Category Archives: economics

A Conversation on Brexit

Rob Shields, Joost Van Loon, Justine Lloyd, David Harvey, Joerge Dyrkton, Michael Schillmeier.

RS: I regard the [Brexit] vote as one of the times in my adult life that I have been diminished.  I’m so glad I had the chance to do a year in France on an UK EU Passport.  That would have been an enormous bureaucratic challenge to organize based on Canadian citizenship without the right to reside in France.

Some interesting network analysis.  What are people saying at the universities?

Brexit is a fact now and is expected to have a significant impact on the economies of the United Kingdom and its key trade partners. One impact area relates to the European Union’s research funding in the form of its current Horizon 2020 Framework Programme for Research and Innovation, as well as ongoing projects funded as part of the previous Seventh Framework Programme. A significant number of universities, knowledge institutes and companies from the UK currently participate in these programmes. Exactly which organizations and projects are potentially impacted, and how are they connected? Network science provides an initial view.  In the immediate wake of the Brexit vote on June 27, I didn’t see much in the way of macro-level scenarios such as this except for Yanis Varoufakis.

Guardian: “Almost unnoticed amid the post-Brexit hysteria, French president François Hollande announced his intention to veto TTIP, the free-trade treaty between the EU and the US. For clarity, that means it is dead…”

JVL: Regarding Brexit,  I have come across a few bits about prognoses that Brexit is bad for academic research, because British universities are the ones that rake in the most European Council research funding.  However,  I sense that the entire “debate” about the consequences of Brexit involve unfettered amounts of economic-ideological speculation.
From a historical materialist point of view, this is really a textbook Gramsci-case: the Referendum concerned issues related to a split within the hegemonic block and the choice on offer was between neo-liberalism and English nationalism.

There are a few English nationalists who believe that Brexit will enable a more just society within the UK, however the vast majority of Brexit votes are from the disenfranchised (northern) working class and elderly people. Although Brexiteers have denied this, strong racist, xenophobic and even fascistic sentiments have been associated with the slogan “taking our country back”. It became immediately clear that Britain is a project and that the nationalism is primarily an English nostalgic natio nalism, as Scotland, Northern Ireland and Gibraltar all strongly voted against Brexit and are now seeking secession from the UK if they are to leave the EU.

Social media played a massive role as a public forum before and after the referendum and the expression “the country is split” is very accurate. This entire episode made me think about the 18th Brumaire mixed with passages from the Prison Notebooks.  As a revival of (radical) nationalism sweeps across Europe, right wing populist movements will seek to cash in on this sentiment,. Which is similar to Trumpmania in the USA: The more intelligible analyses however refer to neo liberalism, austerity capitalism and the geopolitical disorder associated with the warfare state that are driving the crisis. None of the right wing populist movements will address this and prefer a repetition of (German) history: the crisis of the Weimar Republic and the rise of National Socialism of the 1920s. I have referred to this as the rise of idiocracy. Of all people I have had contact with, it are the Germans (even the most inward-looking amongst my Bavarian friends) that understand this danger the best. I was amazed to hear how well informed they were about this unfolding of what has been for a long time  primarily a crisis within the British Conservative Party into a full blown and potentially very dangerous crisis in Europe.

Should we do a kind of special blog issue on kleptocracy, idiocracy and the impeding class warfare (provisional title: the gloves are off)?  Take care  Joost Van Loon

JL: I am working on a project with colleagues here that connects with the ‘entangled’ media histories folk at Hamburg and Bournemouth, and after the weekend they are worried that looks like it would have less chance of being sustained.

apart from that Australia feels very far away and I’m sure that those who are nostalgic for the Empire are keen for us to be drawn back into the fold rather than make transnational connections.

the regional aspects are really interesting, maybe the predictions of neo-feudalism are right?!

cheers  Justine Lloyd

JD: If you have time, you might want to check out my latest blog (produced in haste) which follows the lead of the Guardian article I suggested to you last night.  After a quick read of George Orwell’s “The Lion and the Unicorn” I offer you … “London Bridge is falling down: George Orwell on Brexit

