“It’s the dark heart of Britain, the place where democracy goes to die.” You’d be forgiven for thinking this describes a seedy underbelly of society – perhaps a British mafia. In actual fact, George Monbiot is describing The City of London. Not London, the geographical location, but the borough known as The City: the financial district of London which is governed by The Corporation of The City of London. How can a square mile of land hold such significance and also be such a threat to democracy? The answer partially lies in its history.

East India Company 

2000 years ago, Londinium was set up as a trading post by the Romans, and it thrived. When William the Conqueror rose to power, he allowed The City to have certain privileges so long as they accepted him as King. Soon, later rulers created Westminster due to being threatened by the power of The City. In 1191, The City of London was declared a commune, which was just one rank below the sovereign. Often, the city was asked to extend its privileges to other areas, however, in 1637 this was firmly refused, leading to the consolidation of a separate self-governing city within a city.

Despite this, in Niall Ferguson’s book Civilisation, he refers to the City of London as an “outback” in the 15thcentury, especially when we look at some of China’s great cities. What changed? A small building about five windows wide. Otherwise known as The East India Company. This was a corporation like no other, one which held the power to take land and wage war for it. The East India Company was a trading corporation that was formed to trade in the Indian Ocean region, eventually colonising large chunks of India, as well as parts of Southeast Asia and Hong Kong. This company was once the largest in the world and had armed forces that were twice the size of the British army. The East India Company brought huge amounts of money into The City, as well as people from all over the world. This led to, between 1825 and 1925, London having the largest population of a single city in the whole world.

There are historic links between The City of London and the East India Company. Charles Peers, Chairman of the East India Company in 1714, was also the Lord Mayor of The City of London in 1715. This goes back even further, even as far back as 1599, when a collective of prominent merchants and explorers met to assess the viability of exploring the East Indies for trade under a royal charter (which would later be The East India Company). This group included Stephen Soame, then Lord Mayor of London.

Today the East India Company has almost no landmarks left to discover in London, many of them have simply been torn down and new buildings raised in their place. There are many reasons for this. Not least on the list was the human misery that many considered the price of the Company’s expansion. It’s thought that Britain robbed India of $45 trillion between 1765 and 1938, as well as causing the deaths of over 1.8 billion Indian people from deprivation. The other was related to the success that many merchants were attaining due to the nature of the Company’s business. Watching famous merchants like Robert Clive buy themselves status, seats in Parliament, and big houses in the country did not sit well with the “establishment.”

Yet the Company did leave a huge mark on the City of London. Nick Robins book The Corporation That Changed the World gives some excellent insights. In the book, Robins argues that the Company was at the forefront of institutional innovation and global transformation in its day. He highlights how “the Company pioneered the shareholder model of corporate ownership and built the foundations for modern business administration.” While the empire collapsed and The East India Company was disbanded in 1874, The City of London continued to be an economic powerhouse.

An Old Boys Club?

This is where we can see that, while somewhat theatrical, Monbiot’s assessment of The City of London as being a place where “democracy goes to die” is not far from the truth. The City of London is a plutocracy disguised as a democracy. The governing structure of the City of London has endured throughout all the transitional phases that the UK has experienced. To ascend in this structure, you have to be recommended by members of the level of seniority above your own at a minimum, making this an insular “old boys club.” The order goes as follows:

 

• Freemen and Livery of the City
• Court of Common Council
• Court of Aldermen 
• Sheriffs 
• Lord Mayor

To become a freeman, you must either inherit this title, be recommended by one of the 110 livery companies as well as the aldermen, or carry out exceptional service. It is also expected that a person’s private funds should be used to support The City, meaning the person elected (particularly to the top job of Lord Mayor) should have a substantial fortune behind them. In other words, you have to be rich. 

There are 25 electoral wards, however, only 4 of these hold the 8,000 votes of The City’s residents. The rest of the votes are taken up by businesses and corporations. The bigger the business, the bigger the vote. It’s not the workers who vote either: it’s the bosses. Much like the lavish dinners put on by the livery companies and the ceremonies that are performed within The City, the governance of The City seems like the practices of a bygone era.

A Global Reach

While The City appears to be insular and exists as a lone entity in its practices, its reach and influence extend globally. The role of the Lord Mayor is to represent The City’s financial interests on the global stage. However, the release of the Panama and Pandora Papers in 2016 and 2021 marked a turning point. These leaked documents exposed that the UK has links to thousands of firms based in tax havens, moving profits offshore to protect its wealth at the expense of its people. In the wake of the release of the Panama Papers, the International Monetary Fund estimates that profit shifting cost developing countries $213 billion per year: almost 2% of their GDP. Mark Donne, the director of the documentary UK Gold, points out that “every single one of the top tax haven law firms are headquartered in London or headquartered in a UK overseas territory.” These can be traced back to The City in a sort of “spider web.” 

It is worth stating at this point that moving money offshore is not inherently illegal, and there can be legitimate reasons for doing so. Indeed, the vast majority of what was exposed in the Panama Papers was not illegal activity. However, tax havens cost governments (approximately) between $400 billion and $800 billion annually. An uncomfortable truth is that there will always be human suffering as a result of exploiting tax loopholes.

Is the City of London a Tax Haven?

The City of London’s unique laws and regulations allow it to direct its money to tax havens, making The City a prime place for foreign bodies to exploit the anonymity and resources it can offer.

 

https://www.disruptionbanking.com/2022/09/28/the-city-of-london-a-pandoras-box/

 

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