On Monday May 22nd, Keval Bharadia spoke at a meeting in Parliament organised by Claim the Future on taxing the rich and powerful. We reproduce a slightly edited version of his talk below.

My talk tonight speaks about the financial markets, the primary engine the rich and powerful use day-to-day. I hope to paint a picture of how it reinforces our undemocratic political system and how we can effectively change it.

I will start by going back to 2017, when John McDonnell first published Labour’s policy, updating the UK’s existing financial transaction tax, the FTT. The policy used the work of Professor Avinash Persaud, a former banker, David Hillman of the Robin Hood Tax and many others.

The proposal was argued on the basis of reducing risk in financial markets, mitigating against another 2008, encouraging long-term share investment, and encouraging asset managers and pension funds to reduce turning over their portfolios unnecessarily.

The proposal targeted intraday and high-frequency traders and speculators, reducing their influence in order to stabilise prices and volatility, getting prices down to their real levels. To quote the title of the paper, it was to “improve resilience and increase revenue”.

The 2017 policy proposal expanded the existing coverage to corporate bonds and equity and credit derivatives, and remove some exemptions. For the purposes of this talk, it is unnecessary to learn what any of that means.

The proposal estimated £5 billion pounds a year in tax revenue. The changes proposed were quite modest given the amount of financial markets trading that would still remain out of scope.

I’m sure you are all familiar with stamp duty land taxes when buying property. Imagine, if when it was introduced 330 years ago, it only applied to flats and maisonettes and nothing else. Terraced, semi-detached, detached, bungalows and mansions were excluded. And also, any homes where the valuation was done by an estate agent.

The current UK stamp duty on finance is still fundamentally a tax on share trading, missing 91% of the financial markets landscape by value traded. Stamp duty on share trading was first introduced in 1694. The last material change to the tax was over 200 years ago in 1808, when the tax changed from a fixed fee to percentage fee based on the value of the shares traded.

Since then, the growth in the financial markets, the beating heart of the system, the engine that drives global capital, has been nothing short of exponential.

FTT in the 2019 Labour Party Manifesto

I crossed paths with David Hillman in 2018, whilst I was consulting for various NGOs, and congratulated him on getting the FTT into political debate. But I said, “Why don’t we expand the proposal to cover all the markets, which after all, are much bigger and just as important as equities, and credit derivatives?”

I said, “The issue for the public, is not just about revenue, it should be about how the financial markets yields power and influence. We need to start having serious public conversations about the way the finance sector dominates public policy which enables the rich and powerful to obfuscate the real issues, hiding behind the false mantra of growth and austerity, where the debate always appears to be on their terms.”

We have to lift the lid on that and remind people why growth austerity is ideological and does not and cannot help people, or the planet, and highlight global struggles against financialisation.

David and I sat down in a café in Waterloo and I pulled out a napkin and started drawing four columns. I labelled the first, commodities trading, the second share trading, the third, fixed income trading, and the last was FX, or foreign currency trading.

Then I labelled the rows. The first row, was the physical asset, or the underlying nature of the trade, such as the share, the tonne of gold, the barrel of oil, the bond. The other row was its derivative or a tradable contract that relates to an underlying asset.

Then I started filling it out, mapping the entire financial markets landscape – who the exchanges were, what over-the-counter trading is, where futures, options and swaps are traded, etc. Again, none of that jargon is necessary to understand here.

I was delighted to help David and Laurie at the Robin Hood Campaign put forward detailed plans on how to expand coverage of the FTT which ended up going into the 2019 Labour manifesto.

We introduced for the first time amongst the 40 already in operation around the world, a comprehensive, if very modest tax of 0.01%, one hundredth of a penny on the pound. Compared to VAT, charged at 20 pence on the pound, the 2019 Labour FTT was miniscule.

The thinking at the time was to start at this negligible level, raising just £3 billion extra and take things from there. The proposal applied the FTT’s rate to the intrinsic value, or the trade’s profit, not the total traded value or notional amount, another concession to the finance sector.

Arguments the finance sector makes

Despite that, the sector and media again came out in force. The main argument against it were the same after the 2017 plans, which is if you tax more of it, trading will move out of the UK, affecting HMRC revenues and UK growth. Well the significant 0.5% stamp duty tax on stock market trading for 200 years has enabled the FTSE indices, and the London Stock Exchange, my former employer for 15 years, to be one the largest in the world.

