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High Finance in the UK
The Much-Too-Special Relationship

The City of London threatens U.S. security and abets corruption. Revisionist powers like Russia have figured out this dynamic and are busy exploiting it.

Published on: March 19, 2014
Nicholas Shaxson is best known for his investigative books Poisoned Wells (2007) and Treasure Islands (2011).
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  • Fat_Man

    I am sorry, this is wasted electrons. The problem is not in London. It is in Washington DC, in the White House. His policy of screwing our allies and sucking up to our enemies has been a disaster. Nothing Britain does can change that. Indeed Britain is high on the list of the allies he wants to diddle.

    • Jim__L

      Why are the two problems mutually exclusive? I would have said they were mutually reinforcing.

  • Anthony

    “Escape and elsewhere. In short, if someone doesn’t like the responsibilities that come with living in a particular society – whether these burdens be taxes, criminal laws, financial regulation or financial disclosure requirements – than he can take his money (and sometimes himself) elsewhere to escape them.” Simply put within confines of global capitalism, author beseeches follow the money to better understand foreign policy dynamic.

  • free_agent

    It’s amusing that there now seems to be a Global Capitalist Conspiracy, and it is preventing the West from attempting any imperialist interventions.

    But I can see the effect of overseas finance. It looks like in London, most of the money comes from international financial transactions. That’s going to make the voters and the politicians want to keep the goose laying golden eggs. And conveniently, the nasty ends of most of those transactions only injure people in other countries, who are not asked what they think.

    You write, “The weasel word “competitiveness” here has nothing to do with market
    competition: This is about a race to the bottom on standards.” In this case, “competitiveness” means “providing the services the customers want”, which is as you summed it up, “We won’t steal your money and we won’t scold you for stealing others’ money.”

    • Will it be amusing if Putin invades a NATO country like Estonia? (An interesting question posed by a Russia expert I was talking to yesterday.)

  • gabrielsyme

    Fascinating read, and very apt. Unfortunately there is little to nothing that can be done about it – even if the City of London were to by run under a well-meaning Shaxson dictatorship, 99% of the activity he doesn’t want to happen at all would simply shift to other centres.

    However, if the City gives the UK an incentive not to act, it also gives the UK hugely more power when and if it chooses to act. Had not Obama had not spent the last five years slighting Great Britain, including supporting Argentina in its ridiculous position on the Falklands the US would be in a much stronger position from which to cajole Great Britain into acting. As it is, who in the world wishes to do Obama any favours?

    • Jim__L

      Shift these activities enough, and they’ll have trouble taking root and flourishing. Don’t let them rest and regroup. Keep harrying them. It won’t eliminate the problem, but that false virtue “tolerance” (just another word for apathy or despair, really) is definitely the wrong idol to follow.

  • The best piece on the City I have read in ages. In particular, it explains the role played by the Crown dependencies in the offshore network.

    On the one hand, this network does provide a valuable service: two Russian businessmen may choose to do a deal through Cayman Islands vehicles not because they are laundering or evading taxes (Russia has a flat 13% income tax) but because in Russia, courts are worthless and the FSB may want its cut. Not all money going through those offshore jurisdictions is dirty; I suspect most is OK.

    On the other hand, we’ve got all the problems described above.

    • Jim__L

      Yeah, that’s the problem here — sometimes, there are good reasons to escape what the Government says are “the responsibilities that come with living in a particular society”.

      That said, it’s a problem when bankers have no standards at all.

  • Nana bella

    I’ll say right at the start that my understanding of finances is limited and I’m sure many people will challenge what I’ll hereby say, or even ridicule it, but nonetheless I opine that financial shady deals come when real economy is lacking, which leads us back to the Land. What is clear about finances, even to the uninitiated, is that it is a complex system to distribute money and wealth around the planet to the advantage of a few (countries, individuals, companies, elite financial centers like the City of London as is so eloquently described here ), and that the closer you are to this abstract feature called ‘money” the better off you are, The “System” makes sure even an American president (Clinton) could not raise the minimum wage in his country, and that resources in poor countries will be purchased for cheap by the double exploitation of the lands and its peoples.
    When you look at London from the air you see a terrible ugly city sprawl, with everybody allowing themselves 2-story cottages at the expense of good farmland and natural landscapes. The famous English countryside itself is completely deranged by (mostly) sheep pasturing, and is poor in trees and proper crop fields (Ireland is even worse and is almost treeless). You can barely find a square meter of land even in the most remote areas that is not grazed by sheep (or cows) destroying the landscape. Is wool such a major industry in the world today and is it worth degrading the land and refraining from proper varied agricultural practices and ecological rehabilitation of forests and other natural habitats? The 19th- century industrial cities in England are often equally deteriorated in all the meanings of the word. To have a real economy a country has to resuscitate its source of riches and subsistence, its Land and all its natural resources, and the People should be able to enjoy it and connect to it . If this is not there, you must resort to (shady) manipulations of capital, and that will eventually fail, in London as well as in Wall Street. We have recently seen when American financiers pushed the limits of ethics by trying to make money out of money out of money out of the pockets of the poor and drew the entire world into a dangerous recession and their country to the “Fiscal Cliff”. This is unsustainable. Artificial “growth” is unsustainable. People, pay attention – human life on the deranged and neglected planet is becoming unsustainable, and England and Ireland are great examples not to follow. We have to go back to the basics and rejuvenate the Land in its bounty. London as a city is a total disaster zone. If urbanization started here, this is a good place to start undoing its damages.

    • Jim__L

      The problem here is densification. Suburban-density housing subdivisions older than about 10 years actually look like a forest — look out over the landscape from a few stories up, and you see more trees than roofs. Having enough space for lawns and gardens helps, too.

      Townhouses, on the other hand (or worse, apartment buildings) crowd out any plants or growing things. It’s a miserable existence. Dispersing places of employment is the only real solution to give people affordable, uncongested space.

  • celtthedog

    Interesting, according to this author Britain should be a colony of the United States. Apparently the City of London should be regulated with an eye to supporting American foreign policy. Interesting.

    The only nation the US has a “special relationship” with is Israel. And, in the end, that relationship — committing as it does America to endless Middle Eastern wars — will do far more harm to the United States than a few dodgy bankers in London cashing checks of dubious provenance.

  • Excellent article. Very educational, and of course intended to be. The author should team up with Matt Taibbi. I really appreciate this sort of thing.

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