England is a family with the wrong members in control.  Almost entirely we are governed by the rich, and by people who step into positions of command by right of birth.[5]… (George Orwell)

Cheers  Joerge Dyrkton

DH: I don’t see how an analysis of this sort can proceed without considering the problems of voting for remain.  After all the European Union has done to Greece I think it is impossible to read the EU as about mutual aid and support for a common project. And remember how the German press demonized the Greeks as inferior beings so xenophobia is everywhere and not just a strong current within the Brexit camp. Who benefited from the Euro venture? To pretend that the EU has not been a convenient vehicle for a German nationalist project and that all is well on that front is also to accept a surface reading that disguises some much more malevolent practices if not conscious designs.  Voting either way encounters the problem of keeping some pretty unsavory company whichever way one went.  On the surface it looks as if the more malevolent company is on the exit side but they do not have the power.  Are  those that have the power and who clothe themselves in a veneer of respectability (e.g. Cameron and Merkel) any less malevolent? I think not.  In this vote we were damned if we did and damned if we did not.

David Harvey

MS: interesting paper by W Davies on the Sociology of Brexit

MS: Dear David, Dear All:

As far I can see, your email is a response to Joost’s email, who tried at least to reflect the situation in the UK, and I fully agree with most of Joost arguments.

I was quite surprised – to say at least – with your kind of analysis, which I think  – to be honest – is more about a general critique of ‘capitalism’, ‘xenophobia’,  ‘EU’ and “Germany” than it does reflect the Britsih nationalism/feudalism and the reasons to vote for opting out. Clearly Brexit is about xenophobia and capitalism. No doubt. But to shift the problem to a “German nationalist project” seems to me a good example of what I have experienced in the UK throughout the In/out campaigns. It is reflects a general attitude in the UK I think, to shift the problem to others …  I am not saying that the EU cannot do better and I am saying that they need to do better (including Germany of course), and I am fully aware that the Greek situation was not all  what the European Idea is about.

Clearly, these kind of ‘democratic processes’ like the referendum and how it was instrumentalized by those you were stoking fears is in itself rather problematic. But I can’t see, if I do not follow the spinners of fear,  David, why we are damned this way or the other.

Feeling European and being a German citizen I think it is important to respect the vote, to respect everybody who doesn’t wish to be part of the EU. However, if it is very much about more capitalism as a nationalist project, if it is about ’stopping immigrants’, if it is about shameless lying as the campaigning shows so vividly, then, me, being a German immigrant in the UK, feels very bad, and indeed thinks that the UK after Brexit is not the open culture I fell in love with when I did my Phd in the late 1990s.

I was in Germany at the time just before and after the actual vote. And I have to say,  the amount of detailed (and controversial) information about the Brexit situation was exceptional, whereas in Britain nobody was feeling that they had enough information …

I also think, that the youth has been betrayed by the vote. Having said that, social media, so popular nowadays, hasn’t helped to politicise the campaign amongst the young voters. Only about 35% of the younger voters actually voted.

Best Michael Schillmeier

RS: Much of the reporting is so choked with emotion, inventing mangles like “ironicidal”, “unserious” and resorting to curses, it is difficult to make sense of British journalism.  One piece by Jonathan Freedland gives a sense of the struggle within British elites.

…A week after the vote: The Brexit crisis has driven the pound down below $1.30 to levels last seen in 1985.  Sterling hit a new 31-year low against the dollar.  Last time the pound was lower was in June 1985, but still off the record low of $1.0520 in March 1985.

 

Tax Havens-R-Us: Digital non-geographies and the financial gaming of distance and difference

In today’s world of off-shore tax havens,i quantitative easing,ii high frequency trading,iii and rampant global asset and real estate speculation it seems that a sort of gamified monetary space-race is going on and that it’s advancing with increasing speed. This monetary space-race game is one that is partially defined by both off-shoring and “on-shoring,” by both making assets disappear behind the legal shrouds provided by nation states that profit by providing secrecy to wealthy international clients and conglomerates, and by making virtual assets material in the form of, for example, international real-estate speculation.

