Trotsky and nationalisation

trotskyIn two previous posts I have looked at Leon Trotsky’s transitional programme and the general approach to a working class programme which it encapsulated at a particular point in time. In this final post on the question I want to look directly at what Trotsky’s views were on nationalisation. As I said at the start of these posts, many organisations claiming inspiration from his politics place calls for state ownership high up in their political programme. This conflicts directly with Marx’s views but we need to look at Trotsky to see if this is also true of him.

First we should note that in the transitional programme Trotsky explicitly counterposes ‘expropriation’ to “the muddleheaded reformist slogan of ‘nationalisation’”. He gives four reasons for doing so. The first is that he rejects ‘indemnification’, i.e. compensation to the capitalists. Secondly he does so as a warning against reformist socialists who, while also advancing this demand, nevertheless remain the agents of capitalism. Thirdly he says workers must rely on their own strength. As we have stressed, nationalisation relies on the state. Lastly he does so because he links the question of expropriation with the seizure of power by the workers. This latter point is crucial in his presentation while, because we live in less revolutionary conditions, I have laid greater emphasis on his third reason.

Thus in the very next section of the programme from that above, in which he argues the importance and the benefits of expropriation of the banks and statization of the credit system, he says that the latter will “produce these favourable results only if the state power itself passes completely from the hands of the exploiters into the hands of the toilers.”

When pushed, Trotsky accepts that ‘nationalisation’ may be accepted as a slogan but only in so far as it actually means expropriation and involves a workers’ government to achieve it. In other words reason four must apply.

It is possible to argue that the socialist programme must be taken as a whole and that therefore calls for nationalisation are perfectly valid when part of a comprehensive programme. There are several problems with such an argument but we will point out only two.

First – try finding the call for destroying the capitalist state or creation of a workers’ state in the programme of the left that might act as an alibi for demanding capitalist state ownership in the here and now.

Allied to this is the second reason. In every advanced capitalist country the working class is separated from conquest of state power by a huge gulf in social and political development and experience. The left might often be opportunistic but it is not immune to registering this fact, if only through avoidance of demanding overthrow of the state. In effect a link between nationalisation and a change in the character of the state is non-existent and the former becomes a simple call for the capitalist state to take ownership from private capitalists.

In other words the organ of the capitalist class as a collective, and its principal organ of defence of its system, is called upon to play a role in the destruction of this class and system.

For some on the left their understanding of Marxism and the working class political programme has degenerated so much that nationalisation of the economy is itself seen as the transformation of capitalism into socialism. In such circumstances however the relations of production remain unchanged; capitalism continues and the working class remains exploited, oppressed and separated from the means of production. It is precisely the establishment of this last condition that made for the creation of capitalism, and its ending that will signal capitalism’s overthrow, when the working class as the associated producers become owners of the means of production.

Trotsky was scathing about just such a belief in the socialist character of nationalisation. When talking about expropriating the banks he says that “of course this question must be indissolubly linked to the question of the conquest of power by the working class.” In the same article (Trotsky, Nationalised Industry and Workers Control, Writings , 1939) he writes that “It would, of course, be a disastrous error, an outright deception, to assert that the road to Socialism passes, not through the proletarian revolution, but through nationalisation by the bourgeois state of various branches of industry and their transfer, into the hands of the workers’ organisations.”

In many formulations of the call for nationalisation there is not even a call for nationalised property to be transferred to workers’ organisations, although the sometimes call for nationalisation under workers control is a nod in this direction.

We are thus left in the following position having reviewed Trotsky’s programme:
The socialist programme must be understood as a whole and it involves the destruction of the capitalist state and creation out of the working class itself of the new state.

In no country does the working class accept such a task or seek a way to achieve it. In no county is it subjectively revolutionary.

Trotsky seeks to adapt the working class and its political consciousness to its historical task but if it is not seeking revolution and has a very low level of political consciousness how do we proceed in a revolutionary way that does not address workers with politics that undermines the revolutionary goal?

