Originally published on Open Labour
The Panama Papers story has been received in a flurry of outraged comments. The intensity with which citizens in various part of the world have reacted is understandable. Both the magnitude of the sums concealed and the size of the list of individuals and corporations implicated in it surely sound astonishing. However, it is not the first time that some investigations expose the mechanisms with which the elite “legally” or illegally conceal their wealth, and in this regard the Panama Papers story appears as just another tax scandal, in line with the revelations of LuxLeaks in November 2014.
Some have commented that Panama Papers have had a shocking effect as they put in the same bag policymakers from a high level of government in the West with officials coming from regions usually considered as fuelled by corruption, hence the appalling character of the revelations. It seems like press secretaries from Western democracies and their relations in the media have done such a good job at pointing fingers at Putin that they have genuinely convinced their people of their own integrity. But these comments also obscure a very simple truth: that the practices of tax avoidance and tax evasion, far from representing an anomaly in late capitalist system, are instead the very proof that this one is working efficiently, along its own neoliberal precepts. These are to encourage a deregulated finance, liberated from the constraints of the state, and from the duties that come with it.
Looking back at the 1970s economic recession in advanced economies offers a fruitful analysis as to the roots of this neoliberal turn. Some scholars have observed how the stagnation during this period that led to rising unemployment and high inflation forced policymakers to take action to avoid a crisis of legitimacy, and for capitalists to maintain the status quo on the social order. They realised that liberating global markets mechanisms offered a way out, as it transformed the resources constraints of the 1970s into an era of cheap, abundant capital.
What ensued were three decades of deregulation of capital markets worldwide. As a result, it has been reported that “from the early 1970s up to the late 1990s […] the number of tax havens rose dramatically, as did the scope, planning, and sheer volume of financial assets passing through them. This was the true heyday of the tax haven.”
Therefore, when the British Prime Minister David Cameron affirms that we live in a world which fosters “wealth creation” when trying to justify his father’s involvement in this affair, he cannot be more right. But a particular type of wealth, one that comes from arbitraging an unleashed and inflated financial sphere.
Accompanying these regulatory changes and liberalisation of capital, a rhetoric of competitiveness has been hammered home for the past thirty years in order to justify these policies. This logic has become so prominent that it left no space for alternatives. It allowed politicians to close their eyes on the rising number of tax havens while doing tax favours to large multinationals and encouraging them to arbitrage between various tax systems across the globe to remain “competitive”, hence avoiding to pay their due to society. “Laissez-faire, laissez aller”, as would say the French. The irony here is that it is completely against competitiveness to allow multinationals to maintain an edge versus smaller size enterprises just because they have the financial and legal means to practice tax avoidance. Nevertheless, the discourse maintained its grip.
Mirroring this ultra-circulation of capital, people from the working class in advanced economies have no choice than to pay docilely their taxes – in addition to being submitted to extremely harsh politics of austerity. Indeed, apart from an exclusive group of wealthy individuals who inhabit the world as one open space, the working classes will find it extremely complicated to migrate regularly to arbitrage tax systems. A French worker will find it a long journey to establish a new life in Dublin due to gaps in language, skills, and culture. In short, the “liquid” aspect of money is far from being transposed to the bodies of the working classes, or if it is, it is often under constraints of survival as various waves of immigration have recently shown.
To justify this injustice, the working class is being served a discourse that affirms the necessity of austerity measures. The latter, enacted by politicians and technocrats undemocratically, are presented to populations as the sole response to the fiscal mayhem their country is in – there is no alternative, they say, there is no money left. So if the Panama Papers are so important, it is because at one level they reveal the rhetorical fraud behind the necessity of austerity.
How ironic the notion of scarcity is, when gigantic sums of money are being exported out of public purses to sit in offshore bank accounts. How outrageous the idea of necessary collective sacrifice becomes, when billions could be transferred to welfare programmes from the revenues of companies like Google which makes 11% of its non-US revenues in the UK – public deficits would look far healthier, and the whole neoliberal argument would lose its grip. Austerity would then appear for what it really is: a political choice which establishes a transfer of wealth from the working class to the elite by putting the costs of adjustment of deficits on the former, instead of tapping into the global savings pools of the capitalist sphere.
Some proposals have been made to counter tax evasion and tax avoidance after the Panama Papers got leaked. A great demonstration of care from the political class? Or simply just communication requirements in times of crisis? The European Commission offered to bring more transparency through country by country tax reporting. Piecemeal proposals in the eyes of Oxfam, as some tax havens will still be out of reach and the story will repeat itself. The French finance minister Michel Sapin on his side expressed the need for “complete cross-border transparency and international tools to deal with the problem”, rightly highlighting how the globalised character of the financial structure requires global action.
Let’s be clear, any institutional changes, however bold they are, will not be sufficient. What is required is a change of ideological framework, a change of values. Unless this is the case, promises made by politicians will remain empty words. Shifting the terrain from the prevalent logic of competitiveness will be crucial. Revealing the injustice at work in a system which taxes the working class and closes its eyes on tax havens for the wealthy will be even more. Once these notions of austerity and competitiveness stop being erected as sacrosanct concepts, the way forward will be to battle for a democratic process for national budgets, one that reinstalls some solidarity between classes and reconsiders justice in welfare as primordial. So much to do.
 Harvey, D., 2007. A Brief History of Neoliberalism. Oxford University Press Inc., New York
 O’Connell, Paul (2013) ‘‘Let Them Eat Cake: Socio-Economic in an Age of Austerity’.’ In: Nolan, Aoife and O’Connell, Rory and Harvey , Colin, (eds.), Human Rights and Public Finance. Hart.
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