Besides, it is not a tax on the LSE, or trading venues, it is a tax on the beneficial owner of the trade being a UK tax resident.

You might ask: would an FTT cause a rich and powerful person or corporate to move? There are a number of ideological ways that could be answered. The answer we gave in 2019 ran something like this.

“The fundamental decisions around tax residency are not dictated by a single, marginal transaction cost, but depend on a broad range of other business costs and benefits that are gained through residence in the UK. These include access to clients, strong market infrastructure and regulation, access to and time zone overlap with other markets, the availability of skilled employees and the ability to offer them a high quality of life.”

The other claim the finance lobby made at the time, was to say it is too expensive and complex to implement. Which is a spurious one. Taxed at source, it already is one of the cheapest and most efficient taxes HMRC collects and the technology to cover more markets is broadly in place, requiring simple modifications.

The finance sector has the world’s leading technology and expertise, used to connect up investors, investment banks, financial institutions, central banks, exchanges, clearing house and data centres the size of football pitches to each other, SWIFT and the HMRC.

Their advanced and nimble technologies are able to compute and send terabytes of data, securely across the globe, in milliseconds. The issue is not a practical one, it is of course, as everything is, a political one.

Which is why, I am proposing here today, that we must move forward with this tax in different ways, one that appeals to the public, not the rich and powerful.

Before I get there, I want to share a little story.

In writing today’s talk, just after the coronation of our King, I was reminded of the time the Stock Exchange asked me to attend one of the Queen’s Summer Garden Parties in 2006. It was in recognition of my ground-breaking work, designing and launching a trade confirmation and clearing platform for equity, and importantly, credit derivatives traded off-exchange, in the ‘over the-counter’ markets a year earlier. It was designed to help traders manage the risks associated with trading these derivatives. Which I’m sure you can remember, included repackaged sub-prime, or unaffordable mortgage contracts that started unravelling in 2007, leading to the global crash.

The platform wasn’t taken up by the world’s investment banks.

In 2009, a year after the crash, the UK government had pumped over £1 trillion pounds into the banks to prevent them from going under. Some banks continued to pay eye-watering bonuses and start new high risk trading departments immediately. Globally, millions lost their homes, jobs, savings and lives. Hedge funds managers are “earning” $1 billion dollars a year in wages.

I spent the year after the crash speaking to colleagues and bankers about acknowledging our responsibility, trying to discuss systemic risk, boom and bust cycles, market crashes and highlighting our role in lobbying, that helped to cover mass impoverishment.

Despite being head of derivatives development at the London stock exchange, I was side-lined and silenced. What was of paramount importance, was returning rates of profitability back to acceptable levels, which I had no interest in doing.

By 2010, I had seen from the inside the way in which the finance sector got governments to sing to its tune and respond with austerity, a step change in class warfare. Right-wing governments, after all, are most propped up by the financial sector, who are responsible for more than 50% of their funding.

I had no option but to quit the City and unlearn economics, business and finance from the ideological and orthodox perspective from which I was taught.

One of the myths around the financial crash was that it was never seen coming. But, as I have just clarified, the view from the inside was quite different across the industry.

The alarm bells were ringing from 2000 after the dot.com crash but business and finance was still searching on extracting greater profits from people through enclosure and bankruptcy with state impunity.

As David Harvey calls it, accumulation by dispossession. Why else was there an explosion in the global mortgage market where low paid workers were offered 100% plus mortgages?

The reason why the system is geared to offer unsustainable loans, is because the financial models do not expect everyone to meet their mortgage payments. The system expects defaults. It banks on human precarity.

Regrettably, the mortgage and debt markets are the tip of the iceberg and all the other markets bank on a certain degree of destitution and global instability. The distinction and lines between finance and government are barely noticeable, and each act in accordance to making the financial markets prosper.

The case for an FTT is far more about interrupting this cycle. It is about global justice and democracy.

Political economy of financial markets

Each day, around £12.6 trillion pounds worth of trading goes through the global financial and commodity markets. The UK accounts for around 30-40% of the total, about the same as the US, because of the vestiges of Empire and modern day imperialism.

Split across the four markets, the global total value traded per day is as follows:

• Commodities trading – £160 billion pounds
• Equity trading – £1.1 trillion pounds
• FX trading – £5.4 trillion pounds
• Fixed income trading – £5.9 trillion pounds.

