Samizdata

Guido Fawkes, aka Paul Staines, takes time out from his usual regime of dishing the dirt on our unlovely Political Class and goes into a more reflective tone of voice with a good piece about one of the lessons of the financial crisis: the problem that the people who run banks often have no financial liability for losses. He’s not the first person to state this, of course: Kevin Dowd, who gets regular plugs on Samizdata, has been writing about this issue for years.

The issue of whether publicly listed, limited liability banks are a problem or not is one that often puts classical free marketeers at odds. Some self-styled free market purists argue that limited liability, inasmuch as it is created by statutory law rather than an emergent phenomenon arising from private contracts, is bad. Others might argue that LL is valuable in making it possible to have large-scale investment projects. Even so, there does appear to be some case, in my view, in looking at the rules under which banks operate. With our current fiat money system, fractional reserve banking, deposit protection and the rest, it seems anomalous that bank shareholders and bondholders, in addition to the cozy protections thus described, have the additional protection of limited liability. One idea, as Dowd has argued, is to increase the total liability that any owners of banks have. So if a shareholder owns, say, £100 of stock in Fred Smith Bank Corp, then his or her liability can be double that amount, or treble that amount. This may not satisfy the purists, but it would, in part, curb some of the more foolish risk-takers.

It should be remembered that in countries such as Switzerland, its collection of genuine private banks (not listed behemoths such as UBS) are private partnerships, and family members – as at Pictet – have unlimited liability for losses. It tends to focus the mind. Exploring how bankers and owners of banks can be made to take a more prudent view on risk-taking makes more sense, in my view, than creating daft and draconian rules on bonuses and salaries for senior staff.

By the way, when Guido Fawkes writes a strong piece like this, it seems to traumatise his less intelligent commenters.

Whether the issues are terrorism, AGW, contagious diseases, the movies of Charlie Sheen (that was a joke), today’s advocates of Big Government often look to the Transnational solution. Let’s have one government! No more hiding places for bad people!

As readers might recall, I have written a few times about tax havens and the importance of the freedom of people to migrate not just their physical selves, but their money. Now, depending on your point of view, tax havens are either refuges of scoundrels who refuse to pay whatever levels of tax are imposed on them by their fellows, or, in a more classical liberal vein, places for people who want to avoid double-taxation and where people can exercise their proper freedom to acquire, transmit and enjoy their private property as they see fit. This is not, I hasten to add, always a black-and-white issue. Some tax havens have been bolt-holes for crooks. And if you believe that even the smallest of governments need to tax to pay for basic services, then people who try to not pay anything for services they use by using offshore banking deserve a degree of censure. Governments could do a lot to put some of the shadier havens out of business by just reducing their own taxes, of course.

It is clear, in my view however, that the current campaign against tax havens as waged by groups such as the Tax Justice Network goes way beyond this sort of legitimate concern about criminal moneys. These guys want world government. Tax competition – which is another way of saying that countries should be free to set different taxes – is something they detest.

And now the Tax Justice Network argues that the Organisation for Economic Co-operation and Development, which is basically a club of rich nations (staff there pay no tax, by the way), is ineffective, because the tax treaties signed by various countries using OECD standards don’t allow revenue departments to automatically seize information from other countries in a hunt for tax “cheats”. Oh no, the OECD is a toothless tiger, and what is needed is a fiercer animal: the United Nations! Yes, the same UN that, let’s not forget, did a splendid job in the Balkans during the 1990s, and which has prevented many a massacre in Africa, and which, as we know, was so fierce in its imposition of arms controls and sanctions vs the government of the late, unlamented Saddam Hussein of Iraq.

Forgive my sarcasm, but if there is anything more deluded than the oppressive idea of putting tax policy in the hands of an unaccountable body with such members as Russia and Iran, never mind good old Britain and the US, it is the idea that such a body could possibly be relied upon to deal fairly, impartially and thoroughly with the always-sensitive issue of tax.

Meanwhile, other people, such as Wendy McElroy, are waking up to my recent concerns about US foreign over-reach on the issue of tax.

Last night, when flicking through the TV channels, I watched the “documentary” film-maker, Michael Moore, talk about his own views on the Occupy Wall Street/wherever people. And he adopted that seductively reasonable tone of voice, although the general effect is spoilt by that annoying baseball cap he insists on wearing (who is he trying to fool, exactly?). The questions from the Channel Four interviewer were fairly softball stuff. At no point did the interviewer say something like: “So, given what you have said about greedy bankers and corporations, can we take it that you oppose the multi-billion bailouts of Wall Street banks, Mr Moore?”

I suspect that some of the OWS might indeed think that bailouts for banks are wrong, although if they follow their views through to a logical conclusion, it leads to laissez-faire, not the socialist nonsense of the film-maker from Flint. We need to keep making this point.