Trotsky said that “comrades are absolutely right when they say we should tell the workers the truth, but that doesn’t signify that every moment, every place, we state the whole truth, starting with Euclid’s geometry and ending with socialist society. We do not have the right to lie to them, but we must present to them the truth in such form, at such time, in such place, that they can accept it.”

It would therefore be wrong to believe that because the complete programme of revolution cannot right now profitably be canvassed among the working class that the programme that must be fought for is less revolutionary. This is so only in degree but not in any qualitative sense. The revolutionary programme does not lose traction, does not cease to truly encapsulate the interests and immediate tasks of the workers because we cannot yet concretely and practically today propose the arming of the working class and destruction and replacement of the capitalist state.

What is also not involved is shying away from arguing outright for a socialist society, a society run by workers, and nor is it necessary or desirable to run away from this vision to the refuge of an improved capitalism. The vision of a systemic alternative to capitalism must capture the working class for it to put it into practice. It cannot be the result of stumbling blindly into it through some disembodied ‘logic’ of class struggle. Not speaking the whole truth every time and everywhere does not mean renouncing the goal of socialism at any time.

The revolutionary programme in non-revolutionary conditions means first rejecting illusions in capitalism and in its state – encapsulated in the demand for nationalisation.

It involves rejecting the substitution of the state for tasks that must be accomplished by workers themselves and it means identifying the steps forward that workers must take to develop their political consciousness, through increasing their economic, social and political weight in existing capitalist society.

There is no shortage of demands which can do so. It involves the demand for workers’ cooperatives – production without capitalists, not just as an answer to failing enterprises but as the model for new ones, through employment of workers’ pension funds and sponsorship by existing workers organisations such as trade unions. This is a question to which we shall return.

It involves workers reclaiming their organisations from the bureaucracies which currently control them through challenging and defeating these bureaucracies. In Ireland one form this takes is opposition to the policy and practice of social partnership. This in turn may involve creation of new trade unions; whether this is so is a practical and tactical question involving judgments that must ensure socialists and other militants do not become isolated.

It means creation of a workers political party that does not become the creature of electoralist stratagems and of TDs, as in the dying ULA. Similarly it does not mean the erroneous view that declarations of revolutionary virtue can in themselves guarantee anything in the wider working class, within which lies the only promise of revolution. The working class will of necessity learn from its own mistakes just as in will be its own liberator.

A programme which proclaims that the emancipation of the working class will be the achievement of the working class itself would go a long way to providing such a programme, were awareness of the dangers of reliance on the capitalist state for solutions as strong as it should be. It is arguing against such illusions, at what might seem excessive length, that many of the posts on this blog have been directed.

It is therefore time to turn to alternatives.

Does the demand for workers control represent such an alternative and does its joining together with a call for nationalisation represent a positive overcoming of the reactionary character of the latter – nationalisation under workers control? (Hint – the answer is no).

Does the call for workers cooperatives represent a real working class alternative to capitalism? Not, it would appear, to the organisations in Ireland’s left. But are they right?

The new bank deal and the working class

debt maturityThe most important aspect of the deal that has replaced the promissory notes is not what it entails but what it does not entail. It does not involve a write off of any of the debt so that less would have to be repaid and interest burden on the debt lowered. It does not involve the European Stability Mechanism, in effect the EU, directly funding the banks which appeared to be the deal offered last June and it does not affect all the bank debt.

The deal on the promissory notes affects €28 billion of a total debt at the end of last year of €192 billion and relates to less than half that incurred in bailing out the banks. The Government has not changed its austerity targets. The editorial in the Financial Times stated that ‘restructuring the promissory note does not make the public liability for bank losses lower, just easier to bear.’ Easier to get workers to pay is more accurate. All the questions regarding how the deal will work have not been answered, which also demonstrates continuity with the promissory note arrangements that were understood fully by very few despite the enormous impact on people’s lives.

