The Panama Papers are a collection of 11.5 million leaked legal documents spanning over four decades — amounting to an incredible 2.6 terabytes of data — that contain details on on over 214,000 offshore companies and their shareholders and directors — who include the leaders of five countries — Argentina, Iceland, Saudi Arabia, Ukraine and the United Arab Emirates — and the officials (or their relatives and confidants) of more than 40 other countries, including Brazil, China, France, India, Mexico, Russia, and the U.K.
The documents were from the Panama-based global law firm Mossack Fonseca, which specializes in helping the world’s wealthy and powerful evade taxes (and in the case of dictators, international sanctions). An anonymous source leaked the papers to the German newspaper Süddeutsche Zeitung back in August 2015, then to the U.S.-based nonprofit International Consortium of Investigative Journalists (ICIJ). Hundreds of journalists in more than 80 countries were subsequently provided with the documents, leading to the recent news breaking out in early April.
As of now, a full list of the companies and individuals implicated by Panama Papers is to be released by this coming May, though it remains to be seen what difference any of this will make. Most of the major financial institutions involved, such as UBS and HSBC, have long managed to endure similar scandals of shady financial dealings. The fact that government officials, namely those hailing from some of the poorest and most corrupt countries, would be involved is no surprise either. It has pretty much been (grudgingly) accepted as a given that those with wealth and power stash their riches to various offshore havens across the globe.
Writing for TIME,
The Panama Papers illuminate a key aspect of why the system isn’t working–because globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot. Globalization is supposed to be about the free movement of people, goods, and capital. But in fact, the system is set up to enable that mobility mainly for the rich (or for large corporations). The result is global tax evasion, the offshoring of labor, and an elite that flies 35,000 feet over the problems of nation states and the taxpayers within them.
Where do we go from here? I think we’re heading towards a root to branch re-evaluation of how our market system works–and doesn’t work. The debate over free trade is part of that re-evaluation. The calls for a global campaign against tax evasion are, too. I think there will also be intense scrutiny about the ease with which financial capital can move around the world – we’ve already seen that with the hoopla over tax inversions, but we’ll see a lot more backlash, in new areas.
“I expect that the populist backlash will be intense and will impact everything from high-end real estate to PACs (effectively political shell companies),” says one of my favorite sources, Peter Atwater, a behavioral economist. “Voters are increasingly angry at the seeming transience of the financial/corporate/political elite. The 1% can move anywhere they want—and profit handsomely from the relocation, but the 99% can’t. Worse, the 99% are left with the aftermath—the empty buildings of a deserted Detroit, the toxic waste from chemical plants in West Virginia or the unsustainable tax liabilities of Puerto Rico.”
Fixing all this is a growth issue, and not just for the U.S. and other rich countries. As Global Financial Integrity recently found, developing economies lost $7.8 trillion in cash because of maneuvers like those allegedly done by Mossack Fonseca, between 2004 and 2013. What’s more, illicit outflows are increasing at a rate of 6.5 % a year—twice the rate of GDP growth. At a time when most emerging markets are slowing, and are the reason for the drag on global economic growth that smart people say could cause another recession by this year or next, it’s an issue that we all need to care about.
I wonder how much more of this the world can take. For all the incredible progress our species has made in reducing abject poverty, hunger, and other social calamities, far too much suffering and deprivation remain — and that is despite the literally hundreds of billions of dollars that remain in the hands of a relatively handful of individuals. Such an unequal arrangement is morally grotesque and unjustified, not to mention increasingly unsustainable — societies wracked by so much inequity and social strife are precarious. How much longer before the rage of the world’s masses reach a crucial tipping point? What are your thoughts?