Oligarchy

Hi, welcome to Oligarchy, where we are tracking how the super rich are changing the world for the rest of us. 

I have been on leave writing my next book, and I can see many of you have joined in that time. Great to have you, and feel free to hit reply at any time if you have tips or questions. 

My last newsletter hit your inboxes at the end of 2020, just as Congress was teetering on the brink of passing Corporate Transparency into law in the United States, and I wondered whether Republican members would have the nerve to override a veto by President Trump. It’s not even been three months, but that already feels like it took place in another age. Congress did indeed hold its nerve, the desperately overdue measure became law, and mercifully we have no idea what Trump thought about it. 

I was glad to see the back of 2020, and the thing I miss least about it is Donald Trump’s Twitter account. It was like having to wear a loud and annoying duck as a hat all of the time. The absence of quacking is Just Bliss.

HOW’S BIDEN DOING?

I have been heartened by how seriously Joe Biden’s team is taking corruption. Oligarchs’ ability to break rules with impunity allows them to enrich themselves, and immiserate the rest of us, all the while preventing us from seeing what they’re up to while stopping us from doing anything about it. This is why the corporate transparency measure was so necessary, since it puts limits on the use of U.S.-registered shell companies to hide assets, dodge taxes, and avoid accountability.

In its interim National Security Strategic Guidance, published earlier this month, the White House has continued this focus, in a pleasing way.

• “Anti-democratic forces use misinformation, disinformation, and weaponized corruption to exploit perceived weaknesses and sow division within and among free nations, erode existing international rules, and promote alternative models of authoritarian governance. Reversing these trends is essential to our national security,” the document states.
• “We will require transparency and accountability in our government, root out corruption, and confront the distorting role of money in our politics.”

There’s a lot of promises in there about what’s going to happen, however, but not much about what’s happening right now. Biden’s got a lot of priorities, what with China flexing its muscles, Covid still being with us, and climate change threatening the future of civilization, so he may need a bit of encouragement to turn this rhetoric into action. It was really good therefore to see a broad coalition of pro-integrity groups – including all around white hats like The Sentry, Global Financial Integrity, the Kleptocracy Initiative, and Transparency International’s US office – demanding that the White House start fleshing out what the new corporate transparency system will look like.

• “We urge you to act immediately to name a specific individual within Treasury to lead the beneficial ownership implementation effort and issue a proposed rule by June 1. We pledge our cooperation and support in this critical effort to help curb wrongdoing on a global scale,” the groups said.

There’s a special United Nations General Assembly convening to discuss corruption in June. That would be a good time to step out and lead the world, Mr. Biden.

WHO WILL BIDEN WORK WITH?

There are encouraging signs in the UK’s brand-new review of its defense and security policy that it too thinks corruption is something that must be tackled, and sees this is as a potential joint project with the Biden administration. If the United States and Britain could work together, they could undoubtedly force through far-reaching changes to the global financial system. Britain apparently sees defending the integrity of its society, economy and money as crucial to protecting democracy, and identifies tackling illicit finance as a particular priority.

The good folks at Transparency International were optimistic about this and welcomed the announcement.

• “Corruption makes the world a more dangerous place, renders our allies less dependable, and emboldens those hostile to the UK’s interests. In order to ensure that the Government’s ambitious new international strategy is successful it is essential to include anti-corruption mechanisms in defence procurement, alliance building and military operations,” said Daniel Bruce, chief executive of TI’s UK chapter.

I couldn’t help wondering, however, what this might mean in practice.

My first concerns were raised by the review’s insistence that the UK’s post-Brexit sanctions regime would “complement existing anti-corruption tools”, which – considering how utterly impotent those tools have been for so many years — is significantly less reassuring than it appears at first glance. Britain’s law enforcement bodies are chronically underfunded, undermanned and demoralized; they can be out-gunned by even a lower-to-middle-ranking oligarch willing to invest in some lawyers. If the new strategy is relying on what already exists, it will struggle to achieve anything.

