Pin-Striped Pirates

 Pin-Striped Pirates


Over a quarter of the world's tax havens are British property. More than half of Britain's colonial territories and dependencies are tax havens. Is that why the UK retains a handful of colonies? To destroy the world's taxation systems.


GEORGE MONBIOT

If you want to know why Britain has never completed the process of decolonisation, look at two lists side by side. One is the official register of tax havens, compiled by the OECD (1). The other is the list of British overseas territories and crown dependencies (2). Over a quarter of the world's tax havens are British property. More than half of Britain's colonial territories and dependencies are tax havens. Strip out Antarctica, the military bases and the scarcely-habited rocks and atolls, and of the 11 remaining properties, only the Falkland Islands is not a recognised haven. The obvious conclusion is that Britain retains these colonies for one purpose: to help banks, corporations and the ultra-rich to avoid tax. These figures scarcely do justice to the UK's responsibility for this menace. The website Shelter Offshore, which helps people to avoid their obligations to society, has just published its list of the world's "top 5 tax havens"(3). Jersey, Guernsey and the Isle of Man come first. "These highly respectable British offshore tax havens," the site tells us, "can be very attractive indeed", offering "superior levels of investor privacy". Privacy is the polite word for the secrecy and obstruction that helped to bring down the world's financial systems. Last month the British government announced that it will introduce new laws to prevent piracy: the armed forces will be allowed to detain ships and arrest suspected robbers on the high seas(4). Yet the same government offers an attractive portfolio of tropical and temperate islands in which pinstriped pirates can bury their treasure. That comparison is unfair – to pirates. The freebooters who use these havens are responsible for thousands of times more deaths even than the notorious Abdul Hassan, known on the Somali coast as "the one who never sleeps"(5). Because of the secrecy surrounding the treasure islands, no one knows how much money they divert from developing countries. Christian Aid's estimate – of $160 billion a year – is the lowest figure(6), though 60% greater than the international aid the poor world receives(7). The Pope suggests $255bn(8); the US research group Global Financial Integrity proposes $900bn(9). In all cases we're talking about the means by which hundreds of thousands of lives could have been preserved in the world's poorest countries. But Britain's network of tax havens permits multinational companies, dodgy businessmen and corrupt leaders to snatch money from the poor. Gordon Brown wrings his hands over the plight of the poor, and urges impoverished countries to earn more money through trade. But by keeping our tax havens open for business, this mumbling Christian hypocrite ensures that even when the poor nations do trade successfully, they are unable to keep hold of the income. This authorised theft, of course, affects us too. We are robbed twice by these gangsters: once when they avoid the taxes the rest of us have to pay, again when the tax havens' secret banking arrangements cause the crises which oblige us to rescue the banks. As the Tax Justice Network points out, the banking system collapsed because it became indecipherable. The banks lost confidence in each other when they could no longer tell who owns what or who owes whom, and could no longer trust each other's financial statements(10). Nothing has done more to promote this distrust than the lucrative secrecy the tax havens offer to their clients. Organised crime also depends on tax havens. The OECD uses four criteria to determine whether a place is a haven: it imposes no tax, there's a lack of transparency, it has laws preventing the effective exchange of information with other governments, and the money which changes hands bears no relation to the business done there(11).The last three criteria are all essential prerequisites for large-scale crime. In fact it's doubtful whether the traditional piracy now flourishing off the Horn of Africa would be possible without the more respectable piracy taking place in the English Channel, the Irish Sea and off the Spanish Main. Anyone who wanted to stamp out drug smuggling, kidnapping, gun-running and fraud would start by shutting down tax havens. But the crime havens have become so respectable that even the British government is now depriving itself of revenue. It has become the major shareholder in the Royal Bank of Scotland, which has offshore subsidiaries in Jersey, Guernsey, the Isle of Man and Gibralter(12). Have the bank's new owners, in return for our generosity in bailing it out, demanded that it shuts these operations? No. And that's not the worst of it. The Inland Revenue, responsible for collecting tax in this country, signed a private finance initiative deal transferring its buildings to a company called Mapeley Steps(13). Mapeley Steps, which is registered in one tax haven (Bermuda) is owned by Mapeley, registered in another (Guernsey). Mapeley has boasted of paying no income or corporation tax in any jurisdiction(14). Why does the government keep these havens open? There's an answer in Geraint Anderson's book Cityboy – a crude but gripping exposure by a former research analyst at a City bank. "Eighteen years out of power has made these jokers so paranoid about being viewed as old Labour that every time Cityboys and entrepreneurs asked for business-friendly reforms they rolled over and allowed tax and regulatory changes"(15). There is a standard British procedure for dealing with problems like this: by which I mean problems that generate bad publicity but which you don't want to address. You commission a review and you choose the right man to conduct it. Confronted with a vocal international campaign and a new US president determined to tackle this issue(16), the government has selected a man called Michael Foot (not the former Labour leader). Until last year, Foot was the inspector of banks and trust companies for the Central Bank of the Bahamas in Bermuda, a British tax haven(17). Though the review was launched only a fortnight ago, he already seems to have decided what it will say. Speaking about tax havens to the magazine Accountancy Age, he claimed that they had been given a clean bill of health by the IMF, and observed, "I can't see where the regulation failure is supposed to be."(18) The Tax Justice Network maintains that throughout his long career in Bermuda, at the Financial Services Authority and elsewhere, he has never raised any public concerns about systemic problems in the financial sector(19). The identity of the person the government appoints is an index to the outcome it desires. Foot sounds like just the man for the job. Even as it was commissioning this review, Brown's government tried to undermine international efforts to address the problem. Teaming up with that revolting little monarchy Liechtenstein, the UK sought to strike out a paragraph from the Doha trade agreement which aimed to eradicate tax evasion(20). Thanks in part to British lobbying, the draft commitment was substantially weakened(21). Were Britain to release its remaining colonies, they would quickly succumb to pressure from the Obama government and the European countries trying to stamp out international evasion and organised crime. We hold onto the Falkland Islands for their oil and fish. We hold onto the other territories for something far more valuable: secrecy. www.monbiot.com References: 1. OECD, viewed 15th December 2008.Jurisdictions committed to transparency and effective exchange of information. oecd.org 2. Foreign and Commonwealth Office, viewed 15th December 2008. List of Crown Dependencies & Overseas Territories. fco.gov.uk 3. Shelter Offshore, 12th December 2008. Top 5 Tax Havens. shelteroffshore.com 4. The Prime Minister's spokesman, 19th November 2008. Morning press briefing. 5. guardian.co.uk 6. Olivia McDonald, 9th December 2008. Casting the first stone. 7. uk.reuters.com 8. Nick Mathiason, 7th December 2008. Pope attacks tax havens for robbing poor. The Observer. 9. Nick Mathiason, 30th November 2008. Tax evasion robs developing countries of $900bn a year. The Observer. 10. Richard Murphy and John Christensen, 10th October 2008. The threat lying offshore. The Guardian. 11. OECD, viewed 15th December 2008. Tax Haven Criteria. 12. Private Eye, 5th December 2008. Offshore Alistair. In The Back, page 26. 13. Stefan Armbruster, 23rd September 2002. Revenue sell-off to tax haven firm. BBC News Online. 14. Jim Pickard, 10th May 2006. Tax-free Mapeley to reject Reit status. Financial Times. 15. Geraint Anderson, 2008. Cityboy: Beer and Loathing in the Square Mile, page. Headline, London. 16. Nick Mathiason and Heather Stewart, 9th November 2008. Obama backs crackdown on tax havens. The Observer. 17. HM Treasury, 2nd December 2008. Independent Review into British Offshore Financial Centres. Press release. 18. Michael Foot, quoted by Judith Tydd, 11th December 2008. Regulation can tackle havens, says review chief. Accountancy Age. 19. John Christensen, Tax Justice Network, pers comm. 20. Tax Justice Network, 30th October 2008. UN Tax Committee - why it matters; UK backs Liechtenstein. taxjustice.blogspot.com  21.Tax Justice Network, 11th December 2008. Doha: a cup half full. taxjustice.blogspot.com

