Архив за етикет: Panama Papers

English Division, Банки и инвестиции, Икономика, Политика

LESSONS FROM PANAMA

1376 прегледа0 коментара

Author & Prof. Dr. Douhomir MINEV, Bulgarian Academy of Sciences, Regular member of „The Philosophy Club“

The debate regarding the Mossack- Fonseca papers focused on a number of important topics. For example, attention was paid to the huge amount of financial resources in offshore companies, individuals whose names appeared in the papers are discussed, some analyses assess democracy and press freedom, according to the severity of criticism of politicians who used offshore havens, while others (Prof. K. Petkov, for example) claimed that the findings could be a percursor of a significant reconstruction of the actual financial system.

All these issues undoubtedly are important, but there are others that remained outside the debate or fell in its periphery. Such a topic is the huge increase in non-transparency and secrecy of finance, its generation and movement. The secrecy surrounding the way of acquisition of certain resources (their origin), the data on their size and the names of the owners, several years ago made some researchers of offshore companies talk about the coming of a new kind of capitalism – ‘the secret capitalism’.

This secrecy only facilitates, and in this sense, encourages and is even a tool for generation of income in ways that are hardly socially useful, barely contribute to the development of societies where the funds are acquired, and speaking bluntly –these resources most probably have been gained in a socially harmful manner that is associated with damage to the societies as a whole and to a large groups of people. Arguably, the secrecy about the origin of the money is a tool used to artificially generate risks that are called ‘new risks’ – they arise from the disfunctions of societies per se and affect societies in general.

Second, wherever we encounter secrecy, we usually also encounter crime. On that account Andrew Sayer challenges the common assertion that putting funds in offshore locations is not a crime because it is permitted by law. The law actually permits concealment of funds in offshore companies, but the funds themselves are usually acquired by criminal means. Tax havens operate with money that is free from any signs of the way they have been acquired and this is not accidental – usually the deletion of origin means ‘money laundering’. In offshore companies are concealed funds belonging to obviously criminal organizations involved in drug trafficking, prostitution, human trafficking, terrorism, tax evasion/avoidance, illegal trade operations etc.

Thierry Godefroy and Pierre Lascoumes state that international mafia circles benefited widely from the opportunities created by the rulers in the economy at the end of the XIX century, in order to evade taxes and to avoid state control over their commercial operations. They call this ‘invention of the first mondialisation’. This ‘invention’ – movement of capital and commercial operations performed in secrecy and with a certain criminal nuance – to this day remains a significant feature of globalization.

Third, the issue with offshore companies (secret, conspiratorial capitalism) does not arise for the first time in 2016 with the disclosure of the Mossack- Fonseca papers. Already in the 70s of the last century was noted that offshore financial centers were experiencing unusual expansion. Researchers point out that only during the period 1970-1975, bank deposits on the island of Guernsey increased twice, and those on Jersey increased nearly 100 (one hundred) times for the period 1970-1990. If in the early 70s the deposits there were below 500 million, in 1990, they reached 45 billion pounds. But these are not the only two islands.

Offshore banking was growing and acquired an enormous scale, where the fifth ranking in world banking (volume of deposits of non-residents) is Georgetown – the capital of the Cayman Islands, with 80% of investors from the US. According to OECD, the pace of this expansion was further accelerated in the 80s and especially in 1985.

Fourth, when the expansion of offshore banking attracted attention, taking special measures was proposed repeatedly. J. Chirac, for example, proposed the so-called ‘Code de la route’, D. Strauss-Kahn proposed an ‘international police’, and these proposals were not made at home, but at international IMF fora. However, there has been no adequate policy response since then, which is hardly just a mistake. As a result of this ‘mistake’, the accumulation of funds in offshore havens today is really impressive.

Tax Justice Network estimates that in July 2012 at least USD 21 trillion (and possibly USD 32 trillion), was hidden in tax havens by the world’s wealthiest people. These figures do not include the wealth held in the form of real estate, yachts, works of art and other kind of properties, “owned” by secretive offshore companies, trusts and foundations. Many researchers (Ronen Palan, Richard Murphy, Christian Chavagneux, Andrew Sayer) emphasize that half of international bank lending is conducted via tax havens, and majority of hedge funds are based in them. Oxfam recently announced that US corporations have concealed USD 1.4 trillion (the amount might be lowered, if we consider the data on the Cayman Islands) in tax safe harbors, where „Apple“ is the leader with USD 181 billion.