Never mind, the Taoiseach proudly told us that the “stains on our international reputations and dents to our national pride, have now been removed from the financial and political landscape”. This is a statement so revealing of the shallow moral argument for the deal, so instructive of the concerns of the elite as distinct from the majority and illuminating of the poisonous demands of national identity that despite its odious character it would be good to see it repeated again and again and again. The Irish people have decades to ponder how satisfying it is to pay for so long to erase such an embarrassment.

As for the new deal itself, it involved the liquidation of IBRC, which was the combination of Anglo-Irish bank and the Irish Nationwide building society. The Government will still pay €1bn to the bondholders of Anglo, as part of the 2008 guarantee, so no bondholder is left behind, and more rotten loans in Anglo will transfer to NAMA, which promises further losses down the road. Loans left in Anglo totalled €15bn.

It involves tearing up the promissory notes that provided the means for the State to get money from the Irish Central Bank (ICB), the local branch of the European Central Bank (ECB), to be replaced by ordinary government bonds, which are really just a more regular IOU used by states. This allows the state to keep the money loaned to it on the back of the promissory notes instead of having to pay it back when the notes were torn up. The state will still have to pay the money back and pay interest but will have much longer to pay and with what appears a lower rate of interest. Both of these are good things – having longer to repay and being charged less for the loan, but both are not as good as they appear.

The longer you have to pay the more you have to pay back, just like any mortgage. The lower interest rate is not such a change for the reason explained in the last article. This is because the high rate of interest paid by IBRC (8.2 per cent) to the Irish Central Bank, which the taxpayer ultimately funded, was used by the ICB to pay the ECB which charged a much lower rate of interest. The difference was returned to the Irish State so the effective rate of interest was not they headline rate of the promissory note. The reduced interest cost between the promissory notes and the government bonds is therefore not what it might appear.

But this is not the only reason the savings might not be so great. The ICB will have an asset, the bonds, the ownership of which entitles it to receive interest every year and receive repayment of the principal. Part of the deal is that the bonds are sold to private capitalists, €6.5 must be sold by 2022. How quickly they must be sold is not at all clear and thus neither is the cost of the deal, although this has not prevented the Government, media and commentators continuing to welcome the deal and proclaim its savings as if they were hard fact.

In selling the bonds the Government will in effect be raising new loans. If for example it attempts to sell €1bn worth of these bonds and investors don’t think the interest they would get on them is high enough they may be willing only to pay €980m, €950m or €930m instead of the €1bn. In other words the bonds would be sold at a loss and the tax payer would foot the bill. To replace the loss would require more loans costing more.

The rate of interest charged on the bonds over their lifetime is not known so calculations of how much the new deal will cost must make more or less educated guesses of how much the deal will actually cost over the long term. The longer the term the more the ‘educated’ guess becomes ‘pure’ guesswork.

Nevertheless within a couple of days estimates of savings on an NPV basis were quoted and savings of €8bn announced. Net Present Value (NPV) analysis allows one to calculate and compare amounts over different time periods recognising that someone would rather pay €1 in 10 years’ time than pay €1 today. It allows one to say whether it would be better to pay €1 for each of the next 9 years and €11 the following year or pay €2 for the next 10 years. In both you pay €20.

The money paid in the future is discounted so that €1 paid in ten years’ time is less than €1 paid in 5 years’ time which is calculated as less than €1 paid in 3 years’ time. How much you reduce the amount depends on the discount rate and this rate can have a big effect on the result. The rate chosen is another variable that is a guess, first educated and then pure.

The higher the discount rate the less costly future costs become which offsets the fact you are paying longer and on the face of it more. So one could be paying €21bn equally over 20 years instead of €19bn equally over 12 years but because the first means the money is paid off later it is worth less and the total cost on an NPV basis is less. In the example above an NPV calculation at a discount rate of 6 per cent shows that the first payment schedule costs €11.2 in NPV terms, where €11 is paid in the last year, and €14.7 in the second where equal yearly payments of €2 are made.