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The man who conned the world

 

December 16, 2008

 

Banks, billionaires, charities and film stars are among the victims of the '$50bn fraudster', whose exposure deals a fresh blow to financial confidence, according to one tycoon facing a $9bn loss.

 
Investors around the world are counting the spiralling cost of the biggest fraud in history, a $50bn scam that has ensnared billionaire businessmen and tiny charities alike and whose tentacles have stretched further and deeper than anyone imagined.
 
The fallout from the arrest of the Wall Street grandee Bernard Madoff was continuing to grow last night, as institution after institution detailed the extent of their possible losses, and the victims in the UK were headlined by HSBC and the Royal Bank of Scotland, which is majority-owned by the British Government.
A charity set up by the Hollywood director Steven Spielberg was among those revealed to be among the victims, along with a foundation set up by Mort Zuckerman, one of the richest media and property magnates in the United States, dozens of Jewish organisations, sports team owners and a New Jersey senator.
 
But the biggest confessions were coming from Wall Street, from the City of London and from the headquarters of European banks and from banks around the world. They have poured billions of dollars into Mr Madoff's too-good-to-be-true investment fund, which appeared to post double-digit annual returns come rain or shine.
 
RBS said that it could take a hit of £400m if American authorities find there is nothing left of the money Mr Madoff had pretended to be investing for many years. HSBC, Britain's largest bank, said a "small number" of its clients had exposure totalling $1bn in Mr Madoff's funds.
 
The Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley in the UK, could be on the hook for $3.1bn. Japan's Nomura said it has hundreds of millions of dollars at risk. City analysts said that even banks who invested only on behalf of clients could end up on the hook, because clients are almost certain to sue for bad advice.
 
Mr Madoff confessed last week that his business was "all one great big lie". The investment returns were fake, and he had been paying old clients with money from new ones. In its conception, the scam is a classic. In its size, it is breathtaking, eclipsing anything seen before. He personally estimated the losses at $50bn, according to the FBI, and as investors owned up to their exposure yesterday that did not seem impossible. For 48 years, until Thursday morning, Mr Madoff was one of Wall Street's best-respected investment managers, able to harvest money from a vast network of contacts and to trade on his name as a former chairman of the Nasdaq stock exchange.
 
His arrest has further shaken confidence in the barely regulated hedge fund industry, which is already suffering some of the worst times in its short history. Mr Madoff – who is now on a $10m bail and under orders not to leave the New York area – was able to operate his fraud under the noses of regulators for many years.
 
Mort Zuckerman, the owner of the New York Daily News and one of the 200 richest Americans, said that one of the managers of his charitable trust had been so taken by Mr Madoff that he invested $9bn with him, including all the money from Mr Zuckerman's trust. "These are astonishing numbers to be placed with one fund manager," he said. "I think we have another break in whatever level confidence needs to exist in money markets."
 
Nicola Horlick, the British fund manager known as Superwoman for juggling her high-flying City career with bringing up five children, turned her fire on US regulators. Her Bramdean Alternatives investment fund had put 9 per cent – about £10m – with Mr Madoff. She told BBC Radio: "This is the biggest financial scandal, probably in the history of the markets."

