UK-US ‘special relationship’ is alive and well – it runs from City of London to Wall St. | Nick Shaxson

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UK-US ‘special relationship’ is alive and well – it runs from City of London to Wall St. | Nick Shaxson

Wisdom abounds that one of the many outcomes of Cameron’s Veto over the EU Summit Treaty was that not only did it isolate the UK in Europe, but it also occurred without the safety net of a special relationship with the US to fall back on. Oh for heaven’s sake wake up, says Nick Shaxson, that relationship, which is effectively between Wall St and London, is not going anywhere.

In essence, London offers itself as an offshore escape route for Wall Street, a source of loopholes to get around U.S. financial regulation (see my last blog, for yet another shocking, appalling example of that.) The relationship began in the mid 1950s just as the British Empire crumbled (read Treasure Islands to know more about this) when the City of London discovered that it could rebuild itself by hosting offshore “Eurodollar” trading. What happened was that banks wishing to trade in this market were ‘deemed’ to be offshore by the Bank of England, and therefore outside the purview of regulation.

This market was, in effect, regulated nowhere. It grew explosively, and created the platform for Wall Street to grow far faster than the rest of the economy, eventually rebounding back into the United States to capture the political process there and bring the economy to its knees in an orgy of libertarian excess. The market spread widely, and had similar effects in other countries too. For over 50 years now, the Special Financial Relationship between the City and Wall Street has been going from strength to strength.

This relationship is pure poison, for both countries.

It is a purely financial relationship whose cross-border nature means it is extremely hard to tax or to regulate. It is thus directly at odds with democracy, and fosters giant inequality, in each country. Bring Britain’s spider’s web of Overseas Territories and Crown Dependencies into the equation – which include some of the world’s biggest tax havens and are umbilically connected to the City of London – then the size of the threat begins to become apparent. A giant zone of transatlantic impunity for some of the world’s wealthiest citizens and corporations.

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Donagh is the editor of Irish Left Review. Contact Donagh through email: dublinopinionAtgmail.com