Fantastic corruption

Who can doubt the truth of Prime Minister David Cameron’s apparently unguarded remarks to the Queen and the Archbishop of Canterbury on the eve of London’s anti-corruption summit? Anyone who questions whether Nigeria and Afghanistan are indeed “fantastically corrupt” can’t have been reading the news, or must have a vested interest in denying facts. Isn’t it better to talk about the world as it is, especially when tackling something as pervasive as corruption?

If truth were all that was needed to make sense of this supposed gaffe then Mr Cameron’s remark could be dismissed as mere tactlessness (the leaders of these countries were en route to the summit). But truth, as Oscar Wilde quipped, is rarely pure and never simple. For one thing, Downing Street later confirmed that the Prime Minister knew that “cameras were very close to him,” so his candour was quite deliberate. Once this is understood, ironies abound.

In the Guardian, the economist Jeffrey Sachs points out that the US and UK should put their own houses in order before lecturing others on corruption. Offshore tax havens – like those detailed in the Panama Papers – are, in large part, created by countries that like to assume the moral high ground. The British Virgin Islands, for example, with a population of 30,000, hosts 479,000 active companies, and has half a million others on its books. As Sachs notes, this is one part of a global problem in which “hundreds of thousands of lawyers, bankers, hedge fund operators, politicians, accountants and regulators have consciously built a system of global tax havens of the rich, by the rich, and for the rich.” The US$20 trillion stashed in such schemes is shielded from “taxes, law authorities, environmental regulation and accountability.”  Mr Cameron ought to know all about this problem since he was unfairly accused, just a few weeks ago, of profiting from a tax haven.

What about financial scandals perpetrated by banks in the City of London? There are so many to choose from since the 2008 crisis. Perhaps the fraudulent manipulation of the London Interbank Offered Rate (Libor) – used throughout global finance – best shows how London’s corrupt practices affected other people. American municipalities – which fortunately could take up their grievances in US courts – were among those who suffered from the rigging of the Libor. According to the journalist John Lanchester, US municipalities bought around US$500 billion of  interest-rate swaps and lost about $6 billion on them because of the Libor fraud (in addition to a US$4 billion paid to exit the swaps). Years later, regulators and courts were still working through the evidence to deliver piecemeal justice. By mid-2013, the British bank Barclays had paid £290 million in settlements and the Swiss bank UBS had promised to pay the US Justice Department $1.2 billion as part of ongoing payouts. But when did anyone lament the “fantastic corruption” of these institutions, or the countries that oversee them? (To date, only a single banker has been convicted for this scandal.)

Even if one sets aside the moral lapses that permitted such crimes and misdemeanours, there is still the long history of developed democracies supporting corrupt leaders in foreign countries – to ensure arms sales, trade, and ‘political stability’. Leaders of the free world have never shied away from propping up tyrants and crooks who serve their interests. Eighty years ago General Smedley Butler, who led the Marines into Nicaragua, described himself as “a high class muscle man for big business, for Wall Street and for the banks … a racketeer for capitalism.” The predators of modern finance need less muscle than they used to, but their shameful record in siphoning billions out of failing economies – Greece is one recent example – is racketeering all the same.

In the end, the anti-corruption summit addressed key issues about the need to improve transparency and access to information in all areas of public life. For places like Guyana, it also tabled a worthwhile Extractive Industries Transparency Initiative. But its laudable agenda faces a credibility gap in areas such as whistleblower protection – which has been consistently undermined by US lobbyists – and on  fiscal reforms, and it will continue to do so until countries like the US and UK learn how to own up to their complicity in creating and maintaining many of the fantastically corrupt countries they are now trying to reform.

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