Oligarchy

One thing that tends to annoy foreigners is U.S. officials’ habit of criticizing them for things that are done more egregiously in the United States. I have heard this firsthand – and, at length – from the leaders of small Caribbean jurisdiction, which have been forced to radically reform their own financial systems under pressure from Washington, while individual states in the U.S. have continued to market schemes worse than anything they ever attempted, and who are really annoyed about it. The leaders won’t go on the record with their objections because they fear that would be like painting a big target on their economies, which – to my mind – makes the hypocrisy even worse.

Some examples: U.S. shell companies are appallingly regulated, and an open goal for money launderers to abuse, as revealed by multiple investigations; U.S. fine art dealers can get away with stuff their European counterparts cannot; U.S. lawyers can move money around without any of the tiresome regulations faced even somewhere as wide-open to scams as London. Most people with even a passing knowledge of how corruption works are aware of this and find being lectured by U.S. politicians rather vexing as a result.

So, credit where it’s due: the White House’s decision to make combating corruption a national security priority is important, and the new strategy, as announced this week, is good. If all of what is laid out here can be achieved, then foreigners will have precious few reasons to grouse.

This is a thoughtful, thorough, coherent, and achievable framework for the country to act within. Yes, there are various references to the need to work with Congress (I was particularly excited to see a proposal to “criminalize the demand side of bribery by foreign public officials,” which would be a game-changer), which will presumably get stuck in the congressional quagmire should the mid-terms not go the Democrats’ way. But there is lots here that could genuinely make a difference, particularly as a rallying cry for Western countries currently at each other’s throats over things like fish.

• “By leaving their financial systems vulnerable to illicit assets—through anonymous shell companies, opaque transactions, and under-regulated professional service providers—rule-of-law-based societies continue to provide entry points for corrupt actors to launder their funds and their reputations. Such activity negatively impacts average citizens in the United States, tilting the economic playing field against working Americans, enabling criminals to flourish and foreign adversaries to subversively peddle their influence, perpetuating growth-dampening inequality, and contributing to pricing out families from home ownership through real estate purchases,” the strategy states.

It is good to see politicians choosing to unite across borders over the importance of fighting corruption, not just as a human rights issue, but as a core national security question. As such, the launch of the Inter-Parliamentary Alliance against Kleptocracy is a welcome innovation, bringing together parliamentarians from Washington, London and Brussels. Among the alliance’s plans are projects to coordinate sanctions and visa banks; to synchronize anti-money laundering frameworks; and to promote anti-corruption ethics.

• “We have been seeing autocrats like Viktor Orban successfully undermining European democracy for years from within, with increasing support from their experienced counterparts in Russia and beyond. If they close their ranks, all democratic parties need to do the same. This is not a fight that a single actor can win alone,” said MEP Daniel Freund of Germany, Co-Chair of the European Parliament’s anti-Corruption group.

The difficulty of course is how to keep such an alliance going in the face of the constant threats, appeals and provocations of the kleptocracies. Russia and China are highly skilled at offering incentives to individual countries and politicians to peel them away from their friends, and one challenge for the White House is how to respond to that without having to give too many incentives of its own.

Another challenge for the White House is how to overcome opposition from wealthy American individuals and companies that like the system as it is, and use shell companies — just as kleptocrats do — to minimize scrutiny of their affairs. As such, I was heartened to see that the administration has acknowledged that this is an issue, if only in a small way.

• “The Treasury will advance its efforts to tackle tax evasion and help American families by making the U.S. and global system of taxation more equitable. While tax crimes are thought to be different than corruption, the two are often interconnected.”

This is a crucial point. Offshore was not invented by kleptocrats but by Westerners looking to dodge taxes and restrictions on movements of wealth established by their own governments. Corrupt officials from elsewhere gate-crashed the party once it was in full swing. If the White House’s strategy does not inconvenience the corporations and billionaires merrily dodging taxes and accountability, it will not be doing its job, and kleptocrats will never be seriously inconvenienced.

This piece shows that top administration officials recognize what they’re up against.

• “Last year, for example, more than $600 billion was effectively withheld from U.S. taxpayers disproportionately coming from top earners and large corporations, who take advantage of our broken tax system and get away with evasion. Obviously, there’s a difference between a tax evader and an autocrat who drains the public treasury, but the financial implications are the same,” wrote Janet Yellen and Samantha Power.