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Socialism's Comeback

 

December, 12 2008

By Neil Clark
Source: New Statesman (UK)

 

At the beginning of the century, the chances of socialism making a return looked close to zero. Yet now, all around Europe, the red flag is flying again.

 

"If socialism signifies a political and economic system in which the government controls a large part of the economy and redistributes wealth to produce social equality, then I think it is safe to say the likelihood of its making a comeback any time in the next generation is close to zero," wrote Francis Fukuyama, author of The End of History, in Time magazine in 2000.

 

He should take a trip around Europe today.

 

Make no mistake, socialism - pure, unadulterated socialism, an ideology that was taken for dead by liberal capitalists - is making a strong comeback. Across the continent, there is a definite trend in which long-established parties of the centre left that bought in to globalisation and neoliberalism are seeing their electoral dominance challenged by unequivocally socialist parties which have not.

 

The parties in question offer policies which mark a clean break from the Thatcherist agenda that many of Europe's centre-left parties have embraced over the past 20 years. They advocate renationalisation of privatised state enterprises and a halt to further liberalisation of the public sector. They call for new wealth taxes to be imposed and for a radical redistribution of wealth. They defend the welfare state and the rights of all citizens to a decent pension and free health care. They strongly oppose war - and any further expansion of Nato.

 

Most fundamentally of all, they challenge an economic system in which the interests of ordinary working people are subordinated to those of capital.

 

Nowhere is this new leftward trend more apparent than in Germany, home to the meteoric rise of Die Linke ("The Left"), a political grouping formed only 18 months ago - and co-led by the veteran socialist "Red" Oskar Lafontaine, a long-standing scourge of big business. The party, already the main opposition to the Christian Democrats in eastern Germany, has made significant inroads into the vote for the Social Democratic Party (SPD) in elections to western parliaments this year, gaining representation in Lower Saxony, Hamburg and Hesse. Die Linke's unapologetically socialist policies, which include the renation alisation of electricity and gas, the banning of hedge funds and the introduction of a maximum wage, chime with a population concerned at the dismantling of Germany's mixed economic model and the adoption of Anglo-Saxon capitalism - a shift that occurred while the SPD was in government.

 

An opinion poll last year showed that 45 per cent of west Germans (and 57 per cent of east Germans) consider socialism "a good idea"; in October, another poll showed that Germans overwhelmingly favour nationalisation of large segments of the economy. Two- thirds of all Germans say they agree with all or some of Die Linke's programme.

 

It's a similar story of left-wing revival in neighbouring Holland. There the Socialist Party of the Netherlands (SP), which almost trebled its parliamentary representation in the most recent general election (2006), and which made huge gains in last year's provincial elections, continues to make headway.

 

Led by a charismatic 41-year-old epidemiologist, Agnes Kant, the SP is on course to surpass the Dutch Labour Party, a member of the ruling conservative-led coalition, as the Netherlands' main left-of centre grouping.

 

The SP has gained popularity by being the only left- wing Dutch parliamentary party to campaign for a "No" vote during the 2005 referendum on the EU constitutional treaty and for its opposition to large- scale immigration, which it regards as being part of a neoliberal package that encourages flexible labour markets.

 

The party calls for a society where the values of "human dignity, equality and solidarity" are most prominent, and has been scathing in its attacks on what it describes as "the culture of greed", brought about by "a capitalism based on inflated bonuses and easy money". Like Die Linke, the SP campaigns on a staunchly anti-war platform - demanding an end to Holland's role as "the US's lapdog".

 

In Greece, the party on the up is the Coalition of the Radical Left (SYRIZA), the surprise package in last year's general election. As public opposition to the neoliberal economic policies of the ruling New Democracy government builds, SYRIZA's opinion-poll ratings have risen to almost 20 per cent - putting it within touching distance of PASOK, the historical left-of-centre opposition, which has lurched sharply to the right in recent years. SYRIZA is particularly popular with young voters: its support among those aged 35 and under stands at roughly 30 per cent in the polls, ahead of PASOK.

 

In Norway, socialists are already in power; the ruling "red-green" coalition consists of the Socialist Left Party, the Labour Party and the Centre Party. Since coming to power three years ago, the coalition - which has been labelled the most left-wing government in Europe, has halted the privatisation of state-owned companies and made further development of the welfare state, public health care and improving care for the elderly its priorities.

 

The success of such forces shows that there can be an electoral dividend for left-wing parties if voters see them responding to the crisis of modern capitalism by offering boldly socialist solutions. Their success also demonstrates the benefits to electoral support for socialist groupings as they put aside their differences to unite behind a commonly agreed programme.

 

For example, Die Linke consists of a number of internal caucuses - or forums - including the "Anti-Capitalist Left", "Communist Platform" and "Democratic Socialist Forum". SYRIZA is a coalition of more than ten Greek political groups. And the Dutch Socialist Party - which was originally called the Communist Party of the Netherlands, has successfully brought socialists and communists together to support its collectivist programme.

 

It is worth noting that those European parties of the centre left which have not fully embraced the neoliberal agenda are retaining their dominant position. In Spain, the governing Socialist Workers' Party has managed to maintain its broad left base and was re-elected for another four-year term in March, with Prime Minister José Luis Rodríguez Zapatero promising a "socialist economic policy" that would focus on the needs of workers and the poor.

 

There are exceptions to the European continent's shift towards socialism. Despite the recent election of leftist Martine Aubry as leader of the French Socialist Party, the French left has been torn apart by divisions, at the very moment when it could be exploiting the growing unpopularity of the Sarkozy administration.

 

And, in Britain, despite opinion being argu ably more to the left on economic issues than at any time since 1945, few are calling for a return to socialism.

