One our core arguments is that if you shower wealthy people and large corporations with goodies, two things happen.
First, you may help them and you may be able to demonstrate some benefits, somewhere in the economy: such as improved performance for the stock options held by the executives at the multinationals concerned.
Second, though, there is the annoying snag that those benefits entail costs elsewhere in your economy.
Someone has to pay for these goodies! Who will it be?
There are many instances in the history of economic thought where economists did not use what today has become the concept of ‘national competitiveness’ but nonetheless wrote about things that look eerily familiar when viewed through the lens of the modern-day Competitiveness Agenda. Veblen’s 1904 Theory of Business Enterprise contains many important passages of this nature. Business leaders, he noted, had become remarkably successful at presenting themselves as the selfless foot soldiers in a national struggle for international economic pre-eminence. Yet for Veblen this was all a carefully constructed smokescreen. They could hardly be seen as guardians of the national interest, he argued, because they enacted significant damage on the economy’s social provisioning capacity in the self-serving desire to protect the social inequalities from which they benefited so handsomely. This latest post for Fools’ Gold by Matthew Watson captures the essence of Veblen’s original argument, while drawing out its implications for understanding the modern-day Competitiveness Agenda.
From The Tax Justice Network, on a presentation by FG contributor John Christensen:
Highlighting a presentation by TJN’s Director John Christensen at the Max Planck Institute in December, and a chapter in a new book by two TJN authors, on the same theme. First, Max Planck, which published the details yesterday:
There’s been a lot of talk for a long time about a threat from globe-trotting HSBC to move its headquarters from London to Hong Kong. It seems there’s been a resolution of the question for now, of sorts. As Bloomberg puts it:
“HSBC Holdings Plc recommitted its future to London, ending 10 months of deliberations over whether to move its headquarters, after securing concessions from the U.K. government on regulation and taxes. The shares rose.”
That’s the Competitiveness Agenda at work, right there. Shower goodies on mobile capital and its owners for fear that they’ll flee elsewhere. More specifically, via Reuters:
Two FG authors, in partnership with Duncan Wigan of the Copenhagen Business School, have just published this new paper in the British Journal of Politics and International Relations.
Recently we wrote an article entitled The Ideologists of the Competitiveness Agenda, in which we fingered the Big Four firm of accountants as some of the most important vectors for the general idea that countries simply have to ‘compete’ in certain ways: namely, to shower goodies at wealthy people and multinationals, for fear that they’ll relocate elsewhere. As we’ve often argued: that attitude is not just misplaced, but generically harmful.
Now, here’s a recent example of a Big Four firm, PwC, playing the “competitiveness” game, in a
lobbying document report purporting to assess the fiscal regimes for gold mining in four African countries. (Thanks to Mark Zirnsak of Tax Justice Network Australia for pointing this one out.)
And the quote of the day is this one, via The Guardian newspaper and Professor Rowland Atkinson of Sheffield University, author of a two-year study of the super-rich in London.
“You can argue that the rich are a tax on everybody [else] in London”
Tax treaties are an arcane but important part of the international trade and investment system. When a business from one jurisdiction invests in another, the question then arises as to which jurisdiction gets to tax which bits of the income that the investment generates. So countries have for years signed Double Tax Treaties or Double Tax Agreements (DTAs) with each other, to sort out these and other questions. Since the global treaty system began to emerge (after Austria-Hungary signed one with Prussia in 1899), the core aim of the system’s designers has been to make sure that multinationals don’t get taxed twice on the same income: so-called ‘double taxation’. Countries sign them because they think they will attract (and smooth the flow of) inward investment.
This will make their country more ‘competitive,’ the thinking goes.
All of which may sound like perfectly reasonable ideas. But of course, beneath these reasonable ideas there’s a world of possible mischief.
We’ve been using a term, the Competitiveness Agenda, to describe a pernicious ideology that’s emerged almost under our noses. As it’s been described:
“The Competitiveness Agenda involves special pleading to bestow perks (such as tax cuts) on Capital and its owners, on the basis that if they aren’t pampered they will flee to other more hospitable jurisdictions. (Whether they would actually do this is another matter: the point here is that the scaremongering is often effective in extracting subsidies for Capital.)”
In a profound way, this agenda is one of the most powerful engines that has been driving the Washington Consensus, and even neoliberalism itself. Soundbites such as “we wouldn’t want to become uncompetitive” are used as trump cards to destroy opposition to policies that shower goodies on capital – and few people raise voices are ever raised against such arguments — even though the whole concept is, as we and many others have demonstrated, populist, economically illiterate nonsense.
We haven’t yet focused very hard on the question of who is pushing this agenda. So here is a starter pack with some preliminary answers.
Recently we posted an article entitled New studies: do ‘competitive’ corporate tax cuts boost growth? – to which the answer was a qualified ‘no.’ Well, now we are delighted to host a guest blog by Prof. Nikolay Anguelov of the Department of Public Policy, University of Massachusetts, Dartmouth, who has produced an important new working paper looking at this question. Entitled “Lowering the Marginal Corporate Tax Rate: Why the Debate?” it provides a range of further evidence and insights. (This article will be permanently stored on a section of our site called The Harms.)