James Meek’s book Private Island left a deep sense of sadness as the impact of privatisation and neo-liberalism that started in the 1980’s was exposed. By the end of just the first chapter of Vassal State, I was so enraged that it was several days before I could bear to pick it up again. Even Thatcher would have been shocked to see how the neoliberal project is playing out in the world today.
A walk down the high street
In that first chapter, Angus Hanton walks through a UK supermarket, aisle by aisle, taking us through familiar brands, listing the US states where the profits go: Atlanta, Michigan, Missouri, Ohio, Texas, Virginia. We learn “how strong brands are a sure way to extract profit” and “how US food companies are well aware of the power of sugar, salt, and fat to harness customer addiction”. (p.12)
The author then leaves the supermarket to continue down the High Street where US chains stand out and then steps back to look at how major US corporations now dominate so many sectors: advertising, agriculture, banking, entertainment, insurance, legal services, management consultancies, logistics, travel, oil. The US Inland Revenue Service records the profit made by the larger US corporations in the UK:
“In 2019 that was $88 billion, equivalent to £2,500 of US profit for every British household.” (p.29)
What follows is a series of in-depth, well-researched revelations.
Foreign direct investment (FDI)
The author describes two types of FDI: the good, where there is real investment in plant and machinery; and the bad, where an existing company is just bought to be managed by new owners, for example, Kraft buying Cadbury and closing a factory. (p.32)
“Our survey of the UK economy suggests that these FDI investments are only rarely new job-creating factories. They are investments in profitable, existing businesses and rent-yielding properties.” (p.48)
Other countries limit the extent to which foreigners can own their businesses. It seems that the UK doesn’t care and, as the author found out, the UK Government is not even interested in collecting statistics. (p.36)
Tolls and platforms (p.68-99)
US-based online platforms such as Ticketmaster, Expedia, Uber, Zoopla, eBay, and Amazon now reach every part of our lives. They provide easy access to services and the operator with a frictionless cash flow, but should you wish to complain or raise concerns things become difficult.
Many of these platforms have established monopolies, seemingly impossible to displace because of their high-quality content. We discover that when a Brit rents a property from a British owner, Airbnb will take 17% of the fee. Overall, they extract $1bn a year from our economy.
Amazon has become an essential platform for UK businesses to access the market, acting as a toll bridge as usage grows and cash flow increases. No British online reseller can collect an annual subscription fee of £95 a year, as Amazon does from its Prime members.
“US Corporations developed the art of moving people from free-to-use services to subscription services.”(p.93)
In 2020, half of retail sales were paid in cash, today 90% are paid using US card issuers Mastercard and Visa, who take 1.5% of UK retail spending. UK banks get some of this, but US corporations are in control.
A bad year for the economy is a good one for private equity (p.103-117)
Few people understand or care about how private equity companies work. When a public company is bought by a private equity company, its information as well as its capital becomes private.
There is a loss of accountability and transparency, accounts are difficult to read, and boards less responsive to stakeholders. Huge incentives are paid to executives, debt is used to finance the acquisition, the focus of the business becomes converting strong cash flows into profit and paying less tax to make it ready to sell on to market (an Initial Public Offering, or IPO) or to a US multinational.
During the pandemic, the founders of many businesses were looking to retire. Others saw that their business had become unviable. Able to borrow cheaply, and by outsourcing almost everything to accountants, surveyors, and lawyers, private equity companies took the opportunity to buy more companies, restructure, and sell on.
“Private equity firms are not wealth creators – they are wealth extractors.” (p.116)
More recently, investors in private equity companies have been invited to put up “permanent capital”. Rather than resell the acquisition, the private equity companies accumulate capital to extract more income.
In 2024, it is estimated that $2.5tn of investment flooded into private equity, resulting in phenomenal amounts of capital in the hands of the US-based private equity titans.
Tax (p.123-137)
Paying less tax is a key driver for US corporations, who put little value on social responsibility. Just 1,000 multinationals make up 30% of the UK economy, paying less than 1% of the governments total tax.
“Walkers, a UK brand established in 1948, was reorganised by its owner PepsiCo… the tax bill for Walkers Snack Foods reportedly dropped from £28 million in 1998 to just £8 million in 2002”. (p.126)
Many of these companies have a low physical presence with a large user base, yet they all rely on our national infrastructure. Amazon’s core business in the UK depends on our road network and local authorities to collect tons of cardboard and plastic waste. Just six corporations (Meta, Apple, Microsoft, Amazon, Alphabet, and Netflix) use around 50% of the capacity of our telecommunications infrastructure, with data centres consuming increasing amounts of power and water.
In April 2020, seeking a more significant contribution to the cost of maintaining our national infrastructure, the then Chancellor Philip Hammond introduced a Digital Services Tax that would be linked to sales rather than profit. EU countries followed suit but were soon forced to back down by pressure from the US Government.
NHS and British Tech (p.140-160)
The US relationship with the NHS started in 2002, with elective procedures outsourced to free-standing surgical units, to be followed by a growing number of services since.
The scale of the involvement of US corporations in the NHS is unknown as the country of origin for goods and services procured is not recorded. The author’s own research, however, shows that roughly 40% of UK non-workforce health spending is already with private suppliers, and around 50% of that is with US companies.
We are told that seven of the top ten suppliers of medical equipment are US-based and that diagnostic centres, clinics, and private hospitals are dominated by US suppliers. US companies have taken over GP surgeries, and Integrated Dental Holdings (Mydentist) is funded by private equity.
The NHS and the Government have become overly reliant on a small oligopoly of large US tech corporations. Historically, the UK Government has only bought cloud services from Amazon, Google, or Microsoft, spending £3bn annually.
British IT Companies, such as Buckingham-based SoftCat, with annual sales of $1bn, list 33 companies whose software it sells to government and all but four are US-based. The contracts to supply systems to the Land Registry and Passport Office were awarded to a Northern Irish company Kainos, who based the solution on US Software hosted by Amazon Web Services.
The ultimate challenge
Like James Meek, Angus Hanton offers some suggested solutions:
Stop the sell-offs
Challenge the idea that FDI is good in all its forms. France and Germany have laws to stop the sale of companies in strategic sectors. To defend against foreign buyers with lots of capital and raw profit-making objectives, France has protected €180bn of assets from foreign takeover. Even yoghurt has been designated as a strategic industry.
Government should actively support innovation
Abandon the notion that private capital alone will deliver sufficient innovation and investment. SpaceX has been given $15bn in US Government contracts since 2003. Why hasn’t the UK Government invested in our technology sector to support the systems that the NHS and the Government needs?
Protect and invest in British people
Measure more to increase our understanding so that we know who owns what assets and runs our economy.
The author quotes from an article in a Forbes:
“Some technologies are so critical for running a country’s economy and government that we must ask three important questions:
- Do we control the critical technology in our own country?
- Do we have access to the technology from multiple independent countries?
- Do we have long-term, guaranteed, unfettered, and secure access to the technology from a monopoly or oligopoly supplier from a single country?
“’If the answer to the above three questions is no, you have to make changes,’ says… vice-chair of the European Innovation Council, Hermann Hauser. ‘There is a danger of becoming a new vassal state to these tech giants. It’s the danger of a new kind of colonialism, which is not enforced by military might but by economic dependence.’”(p.66)
Vassal State could be summed up by the familiar looking slogan below. If we are to stop being driven by US interests, we need to make changes.
We send the US approximately £1.25bn a week, equivalent to £65bn or $88bn annually. Let’s invest in the UK instead.
Comments? We want to hear them. Please write to editor@westenglandbylines.co.uk
