Following on from Sunday's post on the collapse of capitalism, speculation is capitalism’s original sin. It dresses up as investment, speaks in the smooth tones of “liquidity” and “market confidence”, and insists that it’s doing something terribly clever with risk. But strip away the jargon and it’s simple: someone bets, someone loses, and society picks up the tab when the house burns down.
For all our talk of productivity and innovation, modern capitalism is built not on making things but on guessing what they’ll be worth next Tuesday. The market long ago stopped rewarding production and started worshipping anticipation. A hedge fund manager pockets millions not because he’s built a factory, but because he’s bought the right rumour and sold the right dream. The profits are unearned – and worse, untaxed proportionately to their damage.
Every speculative bubble drains real GDP like a slow puncture. It inflates paper wealth, drives up housing and food costs, and then collapses – leaving central banks and taxpayers to sweep up the debris. It’s the same ritual: privatised profits, socialised losses, and a solemn promise from the City that this time, lessons have been learned. Until the next one.
And here’s the cruellest irony: when the dust settles, those profits don’t even stay in the country that enabled them. They’re shovelled offshore – hidden in shell companies and trusts, spirited through the Caymans, Luxembourg, or Delaware. The money leaves the very economy that made it possible. Had the speculation never taken place, that capital would still be circulating – paying wages, building homes, funding enterprise. Instead, it’s locked away in financial exile, compounding quietly on the vacuum it created.
That’s why speculation isn’t merely unproductive – it’s anti-productive. It sucks oxygen from the economy and calls the suffocation “growth”. Governments are then forced to borrow to plug the gap, effectively subsidising the gamblers who gutted the tax base. The nation grows poorer by roughly the amount the speculator grows rich.
And yet, whenever you suggest taxing speculation properly, the same chorus begins: “But the money will flee!” To which the answer is – it already has. Speculative capital is rootless by design, a digital migratory species that owes loyalty to no flag and contributes to no community. It needs no factory, no workers, no soil beneath its feet – only an internet connection and a lawyer fluent in tax havens. It’s already operating from offshore servers, booking profits through Ireland, paying dividends in Jersey, and retiring in Monaco.
Real investment, by contrast, can’t flee so easily. No one ever moved a railway to the Cayman Islands. You can’t offshore a wind farm, or a bridge, or a dockyard. Infrastructure is anchored by its very nature – it exists somewhere, employs someone, and leaves a footprint that can’t be spirited away overnight. The capital tied up in those things builds a nation; it doesn’t drain it. And here lies the truth that polite economists never quite admit: taxing speculation more heavily would make investment in infrastructure more attractive, not less. When gambling with money becomes less profitable, building things becomes relatively more rewarding.
Of course, even infrastructure investors can walk away when a nation becomes hostile to reason, as Dyson proved – patriotism ends where profit begins. But Dyson didn’t leave because speculation was overtaxed; he left because Britain prized financial engineering over mechanical engineering. When your economy rewards those who shuffle wealth rather than create it, the innovators pack their bags. He moved his headquarters, not his factories – the brand stayed British, but the profits didn’t.
The lesson is simple: don’t confuse productive capital with parasitic capital. Punish both alike and you drive out the builders along with the bettors. Reward speculation, and you throttle the productive economy with your own short-termism. The balance lies in protecting those who invest in things that stay – infrastructure, technology, skills – while making it ruinously expensive to bet against the people who do.
If you buy and sell within a year, pay 90 percent. If you hold for two, pay 70. The longer your capital is actually at work, the less you owe. Real investors won’t mind; gamblers will squeal. And that’s the point.
“Liquidity,” they’ll cry, “will dry up!” Good. We have oceans of it sloshing uselessly between trading desks, destabilising currencies, distorting commodity prices, and rewarding insiders who front-run pension funds. Let it evaporate. Perhaps then we’ll rediscover the old distinction between value and valuation.
Politicians, naturally, will flinch. The speculators fund their campaigns and write their manifestos. The revolving door between Treasury and trading floor spins so fast it could power a small city. But that only proves the necessity of the tax. A democracy that can’t tax its parasites has already been captured by them.
This isn’t about envy; it’s about arithmetic. Unearned wealth isn’t growth – it’s extraction. When a hedge fund makes a billion betting against a currency, GDP doesn’t rise by a billion; it falls by the cost of lost jobs, shuttered factories, and inflated imports. Speculation transfers wealth from the many to the few and then calls the theft “market efficiency”.
Feudalism had its tithes; capitalism has its bubbles. Both are forms of rent – one paid in wheat, the other in wages. And both end the same way: a revolt by those who’ve run out of things to lose.
So tax speculation until it remembers its place. Let the gamblers pay for the risks they create. Real enterprise will thrive; parasites will move on. And when the next crash comes – as it will – perhaps, for once, it won’t be the nurses and builders bailing out the traders.
A society that can tax work can surely tax luck.
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