 

The British left, despite promising initiatives such as September's Convention of the Left in Manchester, which gathered representatives from several socialist groups, still remains fragmented and divided. The left's espousal of unrestricted or loosely controlled immigration is also, arguably, a major vote loser among working-class voters who should provide its core support. No socialist group in Britain has as yet articulated a critique of mass immigration from an anti-capitalist and anti-racist viewpoint in the way the Socialist Party of the Netherlands has.

 

And even if a Die Linke-style coalition of progressive forces could be built and put on a formal footing in time for the next general election, Britain's first- past-the-post system provides a formidable obstacle to change.

 

Nevertheless, the prognosis for socialism in Britain and the rest of Europe is good. As the recession bites, and neoliberalism is discredited, the phenomenon of unequivocally socialist parties with clear, anti- capitalist, anti-globalist messages gaining ground, and even replacing "Third Way" parties in Europe, is likely to continue.

 

Even in Britain, where the electoral system grants huge advantage to the established parties, pressure on Labour to jettison its commitment to neoliberal policies and to adopt a more socialist agenda is sure to intensify.

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Now the party's over, will the young really pick up the tab?

 

There is little fairness in expecting future workers to support the gilded pensions of a generation who had it so much easier

 

• 
• Jenni Russell
• The Guardian, Friday 12 December 2008

 

On the day of the pre-budget report my teenage son was listening to a news item about the huge expansion of government borrowing, and the debt being built up for the future. "I don't understand - who's going to pay for all this?" he asked. I thought for a millisecond. "You are," I said.
 
The fallout from the financial crisis is just the latest burden we are about to place on the shoulders of the younger generation. For the past 50 years or so, our society's been having a party. It's true that not everyone was invited, but those who were had a very good time. There is, for instance, the golden generation. That's the term for the people lucky enough to retire, often early and with final-salary pensions, around the start of the decade. They had free university educations and hit a rapidly expanding market for middle-class jobs. They walked into employment, rode the property booms as inflation made nonsense of their mortgages, and could even fly to Asia or Antarctica without knowing they ought to feel environmental guilt.
 
The people 10 or 20 years younger than them didn't do badly either; spending and consuming in abandon while watching the value of their assets grow. But now the bills are coming in, and people who are young now will face a much tougher future.
 
Take education. Students already expect to pay for university, but they do so because they have been assured that it will be an investment. A shrinking economy threatens that. In a tough job market, those who get offers come from the most prestigious universities and most taxing courses. The thousands of people who have been urged into new universities and narrow courses are already finding it harder to get jobs, and it will get worse. The general graduate premium is dwindling fast - Swansea University recently estimated the lifetime value of the average degree at no more than £22,000.
 
Bob Worcester, of the polling firm Mori, thinks the overhang from the hole in public finances could affect young people's lives for decades. "I'm very conscious that students are leaving college owing between £12,000 and £20,000, and while the debts are there, the jobs aren't. Especially for the soft-touch degrees, the ones that don't teach wider skills."
 
The economist Bridget Rosewell is equally worried by the pressure on young people to go into training rather than work. She has sat on quangos whose purpose is to get people into colleges and improve their skills so that Britain can compete internationally. "We've created a system that's better at producing courses than skills that are useful to the individual or society."
 
Even falling house prices aren't automatically good news for the young. Homes are still expensive compared with salaries; loans without high deposits are impossible to find; and those who buy at a time of very low inflation are going to find their mortgages won't shrink as they did in the past. The only people exempt from this will be those whose parents can spare some capital. In other words, generational inequality is going to further entrench social inequality.
While college leavers delay their entry to the job market and accumulate debt, they are shortening the period in which they are available for productive work. That's serious, because in their lifetimes they are going to be expected to build up their own pensions and save for them in a way that previous generations were not obliged to. Simultaneously they are going to have to pay, either through taxes or by producing profits, for the lifestyles of all the people who have retired before them.
 
Rosewell thinks we still haven't faced up to the burden this will lay on future workers. This week the Office for National Statistics described the rise in the number of over-85s as "a time bomb". Longevity and demography will combine to increase the ratio of over-65s from 16% now to almost 23% by 2032. That shift will make today's long retirements unsustainable for future generations. Why, then, should the young agree to labour for ours?
 
It is quite possible that they will simply refuse to do so. They may rewrite the terms of the generational bargain. In recent years those getting older have become increasingly demanding of government, and indignant about its failure to provide more for them - in campaigns for free social care and against the selling of homes to fund old-age care, for instance. The feeling is that making individuals pay isn't fair, and that the state should provide. But the state is only a collection of individuals, and if I want free care, some younger, fitter person will have to pay for it.
 
Politicians find these questions of intergenerational conflict very difficult. They would prefer to evade them, especially when they involve large and politically active constituencies. That's why the government was slow to introduce even Adair Turner's relatively modest proposals; why it backed away from substantial reform of public sector pensions; and why it decided to make students pay for university, rather than impose a retrospective graduate tax on those who had already benefited. But we can't afford this kind of myopia. What's the right balance over our lifetime between working and dependence, and how should we balance the competing interests of generations at a time of chaos, cuts and profound change? We all have a profound interest in the answers.


  

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Some companies are too powerful to fail

 

 

By John Kay
Published in the FT: December 9 2008 19:13 | Last updated: December 9 2008 19:13

 
Great banks are "too big to fail". The predictable consequence of governments accepting this argument is a queue of other companies "too big to fail" lining up at the front door of treasuries. Insurers were next. This week, the car manufacturers secured their subsidy.
The failure of any business has ripple effects on suppliers, employees, distributors and customers. If the business is General Motors such effects are larger. But since GM is many times larger than most companies, the subsidy needed to keep going is correspondingly larger. There is no reason to think that the ripple effects are larger, relative to the size of GM, than the consequences of the failure of a smaller business relative to its size.
 