In the new deal the first repayment of principal is not until 2038 and the last in 2053. The NPV savings in the new deal were worked out by one economist as €8bn and then by a couple of others as €4bn, a whopping difference of 50 per cent of the first estimate. Another economist has stated that almost all of the calculated savings disappear if the timing of the sale of the government bonds to the private sector is accelerated. Factor in the loss on sale to the capitalists plus increased interest costs and the deal might very well cost more.

A final argument has been much quoted, and certainly more often than the lack of robustness of the savings estimates. This is that inflation will erode the real value of debt repayable by our children, who will be middle aged when they might finally pay it off. This means that, if say the interest rate is 5 per cent and inflation is 3 per cent the effective rate of interest is only 2 per cent. Also the real value of the money repaid in thirty years’ time will be less because of the cumulative reduction in the real value of the debt by this inflationary process.

It might otherwise be amusing to listen to these experts, who gave us a property ‘soft landing’ and now the wonderful benefits of inflation, except that we can state with absolute certainty that they will also be lecturing us in the future on the evils and futility of seeking pay rises to compensate for inflation because these will only increase it. Not only will interest rates rise in response to higher inflation thus limiting the effect above, which will also put up the cost of mortgages, car loans and credit card debt etc. but higher inflation will also erode living standards. What workers might gain from erosion of the real value of the debt they will surely lose by the reduction in living standards caused by an increased cost of living.

By now it should be apparent that the deal’s main benefit is putting off repayment of the loan principal thus making it less likely the state will have to default. In other words the main beneficiaries are the State and the ECB, which is sanctioning the lending of the money and protecting the European banking system. What is good for the state, that it continues to pay and does not default, is bad for workers who will really do the paying.

The second benefit is that the low interest rate charged for the money the state gets in exchange for the bonds will be around longer. However as we have seen, how much longer we don’t know. It won’t be our decision when it goes up (through selling the bonds to the capitalists) because this is a decision of the European Central Bank. Such a decision will cost us billions but we have absolutely no say in the matter. Yes, we live in a democracy.

Once again it is necessary to educate workers that they must distrust the state as much as they would distrust an email from Nigeria asking for their bank details. (The power of the state means it doesn’t need them.) We need to remind them that the state is able to foist the debt of Anglo and Nationwide on them because it nationalised these institutions. We need to inform them that both the Irish Central Bank and European Central Bank are institutions of the state deliberately designed to be protected against any kind of democratic pressure.

This brings us to a couple of questions a reader asked me about the promissory note deal. He asks how the government borrows from the central bank as if it is separate institution. “To me it looks like the government is borrowing from itself, but if that is the case why doesn’t it borrow some more?”

The first answer is that with so much debt the Irish State cannot borrow more from the markets (private capitalist funds) which is why the EU and IMF stepped in to loan the money. It can’t borrow more from these institutions because they want the state to reduce its indebtedness and pay them back their existing loans.

The second answer is that the Irish Central Bank is a branch of the state and a normal central bank can both provide loans and ‘print money.’ There are limits to the former if, as we have just noted, the state won’t be able to pay the loan back. In this case it is if it makes a loan that isn’t repaid just printing money. Printing money will at some point lead to a devaluation of the currency meaning that the Euro will be worth less and buy less making everyone across the Eurozone worse off when it has to buy goods from countries that don’t sell in Euros.

To protect against this the ECB has a firm grip on money printing and the deal on the promissory notes and the new one involving the issuing of bonds required its approval. The Irish state is part of the Euro so doesn’t control its own currency or it could try to get away with printing some money, although in reality it is too weak to be able to do so even if it went back to the Punt.

The ECB is taking control of the timing of selling the bonds because printing money in exchange for bonds that don’t have to be repaid for years is so close to money printing it really is printing money.

