Libor, Tax Havens and the Filthy Rich

By Glenn Ashton · 2 Aug 2012

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2012 is the year to dispel any doubt that capitalism is terminally ill. The recent Libor scandal in the United Kingdom, where the head of Barclays was pilloried for his responsibility in fixing one of the world’s most important international interest rates was shocking, not for the fact that it happened, but because it was exposed at all. The incestuous relationship between the international banking industry and the fiat-money based central banks is a shell game of staggering duplicity, in which only the truly ignorant are fooled.

The structure of money, of international banking markets and of wealth production through ledger entries, is almost certainly one of the boldest confidence tricks ever visited on society. The architects of the system argue that without it we would not have the stability and liquidity required to create the wealth that has been generated since the Bretton Woods agreement stabilised the global economy after World War II.

Yet all that this so-called Washington consensus really achieved was to ensure continued control of the world’s financial markets by the identical interests which were in the ascendant at the time. This hegemony is evident to all who would see it – the G8, the OECD, the World Bank, the IMF and World Trade Organisation and central and commercial bankers are each simply different branches of a financial world government of insiders.

While some spectacular ponzi schemes are shut down by the architects and builders of this financial empire – let’s not forget Mr Madoff - the grandest ponzi of all is not only allowed to continue, it is encouraged to blossom. As the world saw in 2008 the system is propped up without a democratic by-your-leave, consistently burying overworked middle-class taxpayers beneath ever increasing indebtedness.

And this is where there is a critical disconnect. The lords of the universe who control this unstable financial edifice insist that they pay their dues. This is a baseless claim. It was adeptly exposed by a far more shocking revelation, one which should have eclipsed the Libor scandal.

This is the real story – the scandal of tax havens and dirty, fugitive money, concealed by those who have profited from this system for far too long. These individuals continue to plunder not only the wealth of the world, but more importantly the ecological account upon which we all depend for our very survival.

Exactly what was this shocking revelation which should have far broader exposure? It was the publication of a set of figures by a little known organisation which tracks this data - as much as it is possible to do so - calculating the amount of wealth squirreled away in tax havens around the world

The Tax Justice Network (TJN), a British-based watchdog organisation, showed how at least US$21 trillion of private wealth had effectively been removed from transparent oversight, and shifted into obscure tax havens around the world. In fact $21 trillion is a conservative figure; TJN estimates that this could be as high, or possibly higher, than $32 trillion. This is a huge pile of dosh.

Exactly how much is a trillion dollars - or a trillion anythings? A trillion is 1 000 000 000 000. A trillion seconds ago humans were still stuck in the early Stone Age around 30, 000 years ago. Put another way, a trillion one dollar bills, if you could extract them from the tax havens, would fill around 500 Olympic swimming pools.

$32 trillion is about half of the 2011 global GDP. Removing half of the value of all of the goods and services generated last year from general circulation is clearly anti-social. It removes a vast amount of money from the global economy, starves markets of liquidity and drives down demand. Put politely, it is indistinguishable from theft. No, make that grand larceny. It is stealing tax revenue from where it is most needed.

But let’s remember another really important point here. The $32 trillion that the wealthy amongst us have hidden from plain view is not the total of purloined wealth – it is only the privately owned, individual wealth. What about corporate wealth for instance? What about profits earned by companies which off-shore their operations to sweatshops and tax havens? Exxon, the world’s richest corporation, paid 2% in Federal Taxes in 2008 – 2010. Chevron paid 4.2%.

What about, for instance, Mitt Romney’s millions? Or billions? Here is the richest person who has ever run for the presidency of the USA. He admits to having foreign bank accounts in havens like Switzerland but cannot recall where. How nice for him. So why does he pay a mere 15% on his latest tax bill, while President Obama – and most other Americans -  paid twice that rate? We can see just which side Mr Romney is going to bat for.

Some important questions begged to be asked about this whole fiasco. For instance how do individuals like Romney, along with the corporations and shell companies around the world get to move money into havens like the British Virgin Islands, Panama, Vanuatu and Lichtenstein? Simply put, they use the conventional banking system. Well, not the high street version; they employ banks most cannot afford.

Interestingly these are the very same banks which we, the honest taxpaying citizens of the world, bailed out to the tune of $2 - $3 trillion on behalf of the global elite in 2008. Goldman Sachs, Union Bank of Switzerland and all of the other top ten are complicit in shifting the money of the 1% into a virtual black hole where it can be neither traced nor tracked.

How does this $32 trillion in tax havens compare to what the world really needs? In order to write off the debt of the 139 poorest nations, conventional figures estimate that some $4 trillion is required. However this is misleading as these countries are actually net creditors to the tune of $10 to $12 trillion. All the same, they have haemorrhaged at least $9 trillion to tax havens, in what is known politely as global wealth flight. More like global extortion.

Neither does the $32 trillion include the property, yachts and other wealth stashed around the world. It also excludes the huge amounts generated by international crime, which flits between tax havens and the legitimate banking system, to the tune of at least $2 trillion annually. And it equally excludes massive flows of illegal money between corporations, governments and goodness knows who else. So, even though $32 trillion is a big figure, it only represents the olive in the martini.

Where does this leave us? How about the fact that Barclays – doubtless as good at moving wealth into offshore havens as it has been shown to be at fixing rates and funding illegal arms deals around the world – has recently funded Mitt Romney by at least $1 million?

The shamelessness of a disgraced banking institution blatantly supporting an erstwhile ally in financial concealment tells us more than any commission into the affairs of Barclays or the credit crunch could ever do. Fixing inter-bank lending rates and fixing the structure of the global economy are just different symptoms of the same disease.

There are oceans of money slopping around between strange tropical havens. This money really belongs to us all – it is nothing less than stolen wealth. It is the interest of pensioners and savers. It is the money lost to tax collectors. It is real money, extracted from the system and then hidden from us all. This is money which should be taxed and equitably redistributed to build a more egalitarian global society.

The reality, supported by World Bank and US Treasury figures, is that less than one percent of the world’s people, fewer than 10 million individuals, control more than 80% of the world’s wealth, accrued though increasingly nefarious means. The exponential growth in global wealth has benefited the wealthy while the poor remain excluded.

So when we are told that we live in a free market, democratic world, there is lie number one. When we are told that life is unfair – perhaps that is closer to the truth. The question is, what are we going to do about it?

Ashton is a writer and researcher working in civil society. Some of his work can be viewed at Ekogaia - Writing for a Better World. Follow him on Twitter @ekogaia.

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14 Aug

Spot on

Excellent stuff Glen. I could not believe that the CEO of Shoprite owes R2 billion in PERSONAL taxes to SARS. There has to be something really wrong with a system that makes a few individuals so rich while millions suffer low wages and high food prices.

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