I will make some brief points about each of these four markets to illustrate how they are key sites of power, driving every facet of society.

Commodity markets

Starting with the commodity markets, where the rich and powerful trade, amongst other things:

• millions of barrels of oil and tonnes of gas a year
• mined resources, such as gold and silver, industrial metals including iron and lithium
• food crops such as coffee, cocoa and other staples and grains
• And a whole range of other markets such as cotton, weather derivatives and even carbon
  credits.

Let’s remember that these resources were and are essentially stolen from enslaved, colonised and indigenous people, who are still resisting multi-national corporates and authoritarian governments where human rights atrocities against them are occurring daily.

Or if they are not, these commodities are plundered through war. For example, BP and Shell got access to Iraqi oil fields in 2011, after the illegal war there which killed nearly 700,000.

By 2020 they were shipping out more barrels of tradable oil from Iraq, then they were doing in the North Sea and Europe.

It is the finance sector who organise, trade, speculate and reap the most rewards from these ill-gotten commodities. The finance sector gave just the fossil fuel industry alone, three quarters of a trillion dollars in finance in 2021.

Shell and BP made £32 billion pounds and £23 billion pounds in profit, respectively in 2022, while energy bills rose. BP and Shell, recipients of tax breaks and subsidies, paid out £31 billion pounds to shareholders in dividends, with most being paid to the finance sector, whilst 90,000 people died of poverty in the UK.

The finance sector and other rich and powerful shareholders get another massive transfer of wealth and further concentrations of power when corporates engage in share buybacks with their enormous cash surpluses, inflating the price of the remaining shares in circulation and therefore dividend yields.

BP, Shell and other corporates who have multiple operations across the world and diversified business models, are not merely extractors or makers of things, they are trading houses too such is the financialised world we live in.

Traders at BP hold derivatives positions worth £24 billion pounds, which they declare is partly for entrepreneurial purposes! Which is polite speak for gambling. It would be naïve of us to think BP traders, Shell traders, and other traders at fossil fuels companies and the powerful investment banks do not operate as a cartel. They arrange commodity prices where they want them to be.

The commodities markets enable the finance sector and corporates who now act like trading houses to draw enormous wealth and power. They help launder the resources of interventionist governments and the war economy.

Equity markets

Second is the equity market which includes shares and share derivatives such as futures and options. These are not relevant to understand. What is relevant, is what share prices represent, practically speaking.

City analysts, extremely bright mathematicians and physicists, sit at screens determining what share prices should be in order to give a buy or sell recommendation to potential shareholders.

Analysts create formulas to predict the ability companies have to stay ahead of the competition, make better products we never thought we needed, and retain the best directors. Implied in all of their calculations is the extent to which interventionist governments keep running the war economy.

It’s an economy where powerful states can have to access the world’s land, labour and resources on the cheapest possible terms. That creates the incentive for war and why the system is literally banking on imperialism, exploitation and subjugation.

Do you remember when a senior serving general warned in the Sunday Times that the armed forces would take direct action to stop a Corbyn government and our honourable troops were using his portrait as target practice?

Analysts are, practically speaking, making calculations on the extent to which corporations can control government and central bank policies that for instance, enable wage suppression, labour discipline and deregulation, austerity, privatisation, interest rates and a whole raft of processes that maintain and increase rates of global profitability.

This includes policies that enable low taxation, lawful tax avoidance including the ability to shift profits out of the global south and use State sanctioned tax havens, as well as maintaining a “soft touch regulatory environment”, a slogan that Britain’s government and finance sector unashamedly uses.

The way to look at the equity markets is this. When share prices and stock indices such as the FTSE 100 the Dow Jones 30 rise, we can expect more inequalities and injustices.

Foreign currency

Third is the currency, or foreign exchange market, used by the finance sector and multi-national corporates to shift billions of pounds across borders in seconds. They speculate on currencies, interest rates, bond yields, levels of growth and international trade.

It is the rich countries who ensure capital can move freely across borders, and refugees of war and climate, who they create, must not.

They yield inordinate power over currency valuations of developing countries, enabling currencies to be held within acceptable ranges for maximum growth and profitability. Put another way, the currency markets, dominated by Wall Street and London, is a key enabler of financial imperialism.

Fixed income markets

Last, and largest, is the fixed income markets, which include corporate and sovereign bonds, and credit and interest rate derivatives. These are collectively known as fixed income products because on one side of the trade, someone is receiving a fixed amount on paying out a variable amount.