The rules of the ECB prevent it funding states and public institutions directly for this reason. It has however ended up with Irish government bonds in exchange for funding the IBRC. Because it ended up in this position indirectly by funding a bank (public banks must be treated just like private ones)rather than a government and through the receipt at first of promissory notes rather than regular government bonds this has to a very little degree been hidden.

This is why they’re not very happy with the deal and might also be why they will quickly ensure the bonds are sold to private capitalists; thereby entailing an interest cost more reflective of the market. As I have said, this will cost the Irish people a lot of money.

In the next post I will look at whether the new deal has solved the debt problem.

Public Debt and Private Debt by Belfast Plebian

public and private debtAbout three months ago I was listening to Max Keiser on Russia Today talking about his participation in the Kilkenomics conference in Ireland. Max is a former stand up comedian, turned Wall Street broker and now a TV commentator on the markets. What he brings to the role is a large dollop of cynicism as to the subjective integrity of the bankers and brokers drawing on his past experience, his collective name for them is ‘banksters’ or ‘financial terrorists’

In this particular show Max went into his cynical routine and the target was the STUPID IRISH. Max was especially indignant with the attitude of the young Irish people attending the economics seminar who consistently said it was the ethical duty of the Irish taxpayers to make good the debts stacked up by the zombie Irish banks. In the world of capitalist finance where Max used to work it is established lore that the only law that really matters is the law of the survivor, the law of the advancement of the strong and the elimination of the weak. Max finished with the sarcastic quip ‘so much for the fighting Irish.’

The truth is that these young Irish have not been educated in a global financial culture that is based on the perspective of the law of the economic jungle. When ordinary folk think about the debt burden it is usually in terms of subjective feeling.

Let us go back to the most basic subjective transaction. If I need 1000 Euro to do something urgent and I don’t have the money I will have to borrow from someone else. If I borrow from a family member or a good friend I might expect to not pay any interest on the loan and I may even expect to overshoot the pay back date, say a year. But no decent person thinks that having borrowed it is right to not pay the debt.

If I have to borrow the money from a creditor rather than a friend I will expect to pay an interest on the loan, say 10 percent. If I honestly can’t make the loan and the interest on the due date then I will try to delay the terms of payment schedule. But I would still think I have an ethical obligation to pay back what I had borrowed.

There are various reasons why I might think that way, one reason being that I might not ever be able to borrow again if I defaulted. This would be a rational reason but the ethical reason is that if I entered an agreement based on a promise to pay then I feel honour bound to keep to the word of the promise. This is a way of thinking that does not belong to the law of the jungle, it is ethical but it might also be inappropriate for the present context.

Some of the young Irish are following a rational way of thinking when they contemplate the country’s debt and they infer that if the debt is not honoured the country won’t be able to borrow again. Others are following the subjective ethical way in their thinking, that is, if a financial promise or agreement is made then it ought to be kept.

Yet there is a big flaw in the way of thinking in the above. The problem is that the young Irish do not see that there is a distinction in kind to be made between private debt and the public debt and a moral rule generally applicable to the former does not necessarily carry over to the latter.

One way of approaching the matter is to argue there is a difference in kind between private debt and public debt. If this is the case then we might be more able to drop our previous adherence to subjective ethical feeling. There is a ready made version of this argument on the Mises web site (Mises Daily Feb 26, 2013).