So the return on the taxpayers' dollar is not likely to be larger if their largesse goes to a big company. Indeed, since the large company has readier access to a range of alternative funding options, a need for government support is more likely the result of deep-seated competitive weakness than temporary shortage of funds which can so easily cripple a smaller business.
 
That is true of the carmakers, whose problems are of much longer standing than the current downturn. In automobiles as in many industries, economies of scale are technological, the diseconomies of scale human. Human factors in business are generally more influential than technological ones in determining the long run fate of a company.
 
The memory of a meeting in one of Britain's largest companies – now no longer so large – is engraved in my memory. We discussed how best to persuade the regulatory authorities of the cost advantages arising from the company's size. But the room was crowded with people who had nothing substantive to contribute. They were there to defend and advance their political position in the corporate hierarchy. The meeting itself demonstrated that the arguments we were presenting were false. Politics overrode productivity.
 
As has been true in Detroit. Arrogant, complacent and only belatedly sensitive to competitive pressures and changing customer needs, the big three have been in relative decline for half a century.
 
But there really are economies of scale in political lobbying. The cost of presenting your case is independent of the size of the benefit you seek. The larger the business, the more likely that legislators will see constituency interest or political advantage in being helpful. Big companies have government affairs departments but for small groups the cost of access is prohibitive. Only large companies have access to the sharpest shooters.
 
Too big to fail, but big enough to exert political influence. The malign consequences are evident in many areas of public policy. Large media and software companies write intellectual property rules, while the interests of users go unrepresented. Big pharmaceutical and defence companies employ thousands of lobbyists. Consumer interests come a distant second to producer interests in the formulation of trade policy. In the past two decades the financial services industry has become the most powerful and effective lobby of all. The cash contributed to political campaigns has now been repaid many times over from the public purse.
 
But few things corrode business efficiency and effective markets more insidiously than the discovery that it is more profitable to win the favour of politicians than to win the approval of customers. In Italy, and in some other European states, an inefficient large-business sector is parasitic on the vibrant small- and medium-sized enterprises, which are the mainstay of the economy.
 
The problems are worse in Russia and in many potentially emerging economies. In these countries, the nexus between the political and business elite undermines both democracy and business efficiency.
 
The populist trustbusters who framed anti-monopoly legislation more than a century ago feared that the cost and technical advantages of large companies would be more than offset by damage to economic efficiency and pluralist institutions from the political power they might acquire. These early trustbusters were right.

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Better to hand us all a grand than hurl billions at banks

 

Call it unsophisticated and crude, but the best way to stop a slump is to shower people with cash and make them use it

 Simon Jenkins

The Guardian, Wednesday December 10 2008

One prediction about the recession is for sure. It will end. Every recession in the past century (roughly 20 of them in all) did exactly that. It ended. It ended when demand stopped falling and began rising.

 
Those of us with old economics degrees lurking in the mental attic recall that credit bubbles turn into recessions when they lead to a collapse in demand. People stop buying goods and services. Businesses lose profits, lay off staff and are refused bank credit. Unemployment rises, and the vicious circle proceeds. That is what is happening now.
 
There is an obvious plan to counter it. It was put forward by John Maynard Keynes ostensibly to make a point - shower people with money or pay them for doing nothing - and has ever since been treated by policymakers as unsophisticated and rather silly. Proper macroeconomists do not dabble in such simplicities. The plan is excellent. If recessions are caused by collapsing demand, increase demand. Do not wait on tax cuts or lower interest rates. They all take time. Do not plead with people to spend, as the Japanese did while suppressing interest rates to zero, or as Iceland is doing with its patriotic slogan: "Spend for your country."
 
Get people to spend by giving them money, and just stop them saving it. Give them non-cashable vouchers for domestic goods and services that expire in three months. Drive them to the high streets, supermarkets, restaurants, entertainments, garages, anything that is not saving and has an employment multiplier effect. Only firms should be able to bank the vouchers. Demand must feed straight into business revenue, because revenue is collateral for credit. Without revenue, boosting credit is pointless.
 
There is no shortage of the requisite money in the Treasury. We know because anyone can get it if a banker. The government is obsessed with bankers. The whole thrust of policy is aimed at trying to get banks to offer credit. But this was last August's problem, and it conspicuously failed to stem recession.
Credit is still the obsession of public policy. The government is underpinning bank deposits and shares to the tune of a staggering £500bn in guarantees and £50bn in real money. The giveaway to banks must have reached its limit. Cuts to bank rate have little effect on the real economy.
 
The government has nationalised bankers, lunched them, told them how much to pay themselves. Now it has started bullying them, hectoring them and telling the public how awful they are. Christmas pantomimes are casting bankers as villains. Card games depict them as knaves. Mothers tell children that "a banker" will come to eat them up if they fail to finish their sprouts.
 
Some £1,000 for every man, woman and child in the land has gone into saving banks, the most extravagant policy of all time. Yet all this is aimed at forcing banks to do precisely what caused the credit collapse in the first place. It is aimed at making them lend to people and businesses which, with each passing week, are ever less able to pay them back. As the Guardian's economics editor wrote despairingly on Monday, "nothing seems to be working".
 
Having failed to halt the run on credit in September, the authorities are now trying to halt it when the disease has gone elsewhere, into the cash economy. Two points off the bank rate or an inter-bank guarantee are no good to a sacked shop worker. Give that £50bn, or even half of it, to every person in the land, and it does not matter what people do with the vouchers, provided they generate economic activity. They may be traded at a discount, but that does not matter since they can only be banked by firms by the end of the period. Vouchers are better than hurling money at banks.
 