Fifth, the dynamics of tax havens is not an isolated phenomenon. The ‘filling’ of offshore locations not only coincided in time, but apparently is in causal connection with several other spectacular changes in the last 4 decades: deregulation, privatization, dismantling of the ‘welfare state’. All these generated a huge resource for the offshore locations.

Sixth, especially remarkable is the fact that when the known effects of these policies (growing inequality, poverty, unemployment, jobless growth (rent seeking) increasing budget deficits) occurred, the decision makers did not address the issue of tax havens and did not remember the the proposals of J. Chirac and D. Strauss-Kahn, but simply began to impose restrictions on deficits and proclaimed financial discipline and the notorious austerity measures the only salvation. Just at the time when the turbulent flows of illegal money flowed to secret bank accounts in offshore companies, the official political efforts were focused on ‘financial stabilization’; ‘deficit reduction in public budgets’; ‘strengthening of financial macro frameworks; ‘flexibility and activation of labor markets’, etc.

The final outcome of the political efforts was called ‘economic and financial crisis’, but some called it ‘kleptastrophe’ (catastrophe caused by theft) and this name reflects better the causes of the crisis – politically and institutionally constructed combination of deregulation, privatization, secrecy, conspiracy and crime. And the crisis itself was the final phase of the slow, prolonged discontinuation of the development process, which took place after the Second World War.

What do these facts tell us?

 First, obviously the economists (James Galbraith, for example), who claim that the economies in the developed world increasingly assume a criminal nature, are right.

Second, probably it will not be a mistake, if we say that the same process spreads also over the political systems and the power elites acquire the traits of organized crime groups or at least merge with them.

Third, the last 4 decades have shown what happens to people and their society when politics, economy and the power elite assume a criminal nature. If we consider the enormous damages inflicted on the life and health of millions of people, we can say that a World War III was initiated, although not between countries but between global power elites (their national branches) and a great part of humanity. The people have lost this war. Now the war seems to come to an end – the revelations of PanamaLeeks are one of the signs thereof. The European leaders also ‘consider’ (at last) some measures against tax evasion. A recovery will probably begin and will continue for another several decades. Then again a crisis will be set up, and again for several decades (for various reasons, it is possible that they opt for 40-year cycles, including because of some infantile desire to see themselves as Moses).

The ability of the elites to organize such global waves shows that they have gained enormous, absolute power. This power has replaced the democracy and is based on artificially created intellectual superiority of the elites – a sort of elitist ‘intelligent design’ of social evolution. Power elites replace social evolution, based on morality, freely created knowledge and increasing democracy (social choices) by large scale manipulations.

Their intellectual supremacy is artificial because it is based on the deliberate restraint of people’s capacity to understand the realities and to control elites. For example – all the time while the spectacular transfusion of resources flowed from the formal financial system (both household and public budgets) to offshore locations, intense arguments and political wrestling were running: ‘liberalism or etatism’, ‘capitalism or socialism’ etc. that had no direct relationship with the actual processes taking place.

The ability of people to understand what was happening was limited by ideologies, control and distortion of information, restraint of knowledge creation, use of secrecy and deliberately maintained ignorance, challenge and rejection of basic moral values (honesty, fairness), control over science, media, etc. By those means power elites gained absolute power and imposed unprecedented symbolic violence – constantly cheating on huge masses of people (it is true that absolute power corrupts absolutely).

Thus, no one was able to oppose to the pervert elitist ‘intelligent design’ of the social evolution. However, some maneuvered better, others – worse, i.e. – more obediently.  

 

Sofia, April  18, 2016

 

English Division, Policy Papers, Банки и инвестиции, Глобализация, Политика

Panama Papers: A Rude Awakening for the World’s Wealthy

1661 прегледа0 коментара

STRATFOR: Geopolitical Diary, April 5, 2016=

A leak from Panama-based Mossack Fonseca law firm revealed the offshore financial dealings of hundreds of the world’s elite, including several international heads of state.

This morning, many of the world’s elite suffered a rude awakening. The Panama Papers, the product of a year’s work by an international network of reporters, had been made publicly available. The information dump, the largest of its kind, reveals the private financial dealings of hundreds of wealthy individuals, with records dating back 40 years in some cases. The development hit the superrich in particular, which partly explains the sensitive nature of the report: Its anonymous source was a leak from within a large law firm in Panama — a notable haven for offshore wealth — and its contents reveal the details of offshore companies and holdings. These details are normally hidden from public view and often for good cause, whether to mask tax avoidance or something darker. The average citizen usually lacks the motive and the resources to make use of such facilities.