Making use of the thought of the Austrian economist, Murray Rothbard, the author argues that it would not be unethical for the American President to repudiate the now 17 trillion dollar public debt pile because the people as private citizens had no part in the making of the debt encumbrance; that was all the work of Congress . He quotes an earlier essay by Rothbard from 1992 when the debt pile was thought to be too high at a mere 4 trillion dollars. The argument is directed against those economists who say that it would be a grossly immoral act and in fact a theft on a grand scale to refuse to honour the loans granted to the Federal Government in good faith

‘If sanctity of contracts should rule in the world of private debt, shouldn’t they be equally as sacrosanct in public debt? Shouldn’t public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people…When government borrows money it does not pledge its own money, its own resources are not liable. Government commits not its own life, fortune and sacred honour to repay the debt but ours’.
The argument continues that the contract between the private creditor and the public authority is an inherently disingenuous one from the beginning. This is because the political authority is not borrowing in its own name but in the name of the taxpayer and secondly the creditor is not taking any risk with his friendship or his promise, for they know the government will always seek to pay the debt because it can expropriate somebody else’s money, and even worse they know in advance that governments will always come asking for another loan unlike the private individual who will eventually realises they have to stop borrowing.

The conclusion is that private borrowing and lending is something honest and is guided by an ethical code whereas public borrowing and lending is inherently crooked.

This is not a bad argument as far as it goes especially if it shocks the subjective ethical feeling out of its subordination to the public debt. In fact repudiating the public debt because it is not our subjective debt is a position that all too easily unites the left and right of the political spectrum. The economists of the Austrian school do provide arguments why the public debt should be repudiated in certain circumstances but it comes with a lot of heavy social baggage. This is the sort of economic thinking that is the basis of the Tea Party movement in the United States. It serves as a useful reminder that the slogan ‘repudiate the debt’ is a slippery one. It is important to know the reasons why we should repudiate the debt.

The problem is that some of the public debt can be construed as our debt and so the Irish government is not without the appearance of a rational case though certainly not an ethical one. Some of the public debt exists to fund crucial social services.

If we try to simplify things by going back to our original loan situation. Say for instance a third party known to me but not a friend borrowed the 1000 Euro on my behalf because he knew I really needed the money and could not get it for myself, how would we stand to this kind of borrowing and debt.?

This in fact is what the Irish government’s rational case really comes down to. The government is presenting itself as the third party that is morally obligated to pay the public debt and the interest on it because the public debt is in fact just the sum of all our private debts. The government merely borrows and spends on our behalf.

In the above situation the simple ethical relation between borrower and creditor easily breaks down into the legal or the political and the moral. The honest person I think would contend that legally they were under no obligation to pay back a loan that was taken out on their behalf by a third party but they would still feel morally responsible depending on one other factor, namely the knowledge factor.

If the money was borrowed on my behalf with my tacit knowledge and approval then I still might feel morally obliged to take on the responsibility for repaying the loan. This track of subjective thought is probably what explains the thinking of those young Irish who still believe ‘we’ have to honour the nation’s public debt. To put it in a nutshell, the government borrowed money from its creditors on our behalf and with our tacit knowledge and approval so we have a moral obligation to help the government pay it back .

Of course it is evident to the not so naive that the Irish government is playing hard and fast with the private and public debt distinction. More and more people in Ireland simply want to burn the government’s creditors; are aware that the so called public debt is not the sum of private debts but the debts of only a handful of very wealthy borrowers concentrated in the private and institutional banking sector. If this is all there is to it then the public debt would I think be repudiated

It might take a while to remove the influence of the golden circle over the political parties but in a situation where the many are steadfastly set against the interest of the few the pressure would eventually count. A no frills Marxist of course would likely disagree, knowing that in a capitalist society the few in the form of the top rung of the capitalist strata do in fact have the political clout to dictate the terms any of economic settlement to a popular government. But even the capitalists have to win elections and socialists should at least concede that their control over the political process is at times precarious.

So why has it not happened yet? I can only offer a few stabs in the dark. Some people continue to look at the situation of the borrower and the creditor in subjective terms and transfer this mode of thought to the public debt situation. What this means is that they think about the public debt in terms of the feeling of the private person: if you expect to get a loan in the future you will have to pay off the loan from the past, and this rule they believe applies to whatever government we choose to elect.

