It has been 45 years since Daniel Ellsberg’s leak of the Pentagon Papers revealed unknown details of how the U.S. was waging war in Vietnam. This week, the release of what are known as the Panama Papers is showcasing how some of the world’s wealthiest and most corrupt leaders in business and government are, in their way, declaring an economic war on the world’s citizens.
At first, the response was relatively ho-hum. After all, the contents of the 11.5 million documents released by the International Consortium of Investigative Journalists (ICIJ) did not reveal any surprising facts about how the oft-described “1 percent” is evading taxes by hiding their assets in offshore accounts. Everyone knows about the financial elephant in the room, so what’s the big deal?
Publications including the New York Times at first buried the story, although the NYT has since been spinning its wheels to explain why the papers were not treated as front-page news. Other news outlets, including the Wall Street Journal, are dismayed at the ongoing questions as to whether these leaders, from Russia’s Vladimir Putin to the father of U.K. Prime Minister David Cameron, are evading taxes or even not paying them at all. Avoiding taxes is a universal trait.
But what is revealing is the scope and scale by which many of the world’s wealthiest people, many of whom already have dodgy reputations, have accumulated assets. To its credit, the WSJ has acknowledged that the amount of income, and number of accounts in which these funds have been sequestered, merits more investigation.
The paper trail has footprints across the globe. Several leaders in Africa, or their associates and family members, are implicated in the leak — the results of which could in the long run help these countries find ways to recover, or at least locate, endless sums of public funds that have gone missing.
And the dominoes are starting to fall: At press time, Iceland’s prime minister, David Gunnlaugsson, reportedly submitted his resignation. Gunnlaugsson really had no choice as many Icelanders suffered after the country’s economic collapse in 2008, largely because many of its highly-leveraged commercial banks collapsed. Many citizens in the country of 323,000 are still smarting despite Iceland’s overall recovery.
The evidence from these documents also suggest that the family of Syria’s Bashar Assad had access to offshore banks — despite the fact that international sanctions were supposed to circumvent such privileges.
Plenty of ire has been directed at the founders of the Panamanian law firm Mossack Fonseca, from which the ICIJ sourced the mountains of documents that will stain the reputations of countless “reformers.” Those who have some explaining to do include Chinese president Xi Jinping, Ukrainian president Petro Poroshenko and even newly-elected president Mauricio Macri of Argentina, who has enjoyed a honeymoon after succeeding mercurial Cristina Fernndez de Kirchner.
But the stubborn fact is that plenty of professional service providers in Panama are in on these schemes. As the Atlantic explained, Panama’s laws allow the process of establishing an offshore company to be almost as easy as opening a PayPal account. Considering Panama’s history, it should not be surprising that its laws have led to this explosion in the news: We’re talking about a country artificially created by its separation from Colombia over 100 years ago as French and American business interests were hell-bent on building a canal through the Panama Isthmus, with President Theodore Roosevelt more than pleased to ensure that it happened. Fast forward to 2016, and Panama is estimated to have the world’s third largest total reserves of offshore bank accounts.
As more citizens see more resources going to the extremely wealthy, much of their ire has been directed at banks for their perceived lack of transparency. This made sense in the aftermath of the 2008-2009 worldwide financial crises, sparked largely by the re-securitization of assets — notably those mortgage-based securities, which American bankers were successful in selling far beyond America’s borders. But the real lesson learned from the Panama Papers fallout is that service providers, including law and accounting firms, have been deeply involved within this shady game. Many governments have been unable, or unwilling, to examine their operations closely for a bevy of reasons. That may finally change as the scope of this leak becomes more understood.
Image credit: Wiki Commons/123Hollic