Skip to main content

Crooked Crux

posted 26 Nov 2009 13:38 by Dick Pountain   [ updated 26 Nov 2009 14:16 ]
The events of the last year offer a lot of support to a popular view that all politicians, bankers, journalists and perhaps businessmen in general are crooks. No doubt this comes close to being true in some parts of the world, but for us in the developed West it's a counsel of despair that cannot survive closer inspection - if all politicians were in fact real crooks then they would never have allowed the press to disclose their petty expenses fiddles, nor rolled over so supinely once discovered.

Nevertheless an article in the current New York Review of Books called "Illicit Money, Can it be Stopped?" (http://www.nybooks.com/articles/article-preview?article_id=23465) makes for deeply disturbing reading. The authors,  Eva Joly and Raymond Baker, explain how the colossal scale of money laundering, tax evasion and false commercial transactions taken together now account for over $1.5trillion annually, which would have paid for the US bank bailout, or several years of Obama's health reform plans. They describe the three main sources of these illicit money flows, which are bribery and theft; organized crime; and dodgy corporate dealings such as tax evasion and price fixing.

Bribery and theft are endemic in many parts of the world, often carried out at the very highest levels of government. The largest modern example is Russia, where oligarchs have stolen between $200 and $500 billion of former state assets since the "privatisations" of the early 1990s. Organised crime includes drug production and trafficking, people smuggling, prostitution and pornography. Corporate shenanigans mainly involve tax evasion by the establishment of offshore entities through which goods are sold at false prices - a carefully structured scheme can ensure close to zero tax liability in the country of production, a hidden profit in the offshore company, and even a loss offsettable against tax in the country of final sale.

What over 60% of these illicit money flows have in common is that they are disguised as international trade. To move dirty money abroad, you sell some commodity to a foreign customer at a falsely lowered price - they either give you a kick-back (agreed verbally and not invoiced) of the difference in cash, or else they are party to the false accounting, which makes the transaction almost invisible to investigation. Companies from Barclays and BAE to Enron and WorldCom have indulged in such practices, which may be quite legal given loopholes and weaknesses of international law. The Mafia buys up cover companies to use in laundering drug money by similar schemes. All such schemes depend upon pliable banking institutions, like those of Switzerland, Lichtenstein, Cayman Islands and Vanuatu to operate.

The article outlines some of the legal measures that governments like the EU and US, and the World Bank could (are in some cases are) taking to tackle these scams. What interested me most though is the picture it paints of a world economy in an advanced state of decomposition being slowly picked apart by predators and scavengers. The best exposition
of this state of affairs that I've read in recent years is by James K. Galbraith (son of the other J. K. Galbraith) in his 2008 book "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too" (Free Press). He suggests that, far from dismantling the social democratic institutions of economic control established in much of the West following WW2, neoliberal ideologues who have held power - in government, corporations and banks - for much of the last 30 years merely adapted them as levers with which to loot the economy. When Peter Mandelson claimed to be "intensely relaxed about people getting rich" he was equally relaxed about appending "...by legal means".

Comments

Popular posts from this blog

The Touchy-Feely Inferno

This essay was originally the final, epilogue, chapter of an unpublished book I wrote in 2009. On re-reading it today I was struck that 9 years haven't changed much….

                      _________________ * ________________

“My holy of holies is the human body, health, intelligence, talent, inspiration, love, and absolute freedom – freedom from violence and falsehood, no matter how the last two manifest themselves.” [Anton Chekhov]


The incontinent expression of emotion has become a new orthodoxy, not only in popular culture but even in politics. We’re regularly treated nowadays to advertisements that exploit neuroscientific jargon where once they stuck to plain chemistry – they now seek to boost our serotonin levels rather than merely applying lipid microcapsules to our hair. The staple diet of celebrity magazines and soap operas is the ostentatious display of “emotional honesty” and “vulnerability”, people are always now “there for each other”. Hugging is as revealing of the t…

Social Democracy Uber Alles

The outcry over the revoking of Uber's London licence shows that the service it provides is popular, and it's unquestionably a significant, innovative use of new technology to improve transport. On the other hand the outcry from drivers about lack of benefits and job security show that the application of technology is being used (not uncommonly) both to increase exploitation of the labour force and to flout legal regulation designed to protect labour and customers. The outcry of Black Cab drivers against Uber ignores the fact that people flocked to Uber not merely for convenience (though that is considerable) but because Black Cabs had priced themselves out of the market with the last big price hike.

Put all this together and it's clear that all the parties need to get together and find a workable solution, which is highly unlikely to happen because of the vastly different political atmospheres between UK and USA, and a general lack of adult leadership on both sides. I ca…

A Very British Coup?

David Cameron is likely to be questioned about his friendship with Mrs Brooks by Lord Justice Leveson as part of his inquiry into press ethics Photo: REUTERS/GETTY







In 100 years time the last week of February 2012 will be remembered as a turning point in UK history, for three events that don't seem all that remarkable at first sight.

The first event was the appearance of Deputy Assistant Commissioner of the Metropolitan police Sue Akers at the Leveson inquiry, where she claimed that there was a "culture of illegal payments" at the Sun newspaper, in which police officers and other civil servants were not merely paid for specific information but were in effect kept on retainer to leak regularly. Akers testimony coincided with James Murdoch finally resigning the chairmanship of News International, the Sun's holding company. 

The second event was the announcement that the West Midlands and Surrey police authorities have invited bids from G4S and other major security com…