Trump wins in a corrupted economy: welcome to #Truxit

So, Donald J Trump has won the US elections. Here’s what we’d have liked to have been able to write today: “The United States will have its first woman president – instead of the first president for years who refused to publish his tax returns; whose business affairs consistently demonstrate an affinity for tax manipulation and financial opacity; whose tax policy proposals imply a deepening of income inequality, and an acceleration of the race to the bottom in the taxation of multinational companies.” But instead we’re preparing to track the implications of Donald Trump’s election victory over the coming weeks and months in the various fields of importance to the global tax justice agenda.

As our own Nick Shaxson reflects below, Trump has repeatedly spoken of his commitment to end the era of tax havens, but without any specifics of how he intends to do that. But now there’s a whole administration to help achieve any given aim. And the range of inconsistencies in the campaign’s tax plans will now have to be ironed out, if practical steps are to be taken.

We await a full breakdown of the polling, but the suggestion is that some of the most disadvantaged people may have been persuaded to turn against other disadvantaged groups and to vote against their own interests. Inequality and precarity have soared in the United States, as in many other developed economies. With only a weak alternative vision for the necessary reforms, this has created an environment where playing on voters’ fears and desperation was like shooting fish in a barrel for Donald Trump.

Today seems like as good a time as any to draw your attention to a new version of the best selling book Treasure Islands: tax havens and the men who stole the world.  There’s a new introduction, and a whole new chapter to the book.  Here’s an excerpt, crossposted from the book’s author Nicholas Shaxson’s blog. We now hand you over to his thoughts on this historic day:

“The Brexit vote was, in the end, about globalisation. The hottest issue was immigration, which is, as Professor John van Reenen of the London School of Economics points out, ‘globalisation made flesh’. But behind the vote we can also discern a powerful role played by tax havens, the dark twisted souls of financial globalisation.

I’m posting this on the day of Donald Trump’s victory: this stuff is all the rage.

Truxit, one might call it. (The word ‘truculence’ is in there somewhere too.)

I spoke to Trump twice for my Vanity Fair article. Both times, he said he would “fix” tax havens and that it would be “easy” to do so. And both times, he cut short the call when I asked him to explain how exactly he would do so. Enough said.

The best explainer for Truxit? Well, everyone has their favourite. I like this, from Arlie Russell Hochschild at Mother Jones, who spent five years with people who’d turn out to be Trump supporters:

“What the people I interviewed were drawn to was not necessarily the particulars of these theories. It was the deep story underlying them—an account of life as it feels to them. Some such account underlies all beliefs, right or left, I think. The deep story of the right goes like this:

“You are patiently standing in the middle of a long line stretching toward the horizon, where the American Dream awaits. But as you wait, you see people cutting in line ahead of you. Many of these line-cutters are black—beneficiaries of affirmative action or welfare. Some are career-driven women pushing into jobs they never had before. Then you see immigrants, Mexicans, Somalis, the Syrian refugees yet to come. As you wait in this unmoving line, you’re being asked to feel sorry for them all. You have a good heart. But who is deciding who you should feel compassion for? Then you see President Barack Hussein Obama waving the line-cutters forward. He’s on their side. In fact, isn’t he a line-cutter too? How did this fatherless black guy pay for Harvard? As you wait your turn, Obama is using the money in your pocket to help the line-cutters. He and his liberal backers have removed the shame from taking. The government has become an instrument for redistributing your money to the undeserving. It’s not your government anymore; it’s theirs.”

I checked this distillation with those I interviewed to see if this version of the deep story rang true. Some altered it a bit (“the line-waiters form a new line”) or emphasized a particular point (those in back are paying for the line-cutters). But all of them agreed it was their story. One man said, “I live your analogy.” Another said, “You read my mind.”

This graph, from Martin Wolf in the FT, illustrates the Truxit:

But this resonates with me at a deeper level because of something I’ve long believed in, which I first understood while writing about Africa’s oil states, and which I recently wrote about in an article about corruption in the Washington Post:

“Nigerian writer Chinua Achebe points toward a better, more systemic definition of corruption in his 1983 classic, “The Trouble with Nigeria”: “A normal sensible person will wait for his turn if he is sure that the shares will go round,” he wrote. “If not, he might start a scramble.”

Picture society as a queue. Disrupt a queue with, say, a fire hose, and after the spluttering has ceased, order should re-emerge – just as stable countries recover from earthquakes or economic shocks. Yet when the strongest push in at the front, that is more dangerous: People begin to lose faith in the queue, and in each other. They start to wonder: “Why should I pay my taxes if the rich go offshore and evade theirs?” Or “If I don’t snaffle that stream of oil revenue to feed my family, then that jerk in the next ministry will get it.”

The world economy is being corrupted. By tax havens, by unaccountable bankers, trust lawyers, lobbyists — and yes, tax-free real estate magnates. Trump, with all his shocking personality flaws, is not an obvious candidate to reverse this deep corruption.

But it must be reversed.”