It should come as absolutely no surprise that in 2014, the biggest banks paid little or no corporation tax in the UK. These institutions are part of a global superstructure of corporate financial supremacy, which holds unprecedented levels of economic and political power. The largest banks and financial firms have no allegiance to any state or respect for law, only to short-term profit and to extremely wealthy shareholders. Avoiding paying taxes is a natural part of their business model. Their net contribution to society -at least in recent years- has been negative; the massive financial crash of 2007-8 caused a severe global economic crash, the effects of which are still tangibly reverberating today.
This crash occurred because of pernicious financial de-regulation over recent decades. For that, we can partly thank the armies of well-funded corporate lobbyists working on behalf of the financial industry, engaged in high-level (and highly paid) corruption in Washington and London. But it goes further than greedy, amoral lobbyists beguiling politicians in fancy restaurants and bars; as a former chief economist of the IMF has argued: the US government has essentially been captured by the financial industry. As he explains in the article, there is a revolving door between Washington and Wall street and the regulatory agencies tasked with policing the industry have been essentially taken over by the very firms they’re supposed to police. The same processes have occurred in the UK, albeit in a slightly less obvious manner.
Since the crash, the financial markets are still as unstable and fragile as ever. The regulatory changes which were necessary to stabilise the financial system after the crash -such as to break up the biggest banks and increasing the currently absurdly low leverage ratios that banks are allowed to operate on- never materialised. As Financial Times economist Martin Wolf explains, the low leverage ratio operated at by the big banks is extremely dangerous; “[it’s] not that terribly difficult to imagine circumstances in which banks would lose more than 3% of the value of their assets… we’ve allowed the core financial institutions on which the entire market economy depends to operate with levels of leverage [that leave the banks] fundamentally fragile”
The next time the financial markets collapse, it will be far worse as the biggest banks and financial firms will be far larger in relation to the rest of the economy than they were before- and they might become too big to save.