The 2018 documentary “The Spider’s Web: Britain’s Second Empire” by Michael Oswald enjoys great popularity. The film has over 5 million views on YouTube with most of the comments being very positive. And indeed, it is a very well made documentary that is very much worth watching.
I only recently watched it, because someone recommended it to me. Apparently, the documentary shows, how the City of London is behind a lot of evil in the world. The thesis of the film is that after Britain’s colonial empire collapsed in the middle of the last century, the British establishment created another, different empire.
Instead of ruling the world militarily, this new empire rules the world financially. This new empire used some of the smaller former colonies and created a number of tax havens which help wealthy individuals to protect their assets. In particular, the City of London has created a web of legal structures, at the heart of which is the legal entity of a trust, whose complicated arrangements allow for total financial secrecy.
Oswalt’s film argues that this financial secrecy is used almost exclusively for illegal activities. After all, why would anyone create these expensive legal structures if it was not to hide something. No one who is playing by the legal rules would do that. Therefore, the City of London has become the centre of organised criminal activities in the world that is causing enormous damage to many regions.
I have no doubt that these offshore legal structures are used by organised crime like drug cartels. It also seems clear that the enormous wealth that has accumulated in the financial sector has had a very corrupting influence on the political and legal systems of most countries. So there is an important message here.
However, the film unfortunately draws the totally wrong conclusions from what is revealed. The main thing the film is concerned with is that the secrecy that is facilitated by the City of London allows many corporations to deprive governments of their fair share of tax income. As a consequence, the poor of the world get poorer while the rich are hiding their increasing wealth offshore.
The film also makes no secret of what Oswald thinks is the solution for this dilemma, which is a global crackdown on financial secrecy and a global effort to tax corporations across borders. This effort however, always fails, because the elites in Britain refuse to play ball. They are aggressively protecting the City of London’s evil doings.
Watching this documentary, I cannot help but feel a little bit thankful to the City of London. And that although me or my family are way too poor to be able to take personally advantage of these offshore services. However, I am only feeling a little bit thankful.
As I said, I am not naive. I do believe that these offshore structures are also used to help very nasty people in their evil doings. It also gives the already rich an unfair advantage at getting even richer compared to the rest of us.
The world, however, is not perfect. If it comes down to abolishing financial secrecy completely combined with global taxation and a City of London that at least provided some freedom from socialism for some filthy rich people, my choice is clear. I take crony capitalism over outright communism, no question.
That is because, at least in a crony capitalist system there are still some producers among the cronies who are creating real wealth. With a global taxation and regulation system, even those remaining producers would disappear over time, that is guaranteed. The result would be the horrific barbarism that we have witnessed in every real communist system, only this time on a global scale.
These, however, should not be the only two choices. There is another way, which is libertarianism, that is to say small governments, with little to no taxation and liberty. That would take away the advantage from the already rich and would create a level playing field for everyone to produce wealth.
The truth is that the one major illegal activity facilitated by these structures is tax evasion. It is not drug cartels washing their money or dictators bringing their stolen treasures into safety. I am sure it is that too, but the majority of clients for these structures are most likely corporations and wealthy families trying to pay less tax.
It is a fallacy, as the film suggests, that there is poverty in the world, because the tax authorities in many states are not able to tax the rich. The truth is that there is poverty because there are too many taxes and government regulations. Poverty does not exist, because of too little wealth distribution. Poverty exists, because there is not enough production. Poverty is the natural state of humans. It is production that got us out of it.
The irony is that the City of London is evil not because of the rich, but because of the socialists that support the message of this film. It is them who have created a world in which the government has the power to tax, to regulate and redistribute wealth.
Once the government has that power, we have a system in which there are those who pay taxes and those who receive them. There are those who can comply with the regulations the government throws at them and those who cannot.
If that is the logic of the system, then on which site would most people like to end up on? Would most people like to be on the receiving side of taxes or on the paying side? And would most people like to be among those who are able to comply with the regulations or among those who are not?
I think it is clear that most people would like their business to survive the regulations, because surviving means that the business can take over the market share of those who do not survive. Likewise, most people would rather be on the receiving side of taxes than on the paying one.
Since logically, if there is redistribution and effective regulations, not everyone can end up in this favourable position, we have effectively created a system in which people compete with each other to end up as the winner. And who is most likely going to end up as the winner, is it the weak or is it the strong?
This is a fatal flaw in the idea of the welfare state. It is not the only one, in fact there are many, but this one is enough to make the system fail. The advocates of a strongly regulated economy have imagined a system in which the state intervenes on behalf of the poor. Leaving aside for a moment the absurdity that the weak need to be saved from the strong producers, why would the state work for the poor?
The welfare statists have created a system in which the weak are competing with the strong, and they are shocked that the weak don’t win. Why would they win? There is no mechanism with which they could win. For this system to work in favour of the poor, humans would need to be selfless angles. But if they were selfless angles, we would not need the government to come in and safe the poor. If one wants to help the poor, the absolute last thing one wants to do is to put them in a competition with the strong.
Any regulation and redistribution tools introduced will end up being used by the strong against those that they can be used against, which is the weak. And it is not just the really weak these tools are used against, it is even the ones that are not super strong. It is like monopoly, the logic of the system dictates that if a welfare state is introduced that can regulate the economy and redistribute wealth, one would expect to over time end up with a small group of super rich winners, who take it all, and the rest of us will end up in the dirt. Now, does that maybe sound like something we are seeing right now? The only difference between crony capitalism and communism is that the dirt of the former is a lot nicer.
The real solution to this dilemma is not to do away with financial secrecy and to introduce global taxation. To the contrary, the real solution is to reduce regulations and taxation as much as possible. These taxation and regulation powers are not tools for the poor to beat the rich, but tools for the super rich to push the rest of us down.
If we take those tools away, and create a small government without much powers at all, then it becomes possible for a lot of people to compete and create wealth. In such a system, very few people could have an exceptional advantage with which they could create significantly more wealth than others. Sure some very rich would still exists, and rightly so, but by and large, a society with a small state, whose only function is to provide a strong rule of law, would have a very large, well off middle class, with very few super rich and really poor. In such a society, more than enough wealth would be in the hands of compassionate people that would not need to be forced to share it with the poor.
Sure, there would still be poverty. Unfortunately, perfection does not exist in this world. But the best the weak and poor can hope for is a world with enough overproduction so that some of that wealth trickles down to them. They will never be able to win a competition against the strong. Therefore, any system that is designed that way should be dismissed immediately. Unfortunately, some evil super strong always manage to convince the poor to exactly support a system like that. And Oswald’s documentary is playing into the hands of these people.