Tijo Salverda

Tijo Salverda

Tax the big

One of the striking features of our times is that we have companies that are wealthier than many states around the world. And even when the largest multinationals aren’t bigger, the likes of Apple, Shell, Glencore, Facebook, and Wall Mart still outpower governments on many fronts. Notwithstanding that many consumers may eagerly buy their products and services, due to their rent seeking, tax avoidance, lobbying, etc., then, large multinationals should be considered a significant societal risk. Instead, it is the ones who can’t transfer their profits or incomes to tax havens (the ordinary taxpayer and average small and medium size businesses, so to speak) who have to make up for this deficit – and indirectly subsidise the existence of many multinationals!

Of course, there is anti-trust and competition legislation aimed at preventing companies from obtaining too large a market share. There are also increasing talks about blocking tax havens and unifying tax systems. So far, however, these are either just talks instead of action or just too limited to start with. In other words, the continuing existence of large multinationals is proof that existing approaches do little to reverse the unequal power balance.

In the highly unlikely case of closing tax loopholes, it will certainly become evident that many multinationals aren’t that competitive after all. In addition, though maybe even more unlikely to happen, (too) big should actually become economically unviable. Above a certain size, a company should be subject to higher taxation. The aim is to discourage companies from merging and growing. Companies may still grow bigger, yet size will come at a cost. But wouldn’t this punish companies that produce something many consumers desire, such as Coca-Cola or Apple, one may ask? Maybe. But then companies can just do the maths: selling more products does not necessarily increase profits. The hope is, however, that they may reconsider their business models. After all, these companies have often grown enormously not because of consumer demands, but because they took over, as in the case of Coca-Cola, many other (soda) brands. Or they ventured into other domains and decided, as in the case of Apple, to not only focus on computers but also develop mobile phones. Faced with a higher tax bill, corporations may instead rethink their strategies. They may realise that mergers, (hostile) take-overs, or simply expanding may not weigh up to the higher tax they will have to pay. Consumers, conversely, will suffer little, as innovation will most likely benefit from the absence of monopoly power. And would companies still want to grow, it is at least not the (immobile) individual taxpayers and small and medium size businesses that foot the bill.

Surely, I am perfectly aware that we are very far from (ever) turning this idea into a reality. To start with, the continuing existence of tax havens doesn’t help much. Yet even with a universal tax approach instead of a race to the bottom, it will still be a huge task – not the least, because economies significantly differ in size and as such also in the ruling whether a company is considered too big. So there are lots (and lots and lots and lots) of challenges and fine-tuning ahead. But we need all the ideas and efforts that prevent multinationals from growing ever bigger – at the costs of competition, fairness, democratic decision-making, and so forth. Plus it makes for a nice challenge to oppose multinationals (and their allies) that will certainly not give up their advantages easily!

Attribution and contestation: Relations between elites and other social groups

In an article forthcoming with the journal Critique of Anthropology Irene Skovgaard-Smith and I explore the often ambiguous relations between elites and other social groups, both subordinate and of relatively equal standing. We draw on two distinctive ethnographic cases: the white Franco-Mauritian elite, and the expert elite of management consultants in a Western European context. Our analysis of the two cases provides insights into how the power and status of elites is both contested and attributed by the people they interact with and relate to in concrete, yet substantially different contexts and situations. The aim is to show how the position and power of different kinds of elites is relationally negotiated and achieved. As we argue, a better understanding of the role of other social groups in the attribution,maintenance and contestation of status is relevant for understanding both more traditional economic elites and expert elites without tight networks. [read the rest of the article here]

Reclaiming the state

From talks with (foreign) corporations and investors active in agriculture in Africa, particularly in Zambia in my case, I realised that many of them are concerned about the issues critics have raised. These critics, ranging from (international) NGOs to local communities, human rights lawyers, international organisations, journalists, and social movements, increasingly point to the negative consequences of current forms of global capitalism. They try, in a way, to put ethics back into economics. They demand a halt to ‘land grabbing’, better treatment and wages for labourers, the mitigation of environmental damage, and so forth. Resonating with the thoughts of John Kenneth Galbraith and Karl Polanyi, the critics can be considered a countervailing power or countermovement aimed at reducing the damaging effects of agricultural investments – and corporate practices and market expansion more generally.