The subsidies donated to stave off recession so far appear to have gone on restoring bank balance sheets, rewarding staff and lending overseas. Money being poured into projects such as Crossrail and the Olympics is going on fees to the rich, which also tend to be saved rather than spent. America is no wiser, in bailing out its least efficient car firms. It would make more sense to give people vouchers to buy cars of their choice, rather than have government choose which they may buy instead.
 
Just giving people money clearly sticks in the gullet of those who run the economy. The whole point in collecting taxes is to control their disbursement. The idea of Gordon Brown going into the street and giving the public their own cash seems undignified and somehow wrong. Yet Brown, Darling, Cameron and the rest seem comfortable giving vast sums to bankers - with no condition that the money be channelled into spending. The banks say thank you but understandably decline to lend to borrowers who are going bankrupt because the government (and Bank of England) has been careless of recession.
The reason for this indulgence of banks is that bankers are "the authorities". They are like chateau generals in the first world war. They talk the same talk as politicians. They head grand institutions that can supposedly handle billions of pounds. They "launder the giveaway" and make it seem respectable. Also ministers can blame them if, as has happened, nothing seems to work.
 
Such counter-recession policy, like last summer's credit policy, is always too little, too late. America earlier this year introduced a mild version of my plan, a $300 tax rebate. While the intention was sound, it suffered from being a rebate, not a restricted cash handout. The money could vanish into savings. It was too small and did not work.
 
A closer parallel is the gift voucher proposed by German Social Democrats. This is a €500 uncashable voucher with a two-month expiry, for every German over 18. Objections have been intriguing: "people might buy imports"; it "would not solve long-term problems"; it "might recall wartime rationing". In other words, none was substantive.
 
The authorities are too hidebound to tolerate eccentricity or simplicity. Giving people money (or borrowing to give it) suggests a loss of competence and
control. It is crude and unsophisticated, without the jargoned nuances that have given macro-economic policy its specious intellectual beauty.
Even the Tories, who should welcome the vouchers as an in-the-hand tax rebate, cannot stomach the idea. The whole lot will go nobly into recession arm-in-arm with their friendly banks, rather than trust people to spend their own money rescuing the economy.

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The Mumbai Terror Attacks:

 

Need For A Thorough Investigation

By R.H.

08 December, 2008
Countercurrents.org

In all the confusion and horror generated by the ghastly terrorist attacks in Bombay, a dimension which has not received the attention it deserves is the circumstances surrounding the death of Anti-Terrorist Squad (ATS) chief Hemant Karkare and two of his colleagues, encounter specialist Vijay Salaskar and Additional Commissioner of Police Ashok Kamte. The major pattern of operations involved well-organised attacks on a few high-profile sites in Colaba – the Taj, Oberoi and Trident Hotels, and the less-known Nariman House – while a parallel set of operations was centred on Victoria Terminus or VT (now known as Chhatrapati Shivaji Terminus or CST) station, Cama Hospital and the Metro cinema, in the middle of which is the police headquarters where Karkare worked. The latter is an area where foreigners are much less likely to be found.

 

Why is a Proper Investigation Crucial?

 

Hemant Karkare was engaged in unearthing a terror network with characteristics which had not been seen so far. The investigation started by tracing the motorcycle used to plant bombs in Malegaon in September 2008 to a Hindu Sadhvi, Pragyasingh Thakur; it later uncovered a cellphone conversation between her and Ramji, the man who planted the bombs, in which she asked why more people had not been killed. For the first time, the Indian state was conducting a thorough professional probe into a terror network centred on Hindu extremist organisations, this one with huge ramifications, some leading into military and bomb-making training camps and policised elements in the army, others into organisations and political leaders affiliated to the BJP. One of the most potentially explosive discoveries was that a serving army officer, Lt.Col. Srikant Purohit, had procured 60 kg of RDX from government supplies for use in the terrorist attack on the Samjhauta Express (the India-Pakistan 'Understanding' train) in February 2007, in which 68 people were killed, the majority of them Pakistanis. Initially, militants of Lashkar-e-Taiba and other Islamist terror groups had been accused of carrying out the attack, but no evidence against them had been found.

 

The hostility generated by this investigation was enormous, with allegations (refuted by medical examinations) that the suspects had been tortured and that Karkare was being used as a political tool, and demands that the ATS team should be changed. Chief Minister of Gujarat Narendra Modi and BJP Prime Ministerial candidate L.K.Advani accused him of being a 'desh drohi' or traitor, a charge that in India carries a death penalty, and the Shiv Sena offered legal aid to those accused of the terrorist attack, complaining that 'The government does not save Hindus from terrorists, and if Hindus defend themselves, they are maligned'. In an interview shortly before he died, Karkare admitted he was hurt by the campaign against him. On November 26, just before the terrorist attack, the police in Pune received a call from an anonymous caller saying in Marathi that Karkare would be killed in a bomb blast within two or three days.

 

Just as attitudes to Karkare in society at large were polarised, with some admiring him as a hero – one Maulana went so far as to call him a 'massiha (messiah) of Muslims', an amazing tribute from a Muslim to a Hindu – while others hated him as a traitor worthy of death, attitudes within the police force too were polarised. For example, dismissed encounter specialist Sachin Vaze (who with three colleagues was charged with murder, criminal conspiracy, destruction of evidence and concealment of the dead body in the case of Khwaja Yunus shortly before the terrorist attack) was a member of the Shiv Sena who was actively engaged in the campaign against Karkare and in support of the Malegaon blast accused. Vaze and several other encounter specialists who had been dismissed for corruption, extortion and links with the underworld also had a grudge against Salaskar, whom they suspected of informing on them.