What this reels out as is a way of thinking that accepts that the best the government can do is what we individuals would do in a situation of private debt ie try to roll over the debt. This tends to give the government the benefit of the doubt. Other people think of the government situation in purely subjective or ethical terms and are prepared to honour the public debt because the money was borrowed by a third party, namely the government, with our tacit knowledge and approval when they voted for the party of government .

We might like to call such people dupes but surely the bulk of the people are not STUPID. Some have even reached the conclusion that the debt should be repudiated because the government’s case for repayment is a fraudulent one, that the Irish people had no knowledge of what the government was doing in its secret dealings with the various creditors back in September 2008. They have already repudiated the government and good on them. The reservation here though is to worry over the reasons they have for repudiating the debt and what logic they will follow into the next phase.

What is missing in the present national context is an awareness of another key concept: that of class debt. When the national debate is conducted in term of private and public debt the majority of people easily falls into the trap of applying rule of thumb maxims of how private individuals think about borrowing and lending. Or they declare the government’s debt has got absolutely nothing to do with them. Both have no place for viewing things in terms of objective class debt.

The crucial point is that the public debt that should be repudiated is the debt built up by a wealthy minority and foisted onto the working class as their debt. The idea that a workers’ government should not borrow and take on expansive debt on behalf of the working class should also be repudiated.

A rational case can be made for the idea that Ireland should in fact be cancelling old debts and searching for new creditors, there is certainly no shortage surplus savings in the world, borrowing to invest in public goods and ending the artificial regime of austerity. So it is of the utmost importance to understand the class composition and derivation of the public debt and this requires special analysis, something this blog site is at least endeavouring to do.

Following the Ugly Game

hampdenWhen I last wrote about following the beautiful game attempts were being made to shoe-horn the successor club to Glasgow Rangers into the first division of the Scottish Football League (SFL), the second tier of the professional game, having been prevented from crow-barring them into the first tier – the Scottish Premier League (SPL). As I said then, this attempt flew in the face of everything a sport is suppose to be about – a game played by common rules the results of which are determined solely by the sporting endeavour of the teams. The parachuting of an entirely new club, leap-frogging dozens of others, would do away with the inconvenience of playing football matches and winning them.

The reason for the Scottish football authorities attempt to do this was the claimed Armageddon that would befall Scottish professional football if one of the biggest clubs were to lie outside the top flight. Speculation was rife that TV broadcasters would walk away and sponsorship would fall massively. I covered it on this site not because of my own interest but because it appeared to present a transparent case of money-making triumphing over a corner of human activity which had not yet been completely subordinated to the drive for profit that otherwise determines so much of life.

The pressure of football fans of all SPL clubs compelled their owners to reject the parachuting of the new Rangers into the division and the equally strong reaction of the fans of the SFL ensured that the new club was not able to unfairly jump ahead of many of its member clubs into its division one. Instead it started out life in the bottom tier, division three, another victory for fan power and defeat for money and bureaucratic interests.
The victory however was only partial. By right the new club should also not have been allowed into the third division since it did not qualify to be there by virtue of it not having three years of audited accounts. The rule was broken by the football authorities claiming the new club was availing of an endowment of the old dying club, a very dubious justification in itself, except the old club hadn’t got any audited accounts for its most recent year either.

The reason it didn’t was because it had been embroiled in a long-standing dispute with the tax authorities over its payments to players by way of employee benefit trusts (EBTs), which gave players untaxed income. This allowed Rangers to sign players they could not otherwise afford, win matches and trophies they might very well not have won and deprived every other club in the SPL of deserved income, the amounts involved reaching tens of millions.

Under its last ownership Rangers simply stopped paying all taxes, including PAYE and National Insurance. In fact it stopped paying anyone, including other clubs it owed transfer fees to and the local newsagent. A liquidation process quickly followed when it could not come to an arrangement with its creditors to pay them only a fraction of what they were owed.