When Elon Musk bought Twitter for $44 billion dollars, it wasn’t his $44 billion. More than a third of it was money raised by selling bonds of Twitter, before he even bought the platform. The clever bankers call this a leveraged buy-out.

Cash cow businesses and services in the public interest such as privatised utility and transport companies, privatised NHS services, even football clubs are sought out, acquired through tradable debt that goes on the bond market.

Thousands of businesses and services pay-off these debts through price hikes on consumers, asset-stripping and savings made from mass redundancies or fire and rehire.

The World Bank’s response to centuries of plunder of poorer countries through the financialised war economy, is to offer them guidance on how to debt-finance their public services through the sovereign bond markets.

I mentioned earlier that credit derivatives include repacked debts that can be offloaded to someone else. Whilst interest rate derivative traders make bets on GDP and unemployment, levels of government spending, government debt issuance and public indebtedness.

The system is self-reinforcing, literally banking on state sanctioned debt and interest payments, and the more debt there is in society, the more it can be repackaged into tradable contracts to be bought and sold on to speculators to make a quick buck.

This incentivises policies for more liabilities and everlasting debt servitude by the rich and powerful over the mass of the global population.

Campaign building

To sum up, £12.6 trillion pounds per day traded through the four financial markets is not real money, but is the fiction of finance on which our material injustices and oppressions are based.

It is not the sum total of all cash, coins, art, gold, property, yachts and jets in the world. It is the value of present and future expected exploitation and profitability, calculated in the financial system as a whole, through which those things come to be owned. It the rich and powerful’s future claims over the world’s racialised and gendered bodies, lands and resources used as collateral.

It is unrealised and inflated gains, leveraged, over and over again for business and financial operations that far outstrips real money in the economy but is the base of extreme power.

The financial markets are the engine through which the rich and powerful drive up financialisation and the commoditisation of life on earth. It is financial markets which drives government policy. It is the financial sector who are chief architects and beneficiaries of the financialised war economy, one in which democracy and justice have never lived for the masses. The financial market is arguably the predominant force acting over society.

Despite its fundamental importance at shaping our existence, financialisation remains out of scope for justice movements, civil society, NGOs and charities working on issues of tax, economics, debt and development.

We must recalibrate tax and economic “justice” campaigns by taking a strategic approach at a systemic level. We have to be careful not to spend our valuable time and resources on attempting to reform the irreformable, and regulate the unregulatable.

A 1% tax on the value traded would raise £120 billion pounds a day at a global level. Remember that the UK and the US account for 60% to 70%. Revenue raised could easily abolish poverty, hunger, debt, and go towards atoning for the past, globally.

A FTT is a tax on operations during commercial activity, during trade and investment, during international business, during the accumulation of soft and hard power, where universities and think tanks maintain pervasive myths.

But when the tax is raised over time, it can interrupt global capital flows, throwing sand, water and cement into our financialised war economy by making the cost of capital too expensive, helping to re-orientate, and degrow our economy, fairly.

Raising the FTT starts to draw down the power of the rich and powerful, and limit the expansion of new capital pumped into the system.

The backlash against an FTT tells us everything we need to know about tackling the rich and powerful at source.

Given the revolutionary, systemic nature of an FTT, it is unnecessary to convince the rich and powerful about the tax. We must build our base, linking grassroots movements and campaigns into a movement of movements which hones in on financial power and campaigns for a global FTT.

It’s a campaign that recognises all our inequalities and injustices are intrinsic and inseparably tied to the authoritarian, financialised war economy.

Through a strategic, co-ordinated and global movement of movement we can have the people power capable of ushering in a new politics, free of hate, who can legislate for the FTT and begin
the process of reparations and system change.

Keval Bharadia is a political economist specialising in transformational approaches to development justice. Keval has consulted for international NGOs including Oxfam, Christian Aid and Stamp Out Poverty. Please follow @KevalBharadia and @RevolutionReps for updates on the global FTT campaign.

Keval Bharadia was speaking at the “How to Tax the Rich and Powerful” session as part of the New Thinking Series with John McDonnell. The series is hosted by the Claim the Future; you can register for upcoming sessions in the series here.

Image: Tax the Rich mural in progress by Megan Wilson on Clarion Alley https://www.flickr.com/photos/ari/9343709526. Creator: Steve Rhodes. Licence: Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)