On Sunday as the 2022 election was being called, I was sitting in a café in one of those affluent strips observing life, and gathering my thoughts.
It occurred to me that the blather we are all now about to face will avoid any reference to the key question that should be addressed: the growing distance between the ‘haves’ and ‘have-nots’, and how to redress the balance.
This is not about the cost of living, price of petrol, or availability of some subsidised form of income. It is about the national income, and the way governments of both persuasions over the last 50 years have let the money required for schools, hospitals, aged care facilities and all the rest slip through their fingers, while ensuring some sticks to selected fingers on the way through.
A brief economic history lesson, recognising I am neither an economist nor historian.
Towards the end of WW11, recognising the coming challenges of post war reconstruction, the allies set about removing the danger of the wild ride that had been the relative value of currencies up to that time. The result was an agreement amongst the allies in the little New Hampshire town of Bretton Woods. That agreement laid out the mechanism by which post war currencies would be tied to the price of gold, pegged at $US35 an ounce. The US dollar became the ‘reserve currency’, a guarantee to exchange an ounce of gold for $US35. At the time, the US was about the only solvent nation, and held most the world’s gold in Fort Knox (Remember ‘Goldfinger’). The International Monetary Fund was created as a part of the agreement as a release valve to address short term fluctuations.
The laws of supply and demand being what they are, the value of gold outside the official control of central governments soared, leading to an active unofficial gold market where it was traded for multiples of $35. Trouble is, you had to move the stuff, and it is heavy. (Goldfinger again)
Over time the core problem of a fixed currency regime became obvious. Money is international, it can be moved and exchanged globally, while the regulatory control of any one country ends at their borders. The obvious example of this disconnect is the so called ‘pirate’ radio stations positioned in the North Sea just outside the international boundary of the UK. These popped up because the BBC which controlled all the UK radio stations refused to play the emerging ‘Pop’ music of the 60’s and early 70’s. Being outside the border, the BBC could not close them down, but those who wanted the music could listen as easily as they could to any other radio station, just move the dial a bit.
Analogous to the pirate radio stations, the gnomes in Switzerland who were sitting on huge and very private sums of hidden wealth that could not be easily used by the owners created their own pirate system: bearer bonds. These enabled those hidden fortunes to be put to work, not only earning interest on the loans, but increasing the capital value of the investments, previously impossible.
By the late 1960’s the Bretton Woods system was clearly broken, and the US terminated the convertibility of US dollars to gold at the fixed $35 in 1971, followed closely by the pound sterling, and other major currencies. In effect we then had floating exchange rates, in an environment where countries still had regulations that stop at their borders, while money is globally mobile. It did not take long for countries to recognise the value of attracting this previously inaccessible capital by a range of means around low tax rates, banking secrecy, and personal anonymity. The lawyers and accountants since then have made this disjoint between the mobility of money and the static nature of sovereign borders a financial bonanza for those individuals and organisations with the money and will to hide their assets and ensure they do not pay tax. Hundreds of billions have been looted from the system by these ‘legal’ means, leaving those with insufficient income to fund the legal complexities to hide their income to pay for the schools, hospitals, and aged care facilities we are all demanding.
This is, to my mind, the core challenge of this election that will not be spoken about.
Labor policy is to collect tax from multinationals by denying deductions for royalties to related parties. This makes sense, but will be hard to enforce, and does not address the inequities in other huge areas of tax minimisation and avoidance. Besides, when sovereign rules change, the tax arrangements of corporations and individuals change as well, moving to a more accommodating regulatory environment. On top of that, those who make the rules are also the ones who benefit, so while there might be some ineffective fiddling at the edges for a press release, real change which requires global collaboration and endorsement currently is just a pipe dream.
However, the first step in solving any problem is to recognise that we have a problem.
Unfortunately, this conversation will not be started by either party in this coming election. For the long-term health of Australia, and Australians, as well as every other person on the planet, apart from the tiny minority of looters, it is a conversation that needs to be started, and followed through.
I need another coffee after all that.
