Mike Phipps reviews The Global Casino: How Wall Street Gambles with People and the Planet, by Ann Pettifor, published by Verso, and We Need to Tax Billionaires, by Gabriel Zucman, published by Basic.

Global financial markets and their gambling habits are largely invisible to most people, Ann Pettifor tells us in this new analysis. Nor are the economies we inhabit really governed by elected politicians, however much our current government thinks they are: “Instead the value of an economy and  of a nation’s currency and its interests rates as well as the levels of investment that ought to provide livelihoods and both economic and ecological security are all economic levers largely wielded by unaccountable and irresponsible financiers.”

Growing financial globalisation is especially dangerous, because financial assets are intangible, based on something ephemeral: money. And money, contends the author, is a social construct: credit, a promise to pay, based on trust, upheld by regulation and law.

But the global financial system is largely lawless and unregulated. Shadow banking – beyond the regulatory boundaries of states – currently gambles with assets estimated to be worth $217 trillion.

The system has a demonstrable power to destabilise governments. It ignores democratic priorities, for example, by funding the fossil fuel industry. The 2007-9 Global Financial Crisis showed little will to regulate the problem. Generous state bailouts gave financial institutions the belief that they were too big to fail and too big to jail.

Political institutions have hollowed out and centrist politicians have no answers about what to do about government by the markets. This fuels the rise of the populist right, Pettifor pointed out in a recent interview, as people say “Give me a strongman to protect me from markets that strip me of the right to a decent roof over my head, food, education, health.”

The dismantling of the financial system’s guardrails, argues Pettifor, began in 1971 with President Nixon’s suspension of the convertibility of the US dollar into gold. The shift away from a national bank-based system to a global unregulated market paved the way for the recurring financial crises subsequently experienced.  At the same time, the over-valuation of the dollar as the world’s reserve currency collapsed manufacturing in the US rustbelt and expanded US consumption of goods and services produced in China and elsewhere, worsening the US trade deficit. But it also harmed the economies of poorer countries which were now forced to buy oil and pharmaceuticals in a currency much stronger than their own.

Today, the export orientation of almost all of the world’s richest economies has led to record levels of overproduction of stuff that can’t be consumed simply because people cannot afford to buy it. So, rather than, as we are frequently told, the public living beyond their means – which forces people into debt – it’s the economy that is operating beyond the means of the public.

There is a lot to chew over here, such as how money cannot and should not be a tradeable commodity, and how households have been exposed to global financial markets thanks to the privatisation of pension funds. The essential point is that the colossal sums of money circulating in global markets are forever seeking lucrative new investments to increase their value – and this is destabilising agricultural markets. Prices mushroomed in 2005-8, causing hunger, despite more food being produced than ever before.

Energy and housing markets are also adversely affected.. The number of houses, even in London and the southeast, has grown faster than the household count, but prices continue to rocket – because they are often deliberately intended to be financial assets, rather than affordable homes.

Pettifor proposes to “urgently transform” financialised capitalism. It’s a Keynesian, reformist perspective: it can be done, we are told, because it’s been done before. But can it? The levels of public food storage and energy stockpiling required to counter the inflationary effects of financial speculation seem vast. But both China and India have food storage policies and the US Department of Energy operates an energy reserve. Pettifor wants the UN to lead in these fields, but that look unlikely in a context of chronic underfunding and superpower sidelining.

On housing, the speculative market could be controlled by the state building more affordable stock, imposing rent controls and taxes on property, second homes and buy-to-let.

Tackling international markets directly, Pettifor proposes constraints on capital mobility, but ideas like the Tobin Tax are very modest in the face of the scale of the problem. One thing is clear: Trump’s rage against globalisation is unlikely to go beyond tariffs unless the power of Wall Street is confronted, and there is very little likelihood of that.

Returning to where we started, one giant step would be to move away from the US dollar being the world’s reserve currency. Given the huge advantages this gives to its economy, the US is unlikely to yield on this without a fight – literally. Attempts by Iraq, for example, to stop trading oil in dollars was identified by some analysts as a motive for US military intervention in 2003, although Pettifor doesn’t look at this.

“Government by organised money has become unbearable for human society,” the author said in a recent article in Tribune. But greater regulation of a sector that appears “vast and unstoppable” may not be enough, and hoping that the world will come to its senses in the event of a major catastrophe smacks of desperation. More radical solutions are needed.

“If the cause of all our woes globally is an uncontrolled financial sector, why does Pettifor not call for the public ownership of the banking system in the major economies and the closure of hedge funds and other speculative forms of finance capital?” asked economist Michael Roberts in a recent review. It’s a fair question.

After the complexities of Ann Pettifor’s book, We Need to Tax Billionaires is comparatively straightforward – but still an eye-opener. Economics professor Gabriel Zucman calculated French citizens pay on average 51% of their income in tax, if all forms of tax, including VAT, are considered. For the working class, it’s around 45%, but for billionaires, it’s just 13%.

If France’s billionaires all moved to the Cayman Islands tomorrow, the loss of tax revenue to the country would be insignificant – around 0.03%. And the same is true throughout Europe.

It’s remarkably easy for the super-rich to structure their finances in such a way that their personal income – and income tax bills – are as low as possible. This is easily done via holding companies. At the same time, the easier it is to avoid paying tax, the easier it is to accumulate more wealth.

Targeting holding companies, as the US government has in the past, just leads the filthy rich to seek other loopholes. The answer, says Zucman, is to tax wealth itself. Even a 2% tax on individuals worth over $100 million would, in France, bring in around 20 billion euros a year.

“Billionaires cannot be allowed to live in some parallel society,” concludes Zucman. “With great wealth comes great power.” The fact that Elon Musk’s Tesla company didn’t turn a profit for 17 years until 2020 didn’t stop him acquiring Twitter two years later for $44 billion, allowing him to turn the social network into a platform for a range of ideological causes, including getting Donald Trump re-elected, with all the rewards that that brought him. If wealth confers power, democracy alone requires it be constrained.

Mike Phipps’ book Don’t Stop Thinking About Tomorrow: The Labour Party after Jeremy Corbyn (OR Books, 2022) can be ordered here.