But this immaterial/material financial binary is not adequate if we are to identify more comprehensively the space and spaces – the game dynamics – being put to work in service of global finance capital. For example, as but one expression of this monetary space-race, the recent tax haven scandals surrounding Panama’s Mossack Fonseca (which after two weeks of headlines is barely discussed anymore) is not so much about securing or profiting from locating capital in distant geographical spaces – tax-free islands, sandy beaches, and sun-drenched shell-company postal boxes, as it is about taking advantage of new and emerging forms of: 1) interstitial temporal spaces; 2) immaterial or undetectable digital spaces; and / or 3) invisible spaces that, as far as the public is aware, simply do not exist. That is, despite superficial appearances, the new monetary space-race is less about physically off-shoring capital and currency, than it is about staying ahead of the embittered and comparatively impoverished masses and the increasingly indebted governments ever more desperate for funds by hiding, or making invisible, digital money that’s been stored in “the cloud,” on the internet, or on an array of hard-drives. In other words, generating financial distance between wealth and the tax-hungry governments who would love access to it is not achieved through the separation offered by geographical space, but through the creation of new spaces, non-spaces, unknowable spaces that may or may not be physically located in a data-centre or business park next to you in Canada, London, New York,iv or Delaware.v

Continue reading Tax Havens-R-Us: Digital non-geographies and the financial gaming of distance and difference

Tax Haven Financescapes: an elite spatialisation?

A layered global spatialization divides the world not just into haves and have-nots, but between a tax-avoiding elite that operate in the flows of a worldwide financescape of tax havens and economic free trade zones and “the rest” bound by taxes in outflanked territorial states.

The geography of the space of flows is distinguished by island tax havens: in the Caribbean, Bermuda, Panama, The Seychelles, the Channel Islands and Isle of Man for which Switzerland and its banks may be a global command and control centre.

The geography of offshore tax havens reflects the spirits of hoarding, self-enrichment, expropriation and mean-spiritedness. The leak of Mossack Fonseca’s archive via the ICIJ International Consortium of Investigative Journalists, a project of the US Centre for Public Integrity, reveals the identity of individuals and families that have cached away wealth to avoid taxation by national governments. As The Guardian put it today,

what has broken out of the vaults of the offshore legal specialists is “the sense that normal rules do not apply to the global elite. In a new gilded age, taxes would – once again – appear to be for the little people…. Slowly but surely… the world has learned that the banks that busted the global economy were also consumed with … rigging rates, ripping off customers and laundering Mexican drug money.” It reveals the “tax-dodging lengths that private wealth will go to in order to keep public coffers empty.”

The amount avoided in taxes would solve many countries budget deficits. Budget deficits are debts piled on to our children by tax avoiders.  The temporal aspects, in which money made in the past is inherited tax free in the present, taxes not paid in the present then lead to debt by others in the future, make this a distinct topology.  Its like the elite and the rest live on different financial planes.  These two worlds, two planetary financescapes, have points of intersection but otherwise conceived as independent.   The reality however is that the elite are living in a virtual reality, of course, and usually find out to their cost that they are dependent on the acquiescence of the many to this situation.  Social consent can easily by withdrawn.

Protests in Iceland at the revelations in the Panama Papers (Daily Mail Online 4 Apr. 2016)
Protests in Iceland at the revelations in the Panama Papers (Daily Mail Online 4 Apr. 2016)

daily mail iceland protest 32D82CAF00000578-0-image-a-10_1459798826336

Countries less able to monitor financial industries and collect taxes are particularly vulnerable, as the map create by Offshore Net  suggests.  USD21 trillion was their 2010 estimate.

Offshore wealth flows (Map: OffshoreNet.com)
Offshore wealth flows (Map: OffshoreNet.com)

A study of the American top 100 publicly traded companies by U.S.PIRG, as measured by revenue, shows 82 maintain subsidiaries in offshore tax havens. Collectively, the companies report holding nearly $1.2 trillion offshore, with 15 accounting for two-thirds of this (see diagram).