New owners bought the assets of Rangers at a fraction of what they had been valued, including the club ground and training complex, through a process that saw the words ‘gratuitous alienation’ (look it up) become common parlance of many more familiar with terms such as zonal marking. This new ownership then proudly declared that the new club was, unlike most others, debt free!

While the directors of Amazon, Google and Starbucks have tried their best to look contrite when confronted publicly with their tax avoidance the directors of Rangers complained about the unfairness of them having to play football in the third division. There was a bigoted agenda against them apparently, although this did not appear to include the Scottish Government which, it was reported, had lobbied on behalf of the tax dodgers. The future independent Scotland that is simultaneously claimed would be a social-democratic alternative to a Tory UK and a haven of low corporate taxation had some confirmation that the latter was closer to the truth, should such an eventuality arise.

The First Tier Tax Tribunal eventually reported, and to the surprise of most found that the EBT scheme was legal although in the fog of Scottish media comment the fact that tax evasion was otherwise proved was lost. Rangers had been vindicated ran the headlines! If only Starbucks could rely on such a sycophantic press.

The decision effectively meant that money to players were loans not income and thereby not taxable as such. The decision, unusually, was not unanimous and the dissenting opinion had rather more to say on why the EBTs should have been taxed than the majority had to the contrary. The precise legal hair-splitting that enabled such a majority decision can be pursued on the net.

On this front however it isn’t all over yet – HMRC is appealing the decision.

A second threat existed to the new club. Rangers had failed to lodge the terms of the ‘loans’ with all the other contractual information required by the Scottish Football Association (SFA) to properly register a new player. Beyond a precaution to ensure that clubs are really independent and the sport corruption-free the rules in this respect are, or were known to be, particularly strict in application. Non-league Spartans had been thrown out of a cup competition and fined a quarter of its annual revenue because it had failed to date a form submitted to the SFA. It had submitted the date but was required to do it twice and hadn’t done so. Just imagine the magnitude of the punishment to Rangers for failing to declare in full the documentation in relation to players’ contracts for over a decade!

Well this week we no longer had to use our imaginations. This was left to the lawyers. The dead club was fined £250,000 it will not pay because .. well’s dead. The whole thing was an administrative error that gave Rangers no sporting advantage according to the independent tribunal set up by the SFA. They did of course embark on this course deliberately but the learned panel pondered that they didn’t know what other clubs were doing and that it had “received no evidence from which we could possibly say that Oldco [Rangers] could not or would not have entered into the EBT arrangements with players if it had been required to comply with the requirement to disclose the arrangements as part of the players’ full financial entitlement or as giving rise to payment to players.”

The ruling appeared to say that once having registered the players wrongly the player was properly registered and eligible to play and only by it being disclosed could the registration be revoked. You are innocent until you are caught! Except even now that you have been caught a slap on the fingernail is the limit of punishment.

Normally incorrect player registration turns the result of every game the player appeared in into a three- nil defeat. But, according to the panel since no sporting advantage arose no sporting penalty should be imposed. What exactly Rangers were attempting to do buying players they couldn’t afford if not to gain sporting advantage the learned panel did not say and dared not imagine.

The decision on the case might appear decisively influenced by the evidence of an SFA official, whose responsibility it was to police the registration process. How convenient then that this rather strange interpretation of the rules also appears to absolve the SFA of culpability for Rangers cheating. The claim of other club’s fans that the SFA showed itself once again to be a Rangers protection racket are indeed hard to deny – so they will be ignored and when not ignored ridiculed.

Once again however this story of money and bureaucracy versus sporting integrity and the wishes of fans may not be over. A future article on this site reporting another victory for the latter may depend on these fans uniting across their various club rivalries to demand that the crimes of Rangers are properly punished and the Augean stables of the SFA are cleared out. In a sport increasingly dominated by money interests and self-serving bureaucracies such an event would be an inspiration to the millions of working people around the world who love the game and would like to see it beautiful again.