There’s no shortage of food, no shortage of wealth to solve social crises. The problem is a system that enriches a few and starves multitudes.
We hear day in day out about the massive poverty and hunger that exists in the world. NGO’s and various non-profits have been around for decades appealing for assistance in feeding the world’s poor. In the third world, water is as precious as gold. Sewage and water sources run parallel in the streets due to the lack of modern infrastructure systems.
More often than not, the experts in the universities and think tanks of the 1% drag the age-old Malthusian explanation out of the closet. There is simply an overpopulation problem. It is the poor that are to blame, if only they’d have fewer children.
But as I have pointed out in previous blogs, it is not too many people that are the problem. It is not the lack of medical knowledge or technical expertise that leads to staggering infant and adult death rates in some parts of the world. It is the lack of social infrastructure and the capital needed to provide it.
The world produces enough food to feed everyone according to Hunger Notes —17% more calories today than it did 30 years ago. But food is a commodity and its production does not take place if the end product cannot be bought and the value added during the production process realized. The capitalist class would call this lack of demand. But in the world of the market, if you can’t pay you can’t play. No money for food, then you starve.
This is the absurdity of capitalism that Marx wrote about, that we starve amid plenty. He wrote in 1848:
“It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce.”
Unicef estimates that between 2000 and 2010 92 million children died form hunger and diseases, “…many of the illnesses and conditions that children suffer are easily preventable, technically.” says Global Issues, in other words, they are really what we might refer to as “man made” deaths. They are in actuality, market induced deaths. Almost 2 million children a year die form diarrhea due to lack of safe drinking water, another market induced crisis with which even the UN seems to agree:
“We reject this [Malthusian perspective that global water problems are a problem of scarcity and population growth]. The availability of water is a concern for some countries. But the scarcity at the heart of the global water crisis is rooted in power, poverty and inequality, not in physical availability.” (2006 UN Human Development Report, p.2)
The cost of bringing people safe water is negligible when compared to the concentration of wealth. “The world’s billionaires — just 497 people (approximately 0.000008% of the world’s population) — were worth $3.5 trillion (over 7% of world GDP).” According to the World Bank. The world’s richest, Business Week claims, have a collective net worth of $2.8 trillion.
Anyway you measure it, there is plenty of money in the world. These characters spend half their time hiding this wealth to protect it, form ex-wives, estranged children and the rest of us. But how do they get it?
Russian billionaire Dmitry Rybolovlev, who is squabbling with his wife over a $9 billion nest egg and who has his cash stashed all over the world, made most of his money (including $500 million in art, $36 million in Jewelry and an $80 million yacht) “…from the sale of two potash fertilizer companies for a combined $8 billion…” Business Week adds.
But how did he come to own these huge operations; and in such a short period? It’s quite simple really and one of the reasons Gorbachev was so popular with the B movie actor and US president Ronald Reagan and the global 1%. Gorbachev was a former leading Stalinist bureaucrat. He was General Secretary of the Communist Party of the Soviet Union during the period when one of the most repressive totalitarian regimes in history began to draw its last breath and collapse under its own bureaucratic weight.
Gorbachev and his old buddies including many former KGB thugs like Putin who reached the ranks of Lieutenant Colonel, wasn’t about to go down with the sinking ship. What happened in a nutshell, and why we see so many prominent Russian millionaires and billionaires is that the old KGB and moribund party men appropriated the collective and collectivized wealth of the Soviet and Russian people.
The US capitalist class welcomed the plunder and their former KGB credentials were a thing of the past as long as capitalism could flourish. That’s where Rybolovlev and other Russians like him got their wealth.
No doubt readers are getting a bit bored with it but there is a need to hammer it home to counter the propaganda of the world’s bourgeois that there is not enough money to feed, clothe, house and provide humanity with a decent and productive life. I am talking about the claim by the Tax Justice Network that wealthy individuals, (we’re not talking corporations here) stashed as much as $32 trillion in offshore accounts in 2010 in order to avoid taxes. This amounts to the combined GDP of the U S and Japan. “Fewer than 100,000 people own $9.8 trillion of offshore assets,” BW claims. This exists as more than 9 million people die worldwide each year because of hunger and malnutrition; 5 million of them are children.
This situation is not something that cannot change. It is not an insoluble dilemma. It is not the fault of the victims, of “human greed” in the abstract or of “natural disasters” or the by-product of supernatural squabbling between a benign god and his disgruntled fallen angel.
It is a very simple; the Russian billionaires for example attained their rapid billionaire status simply through the transfer of the collective wealth of society to individuals including the means for generating that wealth.
We solve the problem by transferring collective wealth, and more importantly, the means by which it is created, the ownership of the means of production, distribution and exchange, from private individuals to the collective.
Through this process, we can emerge from the depths of depravity to the apex of civilization. True freedom.
Farmer Willie Corduff is just one of the Irish taxpayers that have to pick up Statoils bill on the Coribb-project.
