Monday, 18 April 2016

Global corruption of democracy in the 21st Century

The Guardian UK, 11 April 2016:

Because at root, the Panama Papers are not about tax. They’re not even about money. What the Panama Papers really depict is the corruption of our democracy.

Following on from LuxLeaks, the Panama Papers confirm that the super-rich have effectively exited the economic system the rest of us have to live in. Thirty years of runaway incomes for those at the top, and the full armoury of expensive financial sophistication, mean they no longer play by the same rules the rest of us have to follow. Tax havens are simply one reflection of that reality. Discussion of offshore centres can get bogged down in technicalities, but the best definition I’ve found comes from expert Nicholas Shaxson who sums them up as: “You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.” In so doing, you rob your own society of cash for hospitals, schools, roads…

“Those who exited our societies are now also exercising their voice to set the rules by which the rest of us live”

But those who exited our societies are now also exercising their voice to set the rules by which the rest of us live. The 1% are buying political influence as never before. Think of the billionaire Koch brothers, whose fortunes will shape this year’s US presidential elections. In Britain, remember the hedge fund and private equity barons, who in 2010 contributed half of all the Conservative party’s election funds – and so effectively bought the Tories their first taste of government in 18 years.

To flesh out the corrosion of democracy that is happening, you need to go to a Berlin-born economist called Albert Hirschman, a giant in modern economic thinking. Hirschman died in 2012 at the age of 97, but it’s his concepts that really set in context what’s so disturbing about the Panama Papers.

Hirschman argued that citizens could protest against a system in one of two ways: voice or exit. Fed up with your local school? Then you can exercise your voice and take it up with the headteacher. Alternatively, you can exit and take your child to a private school.

In Britain and in America, the super-rich have broken Hirschman’s law – they are at one and the same time exercising economic exit and political voice. They can have their tax-free cake and eat it……

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