Financing violence | Red bell pepper

The New York stock exchange. Photo by David Blaikie (under CC BY 2.0 license)

A critical examination of capitalism shows that it can only function on violence. The sources of this violence vary widely, ranging from government military spending, surveillance and borders to private property regimes, imperialist laws and labor exploitation. These alienating and divisive institutions are underpinned by a cultural hegemony that dictates there is no alternative.

The United States and Western Europe represent majority of the government’s annual military expenditure despite being at home only 10% of the world’s population. In 2015, the US Department of Defense was largest employer in the world. The concentration and scale of Western military power is promoted as necessary for global peace and security.

Since US and European governments spend the most on war, naturally the companies based, influential, and protected there sell the most weapons. Sixty-four of the 100 most profitable arms companies are based in the USA or Europe, accounting for $394 billion (74%) of global sales. These sales ensure that a constant supply of ammunition is available for governments to impose imperialism at home and abroad on marginalized and racialized people, sustaining global inequalities and impoverishing large swaths of the Global South.

A complex network of Western governments, liberal and conservative politicians who are themselves shareholders and owners, powerful think tanks and lobbies in the arms industry and, above all, in the financial sector, play a determining role in these process.

A secret market

To understand the role of the financial sector in the military-industrial complex, some context is needed. Since the financial crash of 2008, trillions of dollars have been printed by central banks for governments through quantitative easing, which increases capital to help stimulate the economy. Unlike the post-war period, this money did not finance housing, health care or the welfare state, and instead drove up asset prices and further fueled wealth inequality. This government spending is classified as debt (because it is essentially unlimited borrowing from its own bank) and then used by politicians to falsely claim that the economy is down when the government is unwilling to spend. for policies he does not like. He then spends what he wants and lets the excess money flow into tax havens.

A 2021 report from Europol estimates that more than 10% of global GDP is now held in tax havens around the world. High-profile leaks such as the Panama Papers and Paradise Papers have exposed the global network of corporations, politicians and celebrities who embezzle their wealth, further enriching themselves at the expense of ordinary people. The United Kingdom and its overseas territories are classified by Tax Justice Network as the most secretive and largest jurisdiction in the world for offshore activities.

Meanwhile, in a world of interdependent financial markets operating around the clock, the gap between the world’s richest – and therefore most powerful – is growing at a dramatic rate to create deep inequalities. In 2019, financial markets were changing $36 trillion every day through stocks, derivatives, foreign currencies and wholesale commodities by boat. Formed in the 16th century, these markets were initially used to raise capital to float slave ships. Today, they remain, as JA Hobson so aptly put it, the “imperial engine governor”.

Join the dots

This vast accumulation of wealth by the financial sector allows it in turn to directly fuel arms sales. Nine of the 10 largest arms-producing companies are based in the United States and Europe and are listed on US and European stock exchanges. Their shares are bought and sold by pension funds and savings banks – as well as local authorities and religious groups – believing it is their fiduciary duty to maximize returns for their shareholders without any critical thought. Many of us are complicit in the ongoing military machine and profit from Imperial wars, whether we like it or not.

Arms companies use the same banks, accountants, lawyers and insurance companies as political parties and many members of the public. As with many listed companies, their shareholders are increasingly dominated by a few colossal financial firms, even if they act as intermediaries on behalf of wealthy clients. Two of the largest investment firms, Blackrock and Vanguard, based in the United States, managing financial assets worth well over $20 trillion, more than the GDP of Africa and South America combined. They have stakes in land, farms, food manufacturers, hospitals, supermarkets, mines and energy companies.

In many cases, illicit financial flows directly support oppressive and draconian regimes around the world. For instance, the Panama Papers exposed the vast network of shell companies that enabled Bashar Al-Assad’s terror regime in Syria to circumvent international sanctions and fund Assad’s ongoing war. A Mossack Fonseca-registered company, Maxima Middle East Trading, allowed the Syrian regime to continue importing fuel, despite international embargoes, through shell companies located in the United Arab Emirates, Syria, Switzerland and the Netherlands. Down.

Transformative Solutions

The UK currently imposes a miserable tax of 0.5% on the value of purchases of shares in UK companies. However, the revenues generated by this tax have not responded to the growth of profits of financial firms and the dominance of the sector in politics, the concentration of capital accumulation and wealth or the reduction of inequalities in significantly.

A new comprehensive financial transaction tax covering all asset classes traded in the UK, not just UK stocks, would be global in scope and would be the subject of global lobbying. As I argue in my recent article, Recalibrating Financial Transaction Tax Policy Narratives, a campaign for such a tax must center repairers and black movements demanding the systemic eradication of imperial exploitation, war and ecocide. to bring much-needed world peace.

Keval Bharadia is a political economist specializing in designing international development and justice policies for reparations and systems change. This article first appeared in Issue 236, “The War Racket” (Summer 2022). Subscribe today to get your copy and support independent media.

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