“When corporations use tax havens to dodge the taxes they owe, the rest of us pay the price, either through higher taxes, cuts to important programs, or a bigger deficit,” said Dan Smith, U.S. PIRG Tax and Budget Advocate and report author. “It also puts small businesses without expensive tax attorneys at a big competitive disadvantage” (Offshore Shell Games).

To these sites, one can add free trade economic zones that are tax free so that companies are not taxed on the value added to products in these zones that are way-points between producers and consumers.  Olivier provides one of the always excellent maps from the Le Monde Diplomatique archived on World Resources SIM Centre:

Tax Havens and Free Trade Zones (Le Monde Diplomatique 2000)
Tax Havens and Free Trade Zones (Le Monde Diplomatique 2000)

-Rob Shields (University of  Alberta)

 

The Politics of Scale: David and Goliath

Is that Salmon versus LNG or LNG versus Salmon?

Like David and Goliath, there is a mismatch between the scale at which environmental impacts are assessed under Canadian legislation and the geographical scale of environmental, human rights and economic risks. The Provincial Government of British Columbia is promoting the development of liquified natural gas (LNG) shipping terminal at the mouth of the Skeena River estuary by Petronas.   Based on both cultural attitudes to the environment and scientific research, the proposal and and offer of $1.5B compensation has been rejected by the Lax-Kw’alaams First Nation on whose territory the LNG terminal would be located.  Effectively this would be a form of expropriation approved by the Provincial government and is reminiscent of 19th century scrip practices in Canada, by which indigenous individuals were offered rations and money to extinguish their aboriginal rights to land and traditional hunting and gathering.  An article published in Science (7 Aug 2015) by Jonathan Moore and others (Moore et al 2015) notes that this estuary is the site of the second-largest salmon-production in Canada, largely by First Nation communities. ‘Although terminal proponents and government have recognized interests of First Nations from the estuary during environmental assessment, they have ignored interests of upriver First Nations who also harvest salmon’ (see Stantec Consulting Ltd. Pacific Northwest LNG Environmental Assessment Certificate Application (Burnaby BC 2014) cited in Moore et al 2015).

Lax Kw’alaams in title action on Lelu Island
LNGWorldNews.com: Lax Kw’alaams in title action on Lelu Island

‘Identifying the proper spatial scale for environmental decision-making is a fundamental challenge for environmental policy and ethics. Whether it is migratory animals like salmon that transmit impacts, hydro-electric dams that deprive downstream farming communities of water (see Glenn et al 1995 in Biology 10.1175), or carbon emissions from industrialized countries that raise ocean levels and threaten low-lying islands (see Barnett et al 2003 in Climate Change 61, 321), decisions can impact distant ecosystems and people. Science can and should inform the scale at which environmental decision-makers weigh risks to the environment and human rights against potential economic benefits’ (Moore et al 2015)

-Rob Shields (University of Alberta)

After Moore et al 2015 Selling First Nations down the river. Science (7 Aug) Online: http://science.sciencemag.org/content/349/6248/596.1 accessed 20 Mar. 2016.

See Lukacs, Martin 2016 By rejecting $1bn for a pipeline, this First Nation has put Trudeau’s climate plan on trial Guardian (20 Mar.) Online: http://www.theguardian.com/environment/true-north/2016/mar/20/by-rejecting-1-billion-for-a-pipeline-a-first-nation-has-put-justin-trudeaus-climate-plan-on-trial accessed 20 Mar. 2016.

