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Monday, 21 December 2009

Capital flight

Capital flight is a very important issue for us on the left who have been known to advocate higher taxes, for whatever reason.
Since the introduction of the banker' bonus tax, bankers' representatives have been screaming blue murder and threatening to flee to every corner of the globe. So this is a live issue.
it is vital that any tax-rising lefties acknowledge this.
Now, i don't believe it's as big a threat as it's made out to be, partly because of the levels of infrastructure e.g. education which fundamentally underpin the ability of these people to make such amounts of money. There's a reason they do business here rather than Monaco.
Will Hutton, who may know even more than me about economics, has some level of agreement with me:
"No success story requires the estimated £850bn bailout. Bank lending is five times British GDP. If it carries on growing without substantial increases in the banks' capital base the next bailout would overwhelm the British economy and the British state. It is vital that banks build up their capital base, which has been declining proportionally for 30 years.This, along with very cheap money, is the chief reason for their very high margins – and extraordinary bonuses. The City is a national asset only if it is self-sustaining. Unless and until it operates with a great deal more capital to underwrite its lending it is a national liability."

2 comments:

Julian Ware-Lane said...

I like the sentiment behind taxing the rich, but wonder about the practicalities. The flight of capital could be very damaging, and ultimately more damaging to the working classes if job losses are the result.

I would like to see more done about tax havens (of which a sizeable proportion have strong links to the UK). Sort these out, then we can create a fairer tax system.

Bearded Socialist said...

agree absolutely.
There are serious issues about how much power lies where, because rich people not paying taxes seems to be taken as read, while the poorest would expect to be punished.
havens and loopholes and sharp practices etc. need dealing with on the basis of basic fairness.
But the problem is what happens to the economy if they do indeed up sticks and leave