ON May 12, about a month after the publication of the so-called “Panama Papers”, British PM David Cameron hosted an Anti-Corruption Summit in London with the aim to “step up global action to expose, punish and drive out corruption in all walks of life.” Though salutary, still a tall order one might think even for countries with efficient judicial systems, strong accountability mechanisms and national integrity systems.
The summit saw business leaders, diplomats and 11 heads of state from 40 nations present visions and blueprints for greater accountability and transparency in public affairs. But most significantly, the leaders presented strategies for the containment of corruption, if not the total eradication of a scourge that has grown to elephantine proportions – costing the world economy billions of dollars every year.
Around 20 of the countries that participated in the summit pledged to enact or strengthen legislation that will make it easier to seize and return assets that have been acquired with “dirty money”. Unsurprisingly, there was much discussion about the use of shell companies and offshore accounts to avoid taxes. Since the “Panama Papers” leak, forty countries have agreed to exchange “beneficial-ownership information” from their registers on an automatic and regular basis. For their usual selfish reasons, several developed countries, most notably the US (ranked third in the world for its levels of financial secrecy), did not sign up to the pledge to share registers – a measure regarded as a “gold standard” in fighting tax evasion and corruption.
In an unusual display of political courage, Allan Bell, chief minister of the Isle of Man, suggested that while it was “all very well to pick on small jurisdictions”, the time had come to acknowledge “the elephant in the room” – by which he meant America with its various tax havens in states like Delaware, Nevada, South Dakota and Wyoming.
As for the host country Britain, just as there has been a constant stream of capital investments into its financial sector, there has also been a regular flow of criticism about its financial double standards and hypocrisy. Perhaps with that in mind, PM Cameron has proposed a number of measures aimed at cleaning up London as an international centre for money laundering and a place where foreign firms and high net-worth individuals often indulge in the worst kinds of financial excesses.
In fact, various NGOs at the summit expressed disappointment that Britain has not done nearly enough to force full transparency on the British Virgin Islands and other British overseas territories, which together account for about a third of global offshore activity. On the issue of tax havens, the British Finance Minister George Osborne has said that “We can get global action by those who don’t play by the rules.” But who really are those countries that don’t play by the rules? By now, hasn’t it become clear that a group of rich countries continue to have one set of rules for themselves and another set for everyone else?
Having himself confessed to owning shares in a Panama tax-haven fund just before assuming office in 2010, (although he has said that the dividends earned were declared and taxed), the British PM described corruption in a post-summit interview as “an enemy of progress and the root of many evils in the world.” Most of the leaders present agreed that corruption doesn’t only harm the economy, but also endangers the unity and security of states by driving people into the arms of extremists.
Whether through bribes, baksheesh or blood money, corruption has many faces, and is as much an American or European problem as it is an African or Asian one. On the day before the summit, IMF had published a report in which corruption was depicted as a burden on the world economy and a growth-hobbling disease.
According to the report, globally US$1.5 to US$2 trillion dollars is lost to bribery and graft annually, which equates to about 2% of global GDP. The paper observed that corruption hampers economic growth by weakening the state’s ability to raise revenue and perform its core functions, as well as undermining the quantity and quality of public spending. In other words, corruption makes the world poorer and less equal.
Reassuringly, the participating nations signed an agreement to “expose corruption wherever it is found, to pursue and punish those who perpetrate, facilitate or are complicit in it, to support the communities who have suffered from it, and to ensure it does not fester in our government institutions, businesses and communities”. There was a specific pledge to “end the misuse of anonymous companies to hide the proceeds of corruption” as well as to “drive out those lawyers, real estate agents and accountants who facilitate or are complicit in corruption,” thereby “denying the corrupt the use of legitimate business channels”.
Of course, the summit was not without a few hitches. The day before the event, PM Cameron was caught on tape saying in front of the Queen that “some leaders of some fantastically corrupt countries” including Nigeria and Afghanistan are due to attend the Anti-Corruption Summit.
Although Nigerians did prod their president to demand an apology, he said he did not require one from David Cameron, but said Britain could instead return assets and property stolen by Nigerian officials who fled to London. Nigeria, which ranks 136 out of 168 countries in Transparency International’s Corruption Perception Index for 2015, has consistently been at the top of the list of the most corrupt nations in the world.
Still, the developed world must stop fooling themselves into believing that the corruption in rich developed countries (whether blatant or hidden) is more defensible than what happens in the developing world. As Jeffrey Sachs suggested, Prime Minister David Cameron’s job at the Anti-Corruption Summit was not to whisper about the corruption of Nigeria or Afghanistan but to “end the deep and historic role of the United Kingdom in this sordid mess.” The same of course, applies to the US, the other forgetful elephant in the room.
Coming Soon: Conscience of a Progressive (My New Book)
For comments, write to ClementSoulage@hotmail.de – Clement Wulf-Soulage is a Management Economist, Published Author and Former University Lecturer.