Ferdinand von Hayek on Pipelines

The aspirations of the great mass of the world’s population can today be satisfied only by rapid material progress… At this juncture we are therefore not only the creatures but the captives of progress… At some future date when, after a long period of world-wide advance in material standards, the pipelines through which it spreads are so filled that, even when the vanguard slows down, those at the rear will for some time continue to move at an undiminished speed, we may again have it in our power to choose whether or not we want to go ahead at such a rate.  (The Constitution of Liberty 1960)

Thanks to Joerge Dyrkton for bringing this to my attention.  Flows (mobilities), cultural transmission, leaders and followers in the global space and time assumed by Hayek.  Empirically, the dependency of the Chinese economy on the US consumer for continued growth puts these preconceptions in doubt.

Pipelines and progress are central images in my colleagues’ local narratives and a central topic of  judicial decisions and debates in Canada, with the government and the oil and gas industry on one side and the indigenous nations and environmental critics on the other.

Rob Shields (University of Alberta)

 

Greece and the spatialisation of economic guilt

Satyajit Das commented on the geographical framing of financial crises:

European politicians and central bankers have provided useful geographical clarifications. Prior to succumbing to the inevitable, the Ireland told everyone that they were not Greece. Portugal is now telling everyone that it is not Greece or Ireland. Spain insists that it is not Greece, Ireland or Portugal. Italy says it is not in the “PIGS”. Belgium insists it was no “B” in “PIGS” or “PIIGS”.

Although never defined, in these discourses “Greece” becomes the spatial figure for an economic guilt complex, labelled as the geographical site of our own fears of disentitlement and moral discourses condemning profligacy.

At the same time as pointing out this process of spatialisation of crisis, the article turns on metaphors of economic “contagion”.  The understandings of flow, transmission and mobilities embedded in the idea of contagion have been critiqued by authors such as Van Loon, Anderson, Street and Nicols over many years in Space and Culture.

-Rob Shields (University of Alberta)

Debtor Colonies, Democracy and International Finance

The Greek / Euro debt crisis has elicited strong editorial writing in places such as The Guardian where George Monbiot argued:

The IMF is controlled by the rich, and governs the poor on their behalf. It’s now doing to Greece what it has done to one poor nation after another, from Argentina to Zambia. Its structural adjustment programmes have forced scores of elected governments to dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives.

The same programme is imposed regardless of circumstance: every country the IMF colonises must place the control of inflation ahead of other economic objectives; immediately remove barriers to trade and the flow of capital; liberalise its banking system; reduce government spending on everything bar debt repayments; and privatise assets that can be sold to foreign investors.

Using the threat of its self-fulfilling prophecy (it warns the financial markets that countries that don’t submit to its demands are doomed), it has forced governments to abandon progressive policies. Almost single-handedly, it engineered the 1997 Asian financial crisis: by forcing governments to remove capital controls, it opened currencies to attack by financial speculators. Only countries such as Malaysia and China, which refused to cave in, escaped.

Consider the European Central Bank. Like most other central banks, it enjoys “political independence”. This does not mean that it is free from politics, only that it is free from democracy. It is ruled instead by the financial sector, whose interests it is constitutionally obliged to champion through its inflation target of around 2%.

Alex Tsipras has successfully broadened an economic debate into a broader debate about democratic self-determination in the context of financial crises that are created by unrealistic lending by banks and private investors guaranteed by IMF bailouts that effectively socialize debt and take over the risk incurred by private financial corporations.  cites Matthias Matthijs and Mark Blyths’ The Future of the Euro in making a similar argument about the people versus the global financial elite:

“There are no sustainable technocratic solutions to the euro problem, which is an inherently political one, and will need political solutions. Democracy is not a mere error term in the non-linear regression of governance.” That is a lesson the eurozone elite has yet to learn.

From the usurous rates of credit cards and loan companies,  to bank fees, to the encouragement of consumer driven economic expansion, the unequal terms of banking have been apparent to the retail public for several decades.   Current debates over austerity policies have eroded the certainty of Thatcherite penny-wise logic of sustenance style economics.   Are we at a historical moment when the moral authority of banks and bankers is decisively questioned and the international financial system is unveiled as a form of colonialism that is global rather than being limited to regions – The “Asian” financial crisis, “African” debt and so on.

Rob Shields (University of Alberta)