Opening a window on what the connected and rich can get away with

A collaboration of reporters from around the world has produced a new report entitled “Secrecy for Sale”. The report describes the way in which the connected and rich use offshore companies and tax havens created by the world’s biggest banks to hide their money and avoid contributing to the communities that have helped them become successful.

From the report summary:

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.

The records detail the offshore holdings of people and companies in more than 170 countries and territories.

. . .

The vast flow of offshore money — legal and illegal, personal and corporate — can roil economies and pit nations against each other. Europe’s continuing financial crisis has been fueled by a Greek fiscal disaster exacerbated by offshore tax cheating and by a banking meltdown in the tiny tax haven of Cyprus, where local banks’ assets have been inflated by waves of cash from Russia.

Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. Studies have estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year.

There has been an ample amount of evidence reported on in the United States to warrant vast prosecutions of those on Wall Street. But that hasn’t happened as the Bush and Obama Administrations let the revolving door between Wall Street and government agencies spin round and round. And besides the Occupy Wall Street, the American people have largely let them off the hook.

I would love to see big banks torn apart brick by brick, a return of the firewall between commercial and investment banking, and government agencies with real teeth and power to go after financial fraud. I’m optimistic but no fool to believe this will actually happen. I suspect even the next financial crisis, which is bound to happen because of the currently overinflated stock market, won’t bring about real change. With unemployment expected to remain high, corporations hiding $1.7 trillion in liquid assets in their mattresses, wages dropping, and the price of energy continuing to climb (no, drilling won’t help) working people don’t have anymore to give.

They don’t have more to give in large part because they aren’t making any money, if they can even find a job.

This is how Bloomberg reported it back in September:

The U.S. Census Bureau figures released yesterday underscored the struggles of American families in a sputtering economic recovery. The report also showed the income gapbetween rich and poor people grew to the widest in more than 40 years in 2011 as the poverty rate remained at almost a two-decade high.

. . .

The census data show the wealthiest Americans secured most of the benefits from the economic recovery that began in June 2009.

“The gains from economic growth in 2011 were quite unevenly shared as household income fell in the middle and rose at the top,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said on a conference call with reporters.

MotherJones puts the income gap problem in graph form:

So what you have is a toxic mix of income equality, hidden money and assets, falling wages for working people, and a political system unwilling to do anything about it. Henry Ford famously set out to make a car that people could afford. For the last 20 years people have been buying cars, boats, computers, and other goodies they really couldn’t afford, able to do so only because of multiple home mortgages and vast amounts of credit card debt. This is not the recipe for a successful society. What companies, their CEO’s and the rich must understand is that their success is tied directly to the fortunes of those don’t have what they do. Wages can only go so low, environmental conditions can only become so bad, and corruption and greed can only become so rampant before the society they depend upon for their riches collapses.


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