The cost overrun is mainly due to poor handling of local residents’ protests. Locals complain of lack of dialogue with the oil companies, little information, and fear of getting a pipeline almost under their houses.
The intense protests have delayed the project and made it more expensive.
Paradoxically enough, though, it is the Irish themselves who must foot the bill for the extra due the country’s legislation. Losses for companies are tax-deductible.
Ireland’s favourable tax policy means Statoil’s losses could actually be very small. Losses, capital costs, and exploration costs can be written off against future income in their entirety, while the tax rate is only 25 per cent.
Irish tax havens
Ireland has long been known to have very favourable tax rules for companies. Both the IMF (International Monetary Fund) and organisation Tax Justice Network defines the country as a tax haven – a term often associated with palm-treed islands in distant waters.
Standard corporation tax in Ireland is 12.5 per cent, which has successfully tempted Internet giant Google to establish its European headquarters in the country. Apple has also received criticism for using the Irish’ tax regime to evade taxes. Apple top Tim Cook had to answer to the US Congress regarding the practice last week.
Norway pays nothing
Statoil’s multi-billion kroner loss falls to the Irish to pay in its entirety, while Norwegian taxpayers remain unencumbered. It would have been different had the project been in Norway.
Companies can write off about 78 per cent of their losses here. This rate may be reduced if the government succeeds in getting its planned tax changes through.
In return, the Norwegian government receives 78 per cent of the hydrocarbon industry’s profits.
“There’s no doubt the tax system is attractive for oil companies. It must be this way, however, to draw companies here. Very few significant discoveries have been made in this country and the outlook for revenues is uncertain. In many ways, Ireland is where Norway was before the Ekofisk discovery in the ‘60s,” says Fergus Cahill, head of the Irish Offshore Operators’ Association.
The oil companies decided
Many among the Irish population are sceptical to the favourable tax regime for oil companies. Padraigh Cambell is a former rig worker and has been a spokesperson union Siptu. He knows Irish history oil well.
“What taxation authorities drew up in the ‘80s was based on what the oil companies said. They dictated the terms; 25 per cent tax and 100 per cent depreciation. All expenses 25 years back in time can be written off, as well as gifts, sponsorships, everything! Politicians said that this would be good for Ireland, but now the situation is that the supply business happens from Scotland, for example. So the oil-related costs can then be written off in Ireland. We want the Norwegian model. We want jobs for Irish ports, Irish companies, and Irish workers,” says Mr Campbell.
The controversial gas pipeline from the Corrib field comes ashore near the town of Rossport, northwest Ireland. Several residents in the town neither believe Ireland will benefit from the Corrib field because depreciation rules are so favourable, nor that the country will not get tax revenues.
“People in Norway will benefit from the project through Statoil. We’re not going to profit from it because of the Irish tax rules,” says farmer Willie Corduff.
Fergus Cahill in the Irish Offshore Operators’ Association disagrees.
“I know this is a popular argument among some opponents of the hydrocarbon industry in Ireland. Calculations by the authorities show that tax revenues from commercial fields will be substantial – even in relation to the present system,” Mr Cahill says.
Modified in 2007
The Irish government has announced a review of the tax system in the autumn. However, there is nothing to suggest that this will result in the country approaching the tax system as it presently is in Norway.
“I struggle to understand how anyone can expect we’ll have a Norwegian tax system without having Norway’s amounts of commercial discoveries,” newspaper The Irish Times reported Ireland’s Energy Minister Pat Rabbitte saying at a hearing earlier in May.
The system was also changed in 2007. Authorities then introduced a surplus tax of up to 15 per cent that could bring the total tax rate up to 40 per cent, depending on the project’s profitability. The change was not retroactive, and has no significance for the Corrib project Statoil is involved in.
Statoil’s annual report on its 2011 operations in Ireland shows total national losses of EUR 1.3 billion (almost NOK 10 billion), but that this can be written off against future taxable income.
In 1997, Statoil also recorded an approximately EUR 159 million (NOK 1.2 billion) loss in the Connemara area of Ireland, when it was determined that the field was not commercial. Irish rules are designed so that losses and expenses can be written off against taxes for 25 years after they are incurred. This means that Statoil can also write off the Connemara loss against tax on future profits from Coribb field.
The corresponding limit in Norway is ten years.
Head of Information Bård Glad Pedersen at Statoil does not wish to comment directly on how the favourable tax terms have or have not influenced their decision to continue their operations in Ireland, but writes in an e-mail that:
“It is common that costs and losses can be offset against future income. The tax system in Ireland does not differ significantly from taxation in the other countries in this area. We make investment decisions on a commercial basis, and the framework conditions are included as a factor in these reviews.”
Shell, operator of Coribb field, has the following comment:
“All companies in Ireland can write off investment costs against profits, and the partners in Coribb field are no exception. Oil and gas companies must, however, pay 25 per cent tax instead of 12.5 like other companies in the country. Ireland also receives tax revenue from the hundreds of people who are employed in connection with the project,” Shell Ireland press officer Fiona McGuinness writes in an email.