As it stands, the scandal looks as though it will have a long life. The information so far released feels like only the tip of the iceberg, yet already important figures have been implicated. A trail appears to connect Russian President Vladimir Putin to a string of secret holdings, including a $2 billion offshore account. He is not alone. Ukrainian President Petro Poroshenko has substantial wealth in the British Virgin Islands. Iceland’s prime minister, Sigmundur David Gunnlaugsson, already faces stiff pressure to resign after struggling to explain his holdings in a shady company at the time of Iceland’s economic collapse. Various senior figures in the Middle East and Africa are on the list, as are members of China’s Politburo. So, too, is Argentina’s president, Mauricio Macri.

What is a Geopolitical Diary?

But not all of these revelations will have a lasting effect. Ownership of offshore accounts is not illegal in itself. Offshore bank accounts traditionally provide a venue for dubious dealings, but they also offer low-tax environments where the superrich may keep their wealth away from prying eyes. Of course, international leaders are embarrassed that the world knows just how much untaxed money they have squirreled away, and where. But that may be the extent of their suffering. For example, Macri’s wealth was never a secret. After all, he was once the president of the Argentine football club, Boca Juniors. Perhaps he could also be forgiven for keeping his money outside the country, considering the restrictive administration that preceded his accession to the presidency in November. If having wealth offshore turns out to be the scope of Macri’s financial activities, he might escape the scandal relatively unscathed.

In other cases, notably those involving former Soviet, African and Middle Eastern leaders, the public might just shrug their shoulders. For one thing, some of these leaders have a tight grip on power, limiting the civil institutions that could conspire to topple them for any crimes they might commit. Furthermore, with a long history of leaders lining their pockets, the populace in those countries may be more surprised to find a ruler did not have an offshore account somewhere. So far, the reaction in the West, where such dealings are considered beyond the pale, has been muted — except in Iceland. Then again, Iceland is hardly a player of global influence.

But there will be repercussions, that much seems sure. In countries where citizens suspected that elites were embezzling money but could not prove as much, evidence will now be available. In China, a corruption probe, aimed in part at rooting out party members with large sums stashed abroad, was already underway. Any new information produced in the Panama Papers may actually do President Xi Jinping a favor by exposing undesirables. At the same time, the leaks could implicate party members or others whose identities he would rather conceal. For instance, Xi’s brother-in-law is among those mentioned in the report. In short, senior figures may lose their jobs, and indeed their freedom, over these revelations. There are also potential political ramifications.

In Russia, Putin’s spokesman has claimed that the leaks are a calculated exercise in realpolitik, an attempt by the West to muddy the waters after Russia showed good faith by withdrawing troops from Syria. In the Netherlands, a referendum will be held on Wednesday over whether to ratify a European trade agreement with Ukraine. Already, the deal’s opponents have seized on Poroshenko’s inclusion in the Panama Papers as evidence of Ukrainian disrepute.

Perhaps the broadest implications will come from the light these revelations shed upon the banking and financial system itself. It is not a secret that vast riches are stored in offshore havens — Gabriel Zucman’s 2015 book The Hidden Wealth of Nations calculated the total sum of hidden assets at 8 percent of global financial wealth — but never before have we had access to the details. And the phenomenon of offshore wealth is a symptom of a more malignant condition. The disparity between rich and poor has been growing for decades, and these giant offshore sums are likely a reflection of that trend.

Offshore funds are a problem for governments. Economies around the world have been flagging, saddled with high debt and lacking obvious ways to overcome their stagnation. While the debt limits spending, raising taxes would surely further stifle economic growth. Meanwhile, central banks, which have been carrying the burden for the past eight years, now appear to be reaching the ends of their effectiveness. To these governments, the 8 percent of global wealth that may currently reside in untaxable offshore havens presents an opportunity. Wealth that should be taxed, whose tax revenue could bolster government coffers, ready to be spent on infrastructure projects that might stimulate the next round of sustainable growth, is instead sitting idle in the Cayman Islands.

That, then, may be the true legacy of the Panama Papers: that they will draw the eyes of the world to the darkest corners of the financial system, and the resulting public outrage will empower governments to shut down these havens that have long sheltered the rich from taxation. In recent years, the world’s leaders have been discussing ways to defeat tax evasion. Thanks to the efforts of investigative journalists, they may have now have the means to do so.

On top: People gather during a protest on Austurvollur Square in front of the Icelandic Parliament in Reykjavic, Iceland, April 4, 2016, calling for the resignation of Prime Minister Sigmundur David Gunnlaugson.