On April 3, 2016, 2.6 terabytes of data—more than 11.5
million documents—leaked from Panama’s law firm, Mossack Fonseca. The documents
show that the firm “helped heads of state, oligarchs and celebrities launder
money, dodge sanctions and avoid taxes.”[1]
Over 40 years, 214,000 offshore shell companies in 200 countries implicate
individuals including the family of Syrian President Bashar Assad, and that of
British Prime Minister David Cameron, several friends of Russian President Vladimir
Putin, and Icelandic Prime Minister Sigmunder Gunnlaugsson; financial
institutions implicated include UBS, HSBC, and Société Générale.[2]
I contend that the markets themselves had been tilted in the interest of the
greater power (i.e., the rich), so systemic rather than incremental or
piecemeal efforts would be necessary to solve the problem.
To be sure, offshore accounts were not at the time illegal,
yet even so, the ethical dimension is stinging. Peter Atwater, a behavior
economist, points to the 1% being able to “move anywhere they want and profit
handsomely from the relocation” whereas “the 99% are left with the aftermath—the
empty buildings of a deserted Detroit, the toxic waste from chemical plants in
West Virginai or the unsustainable tax liabilities of Puerto Rico.”[3]
In short, the richest of the rich had for years gotten away with minimizing
their taxes in ways that are not open to anyone else. Simply put, this is not
fair; no social contract with any sort of equitable basis would have such an “out.”
Global Financial Integrity found at the time of the leak that
“developing and emerging economies lost $7.8 trillion in cash from 2004 to 2013
because of maneuvers like those allegedly perfected by Mossack.”[4]
In 2016, illicit outflows were increasing at the rate of 6.5% a year, twice the
rate of global GDP growth.[5]
As most emerging economies were slowing in the first quarter of 2016, the
outflows could have tipped the global economy into recession.
Clearly, a cultural mentality of self-aggrandizement at the
expense of the general economic good (not to mention ethics) had gripped the
richest of the rich, with a slanted (i.e., unfair) economic “game-board”
resulting. Such a dynamic is the antithesis of a social contract. Put another
way, the mentality undercuts the de facto social contracts by which people
agree to live within societies and accept even their basic frameworks. Were the
99% organized, we might have seen an effort to re-evaluate how the market
mechanism works. As it was, incremental rule-changes by governments was the
response. For instance, “new rules released by the U.S. Treasury on April 4
crack down on American corporations that allow themselves to be acquired by
foreign firms to avoid U.S. taxes.”[6]
Yet if the Panama Papers are any indication, the problem goes well beyond the
acquisition of U.S. firms by foreign ones. For instance, a company need only
establish operations in a tax-haven to shield taxation at higher rates.
Furthermore, what was being done to stop companies from dodging sanctions to do
business with certain countries? What of the money laundering? Even answering
these questions one by one misses the more fundamental point that the global
market-system itself is flawed—and in a way that is convenient only for the
rich. Attention to the system itself is needed, yet without the organized
pressure of the 99 percent, wholesale political efforts are unlikely.
Abstractly speaking, a system is not a system if certain
internal variables can maximize themselves without stopping at the contours of
the system. Put another way, a system that restricts the vast majority of
people yet is semipermeable to the maximizing few is inherently as well as
ethically compromised. Yet efforts to level the board would seem to require
lessor power to overrule a greater power unless the power of the vast majority
is organized and activated such that it becomes the greater power.
[1]
Rana Foroohar and Matt Vella, “The Panama Papers Expose the Secret World of the
1%,” Time, April 18, 2016, pp. 11-12.
[2]
Ibid.
[3]
Ibid.
[4]
Ibid.
[5]
Ibid.
[6]
Ibid.
