In a wonderful preamble to a song about bullfighting in Mexico, Harvard mathematician and satirist Tom Lehrer
, introduced the character of Dr Samuel Gall, inventor of the eponymous bladder and specialist in diseases of the rich. Gall has, of course, been joined in this specialism by virtually the entire American medical-industrial complex, but I digress.
I was reminded of Dr Gall whilst working in Vienna last week. Talking with lawyers, bankers, economists, government ministers, and other specialists in the affairs of the rich, I entered this all-too-familiar world in which tax evasion by wealthy people is a legitimate response to the predations of democratically elected governments (code for Germany where a large proportion of their clients reside).
The tax evasion industry has a wide range of cheerleaders, including university professors, journalists, and all sorts of think-tank-operatives-cum-spin-doctors. Their ideology has shaped political debate since the 1970s and in almost all cases can be traced back to the Austrian (later British) economist Friedrich Hayek
, most famous for his book The Road to Serfdom
(first published in 1944). Hayek
worked briefly at the London School of Economics, before heading to the University of Chicago in 1950. He later worked in Germany and returned to his native Austria. His influence as a preacher of full-on laissez faire
capitalism cannot be underestimated, with leading disciples including Milton Friedman, Alan Greenspan, and a huge number of politicians who (following the lead of Margaret Thatcher and Ronald Reagan) bought into the notion that "there's no government like no government".
Greenspan has, of course, famously recanted. Faced with the almost complete collapse of the deregulated American financial system, he has fessed up in front of the US Congress and the world's TV cameras that he (belatedly) recognises a «flaw»
in free market theory. Under challenge from Representative Waxman
who proposed: «You, mean that your view of the world, your ideology, was not right, it was not working?»
Greenspan replied, «Absolutely, precisely. You know that’s precisely the reason I was shocked, because I have been going for 40 years or more with the very considerable evidence that it was working exceptionally well.»
But not all of Hayek's
disciples have joined the repenti. Several of those I met in Austria persist with the argument that the current crisis finds its origins in excessive or incompetent government regulation, and one lawyer put it to me that the only scandal relating to awarding bonuses to bankers who have been incompetent, greedy and worse was the idea that the state could intervene to prevent such payments from going ahead. The markets know best remains the refrain, despite overwhelming evidence that the markets have been clueless about the current crisis which has been building up for years.
And then there's the issue of tax havens. I have spoken with a large number of Hayek's
disciples, including Dan Mitchell at the Center for Freedom and Prosperity (a leading cheerleader of tax havens), plus assorted members of Hayek
related groups like the Mont Pellerin
Society, and the F.A. von Hayek Institut
, and they uniformly support tax havens as promoters of tax competition. Friedman, for example, is cited on the homepage of the CFP
saying: "I write to express support for the Center for Freedom and Prosperity's support of tax competition."
We have written elsewhere about the totally bogus idea of tax competition, which conflates micro-economic theory of the firm with the broader issue of political science and democracy, see here
, for example, and here
, but these zealots persist despite the huge evidence of the harm they have caused.
Whilst in Vienna I learned that the F.A.von Hayek Institut
has put together a Road Show of various opinion formers on the extreme right, including Richard Rahn
(former adviser to the Cayman Islands) now linked to the Discovery Institute, Dan Mitchell (CPF
and Cato Institute), Prince Michael von und zu
Liechtenstein, and others, to tour European countries to promote the benefits of laissez faire
capitalism (and tax havens). Interestingly, the listed speakers include John Fund (Wall Street Journal
) and Daniel Thorniley
from The Economist
, both newspapers taking an uncritically supportive editorial position on the role of tax havens, see here
The Road Show starts in Skopje on 11th
May, ending in London on 20th
May. Expect to be reading a whole load of tax haven propaganda in your newspapers imminently.