Economist Jeffrey Sachs argues that while the release of the Panama Papers has brought welcome attention to the existence of these off-shore tax havens, we should not forget that the roots of the problem lie much closer to home.
The tentacles of corruption reach deep into the UK (and US) financial systems. Banks in the City of London and Wall Street have paid tens of billions of dollars of fines for insider trading, financial fraud, price rigging and other financial crimes in recent years. Yet almost no leading bankers have taken a hit for their organization’s malfeasance. It’s hard to escape the conclusion that the major financial firms are part of a global network of organized financial crime.
The UK and the US are at center of the system of global abuse. Britain created the modern world of global finance in the 19th and early 20th centuries, and Wall Street became co-leader with the City of London after the second world war. In both countries, hundreds of thousands of lawyers, bankers, hedge fund operators, politicians, accountants and regulators have consciously built a system of global tax havens of the rich, by the rich, and for the rich that now hosts more than $20tn (yes, trillion) of funds hiding from taxes, law authorities, environmental regulation and accountability.
In the excellent documentary Requiem for the American Dream that I reviewed here, Noam Chomsky discussed what he calls the financialization of the economy, how over time the financial sector has rapidly grown in size at the expense of manufacturing. In 1950, the manufacturing sector contributed 28% to the US GDP while the financial sector had 11%. By 2010, the former had dropped to 11% while the latter had risen to 21%. By 2007, just before the last crash, the financial sector had 40% of corporate profits whereas before 1970, it had been in the 15% region.
This has made the banks, investment firms, and insurance companies the most powerful economic players in politics. For all Hillary Clinton’s claims that she will be tough on the big banks, the financial industry from continuing to shower cash on her, suggesting that they believe her stance has been forced on her because of how much resonance Bernie Sanders’s’ attacks on the banks have resonated with people, and that her heart is not really in it.