 

Hard Evidence or Pulp Fiction?

 

Given this background, and reports that are riddled with inconsistencies, it is not surprising that many residents of Bombay are asking questions about the exact manner of the death of Hemant Karkare and his colleagues. The earliest reports, presumably relayed from the police via the media, said that Karkare had been killed at the Taj, and Salaskar and Kamte at Metro. If this was not true, why were we told this? And why was the story later changed? Was it because it conflicted with eye-witness accounts? Indeed, under the heading 'ATS Chief Hemant Karkare Killed: His Last Pics', IBNlive showed footage first of Karkare putting on a helmet and bullet-proof vest, and then a shootout at Metro, where an unconscious man who looks like Karkare and wearing the same light blue shirt and dark trousers (but without any blood on his shirt or the terrible wounds we saw on his face at his funeral) is being pulled into a car by two youths in saffron shirts. The commentary says that Karkare 'could well have fallen prey to just indiscriminate, random firing by the cops', and also reports that there were two vehicles, a Toyota Qualis and Honda City, from which the occupants were firing indiscriminately.

Later we were given two accounts of the killings where the venue is shifted to a deserted lane without cameras or eye-witnesses. The first account is by the lone terrorist captured alive, claiming to be A.A.Kasab from Faridkot in Pakistan and a member of the terrorist group Lashkar-e-Taiba. According to him, just two gumen, he and Ismail (also from Pakistan), first attacked VT station, where they sprayed bullets indiscriminately. (Around 58 people were killed there, over one-third of them Muslims, and many more might have been killed if the announcer, Mr Zende, had not risked his life to direct passengers to safety.) They then went to Cama, a government hospital for women and children used mainly by the poor.

According to the police, Kasab claimed he and Ismail had killed Karkare, Salaskar and Kamte.

 

 

The other account is by police constable Arun Jadhav. According to him, Karkare, Salaskar, Kamte, a driver and four police constables including himself were driving down the alley from VT to the back entrance of Cama (barely a ten-minute drive) in their Toyota Qualis to check on injured police officer Sadanand Date when two gunmen emerged from behind trees by the left side of the road and sprayed the vehicle with bullets, killing all its inmates except Jadhav. They then dragged out the three officers, hijacked the vehicle, drove to Metro junction and then Mantralaya in South Bombay, abandoned it when a tyre burst, and grabbed another car. According to police accounts, they then drove to Girgaum, where Kasab was injured and arrested and his companion killed.

 

These accounts raise more questions than they answer. Kasab claimed that a band of ten terrorists landed and split up into twos, going to various destinations, he and his companion going to VT. He said they wanted to blow up the Taj, as in the attack on the Marriott in Islamabad; yet we are told that only 8kg of RDX were found at the Taj, and even that was not used; contrast this with 600kg of RDX and TNT used to blow up the Marriott: could they really have expected to blow up the Taj? He said that the terrorists planned to use their hostages as a means of escape, yet there was no attempt at any such negotiations; at other times, he also said they had been instructed to fight to the death. He says he is a labourer from Faridkot near Multan and only studied up to Class IV, but it is reported that he speaks fluent English and that people in Faridkot village say they have never seen him. (Moreover, how did the invaders from the sea get one bomb to go off in Dockyard Road and another in Vile Parle, 25 kilometres away, at around 11.30 p.m?)

 

During his interrogation, Kasab said that he and eight of the operatives had done a reconaissance trip to Bombay a few months back, pretending to be students and renting a room at Colaba market, which is close to Nariman House. It is extremely hard for Pakistani nationals to get Indian visas, and they are kept under close surveillance by the police; it is also most unlikely that the Indian immigration authorities would be fooled by forged passports of another country. In that case, the Indian immigration authorities would have visa applications of nine of the terrorists including Kasab, and could match the photographs in them to those of the terrorists: has this been done? Later, Kasab changed his mind and said that the team who carried out reconnaisance was different from the team who had carried out the attacks, but they still would be traceable.

 

The events in VT and Cama and the back lane also put a question mark over his story. According to witnesses, two gunmen started firing at the mainline terminus in VT at 21.55 on Wednesday night, but at precisely the same time, according to CCTV footage, two gunmen began an assault on the suburban terminus. If the first account is true, there were four gunmen at the station: where did the other two come from, and where did they go? We are shown video footage, claiming to be CCTV but without the timeline of normal CCTV footage, of Kasab and Ismail wandering around the parking lot near the mainline terminus. This surely cannot be before the shootout, since the station is completely deserted; and after the shootout, Kasab and Ismail are supposed to have escaped via the footbridge from Platform 1 of the suburban station on the other side of VT: this, again, suggests there were four gunmen. Several people have pointed out that one of the terrorists in VT was wearing a saffron wrist-band, a Hindu custom. And even if Kasab and Ismail had been shown photographs of Karkare, Salaskar and Kamte before they embarked on their trip, how could they possibly have identified the police officers in a dark alley in the dead of night?

