors we both identify are similar. Anyway, Salmon’s next point is where he goes off the rails. Here is the conclusion he draws:

“This is why the Occupy movements are particularly American. The Russians can’t Occupy anything: all their billionaires are in London. And while there’s an enormous number of the global elite living in Switzerland, they’re not actually Swiss: they’ve already broken the bounds of national identity, and have basically created a stateless stratospheric sovereignty of their very own.

In a way it’s reassuring that America’s billionaires are still so civic-minded that they buy laws and political parties: it’s a sign that they’re invested in the country and are here for the foreseeable. And the one law they’re not going to repeal any time soon is the most important one — the one which says that US citizens have to pay US federal taxes on their global income, no matter where they live. (Or at least demonstrate that they’ve paid at least that much in taxes elsewhere.) American plutocrats, almost uniquely, are tied to their home country in a way that other members of the global elite can barely imagine.”

Flat wrong about Occupy being peculiarly American, and poor reasoning I think. First, Occupy is not a particularly American phenomenon, although the U.S. has been the location of its most important and noisiest successes so far, no doubt. There is something profoundly important happening around the steps of St. Paul’s in London, and elsewhere, filling local newspapers’ pages and mobilising widespread sympathy and support.

The most important achievement about #Occupy in my humble opinion is that it is creating, or pointing the way towards, an entirely new kind of politics: breaking out from the old political constraints of right and left – Democrats vs. Republicans in the US; Tory vs. Labour in the UK; and so on. It is looking at the world in new ways.

The 1% vs. 99% confrontation is a major part of the fire beneath Occupy, around the world. And nothing epitomises the 1 percent, and the power they wield (to skirt taxes, to force governments to cut financial regulation, eviscarate laws, reduce their taxes, and to do other things), as much as this rootless, offshore-roaming élite.

Salmon’s mistake is to say that in places like the UK, #Occupy can’t engage on this issue because it’s too difficult. I, and many others, think that what Salmon’s earlier (correct) analysis shows is that this particular point about the rootless 1% – this giant faultline in the global economy – is where the Occupy messages can be most relevant in pointing to the source of the trouble.

Treasure Islands, meanwhile, explains why this rootlessness of the élite and the offshore system more generally has actually had a far greater impact on the United States than almost anybody realises.

Globalisation, and particularly financial globalisation, has raced ahead of us all. Time to catch up with the curve.  This where the new politics lies. And you will never, ever understand it without understanding offshore.

Postscript: just spotted this Freedland article on Occupy. Quite good, I think. Zedillo, by the way, was the author of the Zedillo report, a key milestone in the history offshore, raising the issues of tax havens and tax in a global context (see ‘Systemic Issues” in the Executive Summary here.) More offshore history here.

2 comments so far

Peter Scholtens 12th December, 2011 1.59 am

#occupy is its own 1% and has demonstrated that by defecating inside St.Paul’s Cathedral in London and destroying St.James Park in Toronto. It will remain 1% until it learns to respect what the 99% does.

Nick Shaxson 12th December, 2011 11.08 am

ah yes, the usual approach of those who haven’t got an argument: the smear. Attack the messenger, because the message is too tough to grapple with.

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