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kleptocracy Rules: The Panama Papers & Capitalism -Today:Neo-liberalism’s World of Corruption

TTIP: legalizing Kleptocracy
Of course corruption has always existed in capitalism. But neoliberalism, the ‘free market’ system that started in the 1980s, promoted it on a vast scale for two reasons:

1. Neo-liberal deregulation and privatisation promoted the dominance of financial capital and the expense of industry and the state. Financialisation and low capital gains taxes have turned big companies and utilities into cash cows, virtual banks with huge wealth, looking to maximise the interest on their money and minimise their tax. Finance capital is, after all, basically about swindling. In the middle ages they called it usury.

2. The shift to the right crashed ‘socialist’ command economies and undermined nationalist governments in the third world, replacing both with corrupt and usually highly authoritarian neoliberal regimes. Getting hold of the state apparatus has become a royal road to mega-wealth for dozens of dictators and their cronies through simple theft.

The core of it is the banking system. European and American banks receive (read: launder) billions of dollars every year from international mafias, and in particular from drug dealers. Sometimes by accident some of this comes to light. In 2006 Mexican soldiers intercepted a drug shipment in Ciudad del Carmen and found a cache of documents showing the Sinaloa drugs cartel had made payments of $378 billion to the American bank Wachovia, a subsidiary of the financial giant Welles Fargo.

Roberto Saviano, the author of the best-selling Gamorrah which exposed the workings of the Neapolitan crime organisation Camorra, claims that London is the centre of money laundering for Latin American drug money. Even the British National Crime Agency says:

“We assess that hundreds of billions of US dollars of criminal money almost certainly continue to be laundered through UK banks, including their subsidiaries, each year.”

Saviano says that Mexico is the ‘heart’ of the drugs trade and London its ‘head’. Antonio Maria Costa, head of the UN Crime and Drugs Agency, says drug dealers invested $352 billion in Western banks in 2008, and this was key in keeping some major banks from collapse.

So corruption – receiving money from crime and drug cartels – is deeply ingrained in the culture of US and European banks. And this is not going to stop, given the vast profits involved.

The klepocratic state is an old story. It’s reckoned that no Mexican president leaves offices with less than $100m. Key Western allies from the 60s and 70s, like Mobutu, president of Zaire (DRC) from 1965-97 and Suharto, president of Indonesia from 1967-98, both established murderous regimes and systematically looted their respective peoples of billions of dollars.

Direct corruption by the state is one thing, influence is something else. In western democracies influence is stacked in favour of the rich and powerful. In the United States and increasingly in Britain it is professional lobbyists who fight their corner. The Atlantic magazine in the US points out:

“Corporations now spend about $2.6 billion a year on reported lobbying expenditures—more than the $2 billion we spend to fund the House ($1.18 billion) and Senate ($860 million). It’s a gap that has been widening since corporate lobbying began to regularly exceed the combined House-Senate budget in the early 2000s.

“Today, the biggest companies have upwards of 100 lobbyists representing them, allowing them to be everywhere, all the time. For every dollar spent on lobbying by labour unions and public-interest groups together, large corporations and their associations now spend $34. Of the 100 organizations that spend the most on lobbying, 95 consistently represent business.”

The above account doesn’t include the direct payments and other gifts given to members of Congress by big companies, not least the health insurance and healthcare companies who have fought so long and so successfully against a universal US healthcare system.

Britain is going in the same direction. As in the United States, business and politics are often revolving doors with former minister joining the boards of companies they dealt with when in power. Seumas Milne says:
“…lobbying doesn’t begin to cover the extent of corporate influence. More than ever the Tory party is in thrall to the City, with over half its income from bankers and hedge fund and private equity financiers. Peers who have made six-figure donations have been rewarded with government jobs.

“But the real corruption that has eaten into the heart of British public life is the tightening corporate grip on government and public institutions – not just by lobbyists, but by the politicians, civil servants, bankers and corporate advisers who increasingly swap jobs, favors and insider information, and inevitably come to see their interests as mutual and interchangeable. The doors are no longer just revolving but spinning, and the people charged with protecting the public interest are bought and sold with barely a fig leaf of regulation.”

Corruption everywhere has the effect of transferring huge amounts of wealth from the poor to the rich. If poor individuals are not directly robbed, then their economic situation, their public services, their health service, their transport, their education – all these are robbed when taxes are avoided and government revenues robbed.

You can’t analyse corruption today by looking for illegal activity alone. Many of the practices that happen in rich and poor countries are legal or in a grey area where it’s difficult to tell criminal from the lawful.

For example, property dealing in Britain is profoundly corrupt. House prices in London (and thus in the whole country indirectly) are pressured by the huge amount of hot money from corrupt Russian oligarchs and assorted gangsters of various nationalities invested in the expensive end of the market. But nothing here is illegal, as far as the house purchases in Britain are concerned. It’s just that they are bought with corrupt money and force up the living costs of millions of ordinary British people.

Look at the purchase of rare earth minerals from the Congo, essential for computers and mobile phones. Much of this mineral wealth is controlled by war lord armies, guilty of war crimes and crimes against humanity. The companies who buy the mineral products they control – the moral equivalent of blood diamonds – have no contact with them at all. Dealers act as a buffer and through their transactions – perfectly legal – wealth based on rape and murder is miraculously washed clean.

Finance capital is by definition corrupt. The investment banks typically do not disclose their fees to investors in advance (they call their charges ‘consideration’) by deduct self-decided amounts as they go along. Free charging professionals like lawyers, and in many countries doctors and dentists, make up their own huge fees. Isn’t this corrupt? But there’s nothing illegal about it.

The tax dodges by major companies like Amazon, Facebook and Starbucks, are perfectly legal. They pay all the tax they are required by law – or by agreement –in countries like Ireland and Luxemburg where they are registered. Whether these practices are illegal in the UK for example is a very grey area. But corruption it certainly is.

All these examples have the same effect: robbing the poor to further enrich the wealthy.

 Read more: CADTM - The Panama Papers & Capitalism Today: Neo-liberalism’s World of Corruption

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