 

Witnesses in Cama hospital say the terrorists spoke fluent Marathi (presumably without a Punjabi accent). The gunmen killed two guards in uniform, spared a third who was in civilian dress and begged for his life saying he was the husband of a patient, demanded water from an employee in the staff quarters and then killed him. They then appear to have made a beeline for the 6th floor (which was empty) and the terrace, taking with them the liftman, Tikhe. 15-30 minutes later, six to eight policemen arrived, and another employee took them up to the 6th floor. The policemen threw a piece of steel up to the terrace, whereupon Tikhe came running down and told them there were two terrorists on the terrace. A fierce gun-battle ensued for 30 to 45 minutes, in which ACP Sadanand Date was injured. Panic-stricken patients and staff in the maternity ward on the 5th floor barricaded the door; nurses instructed the women to breast-feed their babies to keep them quiet, and one woman, who was in the middle of labour, was told to hold back the birth; but they were not invaded. Eventually the gunmen appear to have escaped, it is not clear how. If they were Kasab and Ismail, then these two must have been fluent Marathi speakers. And why would they have taken up positions on the terrace? Was it because they would have a direct view of the lane in which Karkare, Salaskar and Kamte were later supposedly killed?

 

The other account is equally dubious. In his first account, Jadhav said Karkare was in the second row of the Qualis, while in the second he was supposed to be in the front row with Kamte. In the second account, Salaskar was initially sitting behind the driver, but then asked the driver to slow down and got behind the wheel himself: is it plausible that an experienced encounter specialist would deliberately make himself into a sitting duck like this when they were in hot pursuit of terrorists? In the first account they were supposed to be going to check up on their injured colleague Sadanand Date, but in the second were supposed to be looking for a red car in which they had been told the gunmen were travelling. If the report about the red car was a decoy to lure them into an ambush, it is important to know who told them that the terrorists were in a red car. If the gunmen were firing from the left side, as Jadhav claimed, how was Karkare hit three times in the chest while Jadhav himself got two bullets in his right arm? Also, the only vegetation in that part of the lane has wire netting around it, and it would be hard for anyone to hide behind it. How did two terrorists manage to kill six police personnel, including Karkare and Kamte who he said were armed with AK47s and Salaskar, an encounter specialist who had confronted and killed dozens of dangerous criminals, without getting seriously injured themselves?

 

There was also an intriguing report in DNA on 28 November saying that Anand Raorane, a resident of a building opposite Nariman House, heard sounds of celebration from the terrorists there when the news of Karkare getting killed was flashed on TV: isn't that strange? The same report quoted a resident of Nariman House and a local shopkeeper who said that the terrorists had purchased large quantities of food and liquor before the attack, suggesting, at the very least, that they were not pious Muslims, and that more than two of them were planning to occupy the place for a long time. Another DNA report, on 2 December, said that sub-inspector Durgude, who had been posted in front of St Xavier's College, between Cama Hospital and the exit point of the back lane onto Mahapalika Road, saw two young men whom he took to be students and called out to warn them that there was firing at Cama. When they ignored him, he approached them, upon which one of them turned an AK47 on him and killed him. If Kasab and Ismail were there, who was firing inside Cama? Eye-witnesses in St Xavier's saw a man shot and lying on the pavement in front of the college around 12.30 a.m., while about three gunmen stood over him: who was that? Various reports said that two to eight terrorists were captured alive. Now there is only one in police custody: what happened to the other(s)?

 

A careful scrutiny of all the reports available so far suggests, to this writer anyway, that the killing of Karkare and his colleagues was a premeditated act, executed by a group that had stationed snipers at various points along the general route between VT and the Metro cinema with a view to maximising their chances of a successful murderous assault.

 

The Objective: Shutting Down Terrorist Networks

 

These are just a few of the numerous questions being asked by vigilant Bombayites who find themselves thoroughly dissatisfied with the information that has been doled out. These are citizens who understand the importance of identifying terrorist networks and shutting them down, but doubt that this will be done by the authorities. Why are they so cynical about the possibility of a genuine professional investigation? The answer is that we have too much bitter experience of investigations in which innocent people (usually Muslim youth) are rounded up, tortured and even killed, while the real culprits are allowed to go free. Karkare broke with this dismal record, but now he is dead. When a person who has been vilified, slandered and threatened with death is killed in suspicious circumstances, it is imperative that a proper investigation should be carried out soon, before too much evidence can be manufactured and/or destroyed. If Kasab aka Iman disappears or is assassinated like Lee Harvey Oswald, or is executed, that would be further evidence of a conspiracy.

 

The government and people of Pakistan have as much interest as the government and people of India in eliminating the terror networks that have killed President Asif Ali Zardari's wife Benazir Bhutto and thousands of others in both Pakistan and India. The terrorists, on the other hand, be they Islamist or Hindutva, have a common interest in destroying secularism, democracy and peace within and between the two countries. That is their precise agenda. Pakistani politicians have offered a joint investigation into the terrorist attacks, a far more sensible suggestion than the belligerent statements by some Indians accusing Pakistan of harbouring terrorists who are killing Indians. It should be obvious that a military conflict between India and Pakistan would be disastrous for both countries economically, while a nuclear war, which might ensue if extremist forces captured power in both countries, would have unthinkable consequences. If the Indo-Pakistan peace process is halted, as L.K.Advani advocates, the terrorists would have won.

 

Indeed, without a joint investigation, the terrorist networks behind this outrage can never be uncovered: how else could the names and addresses in Pakistan revealed by Kasab be followed up to the satisfaction of all parties? A team of Pakistani investigators should be invited to come to Bombay and interview Kasab. If he is indeed a Lashkar-e-Taiba militant, he will be able to provide invaluable information, and a team of investigators from India should be invited to Pakistan to pursue the investigation there. If, as some reports have indicated, he is not what he claims to be, that too would become clear. The Indian government owes it to the memory of Karkare, Salaskar and Kamte, who died fighting terrorism of all hues, to establish exactly where, when and how they were killed, identify their killers, and make sure that their work is continued. They also owe it to us, the public, who are the prime targets of all terrorist attacks, to carry out a credible investigation which identifies and puts behind bars all the mass murderers involved in this and other attacks.

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