However, this extraordinary investigation by ProPublica into the Alice in Moneyland world of super-wealthy Americans’ tax returns will show you quite how attached they are to the tricks of the financial system. Getting something like that reformed by Congress is going to take all of Joe Biden’s charm.

LIBYAN SHAME

It’s not just Americans who lecture foreigners about things they themselves are guilty of, of course. There’s a particularly stinging example from Ian Urbina (if you haven’t read his book Outlaw Ocean, you should) this week in the New Yorker, detailing how Europeans have essentially outsourced their policy on African immigrants to Libyan mobsters.

• “In the past six years, the European Union, weary of the financial and political costs of receiving migrants from sub-Saharan Africa, has created a shadow immigration system that stops them before they reach Europe. It has equipped and trained the Libyan Coast Guard, a quasi-military organization linked to militias in the country, to patrol the Mediterranean, sabotaging humanitarian rescue operations and capturing migrants. The migrants are then detained indefinitely in a network of profit-making prisons run by the militias,” he writes.

The horror of Libya’s camps for migrants has been revealed before, including by Amnesty International in this report from July.

• “Death in Libya, it’s normal: no one will look for you, and no one will find you,” said one 21-year-old detainee who spoke to the report’s authors.

But one of the most disturbing aspects of Urbina’s tale of corruption, slavery and hypocrisy is how it reveals the difficulties that democratic states face in combating this kind of threat. There are lots of reasons why young Africans seek to reach Europe, but one of them is the fact that the leaders of African nations have looted their countries with impunity for decades, with the active assistance of enablers from European countries. As African states have fallen apart, young people have looked to Europe to find a better life, thereby following the same path as the money that was stolen from them, although it takes them far longer.

In order to solve this problem, European countries need to aggressively tackle their own role in enabling corruption, to turn away kleptocratic cash and its owners, and thus allow African countries to build prosperity for themselves. But instead they’re stuck in a news cycle fixated on the threat that immigrants pose, and thus – in Libya and elsewhere – they end up collaborating with the very corrupt people they should be fighting.

• “These challenges simply do not justify the knee-jerk reaction we have seen in some places. The irresponsible xenophobic discourse. The walls and barbed wire. The violent pushbacks that include the beating of refugees and migrants, sometimes stripping them naked and dumping them in rivers or leaving them to drown in seas. The attempts to evade asylum obligations by paying other States to take on one’s own responsibilities,” Filippo Grandi, United Nations High Commissioner for Refugees, told the EU parliament last month. “The EU, a Union based on the rule of law, should and can do better and in matters of rule of law continue to be an example to others.”

RUSSIA

As I write, Russian state television is showing a clock counting down to a scheduled conversation between Biden and President Vladimir Putin, in which they will presumably accuse each other of acting aggressively in Ukraine. When it comes to Ukraine, Putin inhabits his own reality, in which annexing Ukrainian territory, in violation of a 1994 treaty in which Russia promised specifically never to do those things, is all the proof you need that it “has never been and will never be ‘anti-Ukraine’”.

There is a strong chance that Putin will lecture his U.S. counterpart about how NATO’s recent arrival on Russia’s borders is unacceptable (the arrival is not recent. Thanks to Norway, NATO has shared a border with Russia since it was founded, in 1949), how NATO broke a promise never to move into Eastern Europe (no such promise was ever made), and how the United States covets Siberia (this is a weird one, and appears to originate with Soviet mind-readers). What probably won’t come up, however, is Putin admitting that – really – he should have more important things to think about.

Between the start of the Covid-19 pandemic and the end of October, Russia has seen 813,000 “excess fatalities” – the cumulative total of people who have died each month, compared to the number in the equivalent month of 2019. October was the fourth consecutive month with more than 200,000 deaths in total. The last time that many people died in a single month was in October 2008. It won’t take much more of this for Russia’s excess fatality total to overtake that of the United States, which has more than twice its population.

Putin often justifies the Kremlin’s actions in Ukraine as being in defense of Russian-speakers. It’s a shame he isn’t as worried about Russian-speakers in Russia.

A MODEST PROPOSAL

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WHAT I’M READING

Sorry, but I’m still reading Dan Jones’ epic history of the Middle Ages, as I mentioned last week. On reflection, a thousand-page-plus book is entirely unsuited to a newsletter when I’m supposed to come up with a new book every week. However, I have just started reading the Wizard of Earthsea to my kids, which is every bit as good as I remember it.