Sir Mervyn King, Governor of the Bank of England, wants us to stop demonising bankers. But what would be the consequences if people could not vent their frustrations on a few scapegoats? Bankers have served as one of the social system’s safety valves. Communities have been wrecked and lives destroyed by the Depression of 2010, but those responsible have escaped censure because people were allowed to bash the bankers.
Sir Mervyn presided over the Bank as the British economy boomed. No warnings came about the bust that had to follow. Sir Mervyn was not alone in being derelict in his duty of care to the people of Britain. It was the same failure across Europe and in the United States. The people who had been entrusted to secure the stability of the economy did not have a clue about the trouble that was brewing in the run-up to the financial crisis of 2008.
Those individuals continue to avoid their personal responsibilities. Sir Mervyn admits that it was a systemic failure. But the so-called experts should have at least explained to governments that the root cause was the incentive to speculate in one asset – land – which drove property prices to perilous heights. All the rest, including the corruption in the financial centres, was symptomatic of the rotten foundations on which the economy is constructed.
If the richly rewarded guardians of the public’s welfare had performed their duties honestly, the public would at least have had the information on which to base their assessments of the policies presented to them by the political parties. That information was not provided, so it is not surprising that the public has lashed out at the most visible targets. Bankers are easy scapegoats.
Law of the Land
Now the politicians are presenting us with new scapegoats: the digital age corporations that are dodging taxes by shuffling invoices in low-tax havens. Apple is the latest multi-national to receive a battering for legally arranging its affairs to pay the minimum into the public coffers in countries where their customers happen to live.
Britain’s Prime Minister, David Cameron, is leading the campaign to demand that corporations should play fair. Don’t expect clarity to emerge as governments struggle to fund public services. Champions of the tax-dodging corporations are not in the business of making life easy for policy-makers. Take the case of Sir Roger Carr, President of the Confederation of British Industries. He says:
“Tax avoidance cannot be about morality…Tax should be calculated in keeping with the law of the land.”
But that is precisely what the tax regime is not about and cannot do – complying with the law of the land. If taxes were anchored in the traditional laws that related to land, civil society would not now be a battleground. Corporations are able to run rings around sovereign governments because tax policies were constructed to favour those who feasted on the rents that pass through the market for land and (now) the exotic natural resources used by dot.com corporations.
Demonising a few scapegoats is the way to protect the rent seekers. The guardians of public policy will not point the accusing finger at those who are really responsible for creating havoc in the economy.