The countervailing power of critics, such as NGOs, has been at the origin of phenomena such as Corporate Social Responsibility (CSR), impact investment, and ethical consumption. Notwithstanding the many limitations of these phenomena, they symbolise a more or less constant struggle between economic beliefs and ethical and social concerns. I have actually come to believe that this is a recurring pattern of capitalism. The raising of concerns, I have noticed, is not without its results. Change is possible. Large-scale systemic slavery has been abolished. In many Western countries labour conditions have seen improvements. Minimum wages have been implemented. There are laws that allow for the prosecution of companies in case of pollution. Yet it is never enough, never completed. There is always something to hope for. Besides, when one issue is solved or attention wanes, a new issue presents itself – or labour rights are gradually undermined again. It is, in a way, a perpetual taming of the ‘capitalist beast’. [read the rest of the article here]

Hope for the future? Efforts and ideas to improve the current economic predicament

In a pessimistic – or realistic – mood, it is hard to deny that the world’s future looks rather grim: growing inequality appears difficult to undo; the financial system has hardly become safer since the 2007/2008 crisis; and the rising power of BRICS and other Global South economies tends to rely on conventional economic and ecologically destructive growth models. At the same time, and nurturing a more positive mood, we are increasingly witnessing efforts to turn the tide of the current economic predicament: more inclusive forms of capitalism; ethical consumption; and alternative approaches to economic growth.

In this issue of Voices from Around the World we present a number of thoughts on alternatives to current forms of global capitalism, and considerations as to whether and how these may evolve… [read the rest of the issue here]

State Intervention in Financial Markets: Why Geopolitics Matter

There is not much new in the observation that markets are closely intertwined with political authority. In the past authorities guaranteed markets to operate, while global financial markets also exist thanks to active state support. If this was not already obvious, then governments acting as lenders of last resort to banks in the aftermath of the 2008 financial crisis certainly brought the message home. However, what has received less coverage in media and academic analyses is how geopolitical considerations influence states in their approaches to finance – and, as a result, to their people… [read the rest of the blog post on the Human Economy blog]

Why comparing Paris to Beirut both misses the point and makes sense

After the first shock of the devastating terrorist attacks in Paris had waned, criticism about the unequal attention the victims in France received compared to victims of similar attacks elsewhere in the world quickly surfaced. Why did President Obama give a public announcement relatively soon after the attacks in Paris but had said little about the equally horrible bombings in Beirut one day earlier? Why did Facebook have a Safety Check in the case of Paris but not in other cases? Why was there not a similar global outpour of sympathy for the victims of, for example, the even more lethal attacks at a university in Kenya earlier this year? It seemed that the lives of (white) Europeans are worth more than that of others around the world, in particular that of Muslims.

But differences in grief and shock about the French attacks are not necessarily an expression of how life is valued. Critics pointing out the hypocrisy of being concerned about Paris but less about Beirut, or any other equally devastating killings around the world, do miss an important point. One of the central factors regarding the newsworthiness of an event, both for media outlets and for media consumers, is the proximity of the event – both in absolute terms, i.e. geographical distance, and in relative terms, i.e. a sense of identification. Most people care more about a car crash close to home than a similar crash in a distant location. Compared to the attacks in Beirut, many could more easily see themselves in Paris on a Friday night (or associate it with a similar situation closer to home) than in Beirut – or at a university in Kenya. Conversely, for someone with strong ties to Lebanon – and less to France – identification with the bombings in Beirut may be much stronger. We just more easily identify with an event that we could picture ourselves in. Many expressing their outrage over the unequal share of attention devoted to the different attacks too easily forget about this logic.

That said, white, Western and/or Christian victims often receive an unequal share of the attention – even though the victims in Paris were by no means all white. Some form of (racial) preference that goes beyond a sense of proximity may well shape differences in attention devoted to attacks around the world. One way or the other, then, politicians, media outlets and also Facebook should become more sensitive to the impact of their messages. Was Facebook’s tool the result of their algorithms going in overdrive due to postings about Paris or did it result from ad hoc decision taken at management level? I imagine the latter. With accountholders all over the world, they may want to rethink how to convey a message of equality when it comes to devoting attention to (horrendous) events in the world. Politicians would also do good to be more outspoken about attacks in case they may not directly identify with the victims and/or the setting. The inhabitants of the (multicultural) nation they represent may care. Or with news travelling fast – helped by the widespread use of social media – they may want to give some thoughts to how their comments are perceived elsewhere in the world. It doesn’t harm to give people the impression that their lives are equally appreciated after all!

Who does the state work for? Geopolitical considerations in the organization of (global) finance

Abstract of my article ‘Who does the state work for? Geopolitical considerations in the organization of (global) finance’:

States acting as lenders of last resort in the aftermath of the 2007/2008 financial crisis clearly illustrated the central role that states have in the operations of financial markets. Despite their active roles, however, states continue to be presented as passive actors that dance to the tunes of the financial markets. This paper, however, takes a close look at how states’ geopolitical concerns influence financial regulation. States are perceived as serving the interests of their citizens, yet future rescue operations (as lenders of last resort) at the costs of the taxpayers remain a strong possibility – in particular, Too Big To Fail (TBTF) banks persist and their leverageratios have not greatly improved. To better understand why this is the case, this paper argues that geopolitical concerns influence the triangular relationships between the (democratic) state, the financial sector, and the state’s citizens (and taxpayers) in favour of the financial sector. Accordingly, the paper argues that we should more explicitly ask ‘what drives states (and politics) in their approaches to finance?’

Read the rest of the article in the Real-World Economics Review, issue no. 71