My second concerns were raised by revelations from investigative journalist Peter Geoghegan, who has exposed how the UK plans to cut the aid it provides to anti-corruption and free speech groups abroad by more than 80%. Considering how dirty money flows unimpeded through the City of London, British support for groups that fight against illicit finance has always felt like greenwashing, but at least the money helped some brave organizations do important work. That will apparently now all but stop. And not only will the new funding arrangements cut off foreign recipients, but also end some anti-corruption work at the already cash-strapped National Crime Agency.

• “The British government has completely abdicated responsibility,” an aid specialist involved in a UK-funded project in Nigeria told openDemocracy on condition of anonymity. “They still aren’t saying what is happening. People don’t know if their work will be there next month.”

WHAT ABOUT THE EU?

Revisions to the European Union’s black list of tax havens (“non-compliant jurisdictions”) seem to come more and more frequently these days, and it would be remiss of me not to point out that there was another one last month. Did Brussels take the opportunity to really single out the jurisdictions that allow multinational companies and wealthy individuals to dodge taxes and avoid responsibility? Did it name and shame the profiteers, or did it just compile the usual ragtag list of places so puny they lack friends in the EU who can argue their corner? 

Judge for yourself, for here is the list, in its entirety: American Samoa, Anguilla, Dominica (which was a new entry), Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands, Vanuatu, Seychelles. I think I can safely say that, if all of those 12 places cleaned up completely tomorrow, it would do precisely nothing to discombobulate the world’s oligarchs.

• “The EU must look at what is happening in its own backyard – European countries are acting as tax havens. It is time the EU cleans up its act and end this looting of public resources. Letting big corporations pay little to no tax at the expense of ordinary people, especially during these hard times, is scandalous,” said Chiara Putaturo, Oxfam’s EU Policy Advisor on Tax and Inequalities.

A more interesting list came from the Tax Justice Network, which published its 2021 Corporate Tax Haven Index, and came up with a rather different selection of non-compliant jurisdictions. If we replaced the EU’s “blacklist” with the top dozen from here, we would end up with a very different picture of who’s responsible for allowing the rich and powerful to avoid paying their fair share: four British offshore territories, Switzerland, Singapore, the UAE, Hong Kong, the Bahamas and – crucially – three EU member states (the Netherlands, Luxembourg and Ireland, ranked fourth, six and eleventh worst in the world).

• “Jurisdictions listed on the EU tax haven blacklist … were responsible for just 1.88 percent of the world’s corporate tax abuse risk. In comparison, EU member states were responsible for 38 per cent,” the TJN noted.

In short, as if wasn’t going to be hard enough to get the United States to tackle illicit finance, President Biden is going to struggle to get his supposed allies to fall in behind him too.

WHAT I’M READING

I loved The Hungry Empire: How Britain’s Quest for Food Shaped the Modern World, by Lizzie Collingham. I am fascinated by the roots of globalization, and its culinary aspects expose as much as the more-discussed financial side. I would never have guessed that a sugar-y cup of tea could be freighted with quite so much significance, in terms of trade policy, history or nutrition. It’s beautifully written, too, and deserves a far wider audience.

I am always on the look-out for events that reek of hubris; things that – like declaring the Titanic to be unsinkable, or the collapse of communism to be the ‘end of history’ – suggest we have all got far too full of ourselves. These are of course far easier to spot in hindsight: an unsinkable ship is only interesting if it sinks. 

However, I’m going to state publicly that I think Elon Musk’s decision to appoint himself “Technoking of Tesla”, combined with the fact that investors did not respond by giving up on him altogether, essentially amount to a sell signal on civilization. History books will be written about this, marveling at humanity’s failure to see the warnings signs flashing all over the dashboard. 

It isn’t too late to save ourselves, however. The Titanic could always have changed course, and steered away from the iceberg. 

An important note. Starting next week, I’ll be giving extra insights about the world of the super rich to anyone enrolled in Coda’s membership program, so make sure to sign up. Plus, you’ll be supporting Coda’s journalism, which is always a nice thing to do. 

See you next Wednesday,

Oliver