Here’s something for the weekend. The American Interest has just published this article by Ben Judah, whose previous article on why Russia no longer fears the West caused such a stir earlier this year. The title says it all: How Offshore Finance Sank Western Soft Power. This is the story of how all the potential gains that might have been made in the post-Soviet era have dissolved as the citizens of the former Soviet Union countries, like those in Africa, Asia, Latin America and the Middle East, have realised that the West is irredeemably steeped in tax havenry. As one Ukrainian anti-corruption fighter puts it:
What we found was that the money stolen in Ukraine was heading into British and European tax havens and hidden using shell companies inside the European Union. This was very uncomfortable to find out. What we felt is the Western elites were being hypocritical to us—preaching anti-corruption but allowing this offshore world to flourish.
By now everyone knows about how Ukraine’s leaders have stripped that country’s assets and shifted them offshore. We’ve also known for years about how Russia’s leaders have done the same. Somehow western politicians and media don’t seem to join the dots that connect the looting and stashing offshore with broader consequences, including the loss of any sense that western democracies hold the moral high ground. We have entered an age of consequences. As Judah notes:
The Russian opposition is even angrier. Russian oligarchs like to parade their lavish lifestyles in London on Russian television, so the welcome reception they are given by British elites is well known. Because this money is universally believed to be stolen, Britain’s moral authority among Russians has collapsed: Both Downing Street and the Foreign Office are widely mocked, and London is known as “the capital of Russian corruption.”
This reputation is well deserved. The City of London has been steeped in tax havenry throughout the past half century, and it will take a massive political effort to wean British banking off its dependency on the rentier incomes that flow from handling stolen assets and kow-towing to kleptocrats, tax cheats and financial buccaneers.
Nothing new there, you may well say, but the really bad news is that the consequences of our not getting our own houses in order feed into corruption at many levels, some of which have nasty feedback loops. As Judah concludes:
What you need to understand is that Western tax havens have resulted in Ukrainian deaths. Take for example the theft of Ukraine’s HIV budget. The national budget for fighting HIV was stolen and hidden in tax havens and in Great Britain. But this has consequences—we are now approaching a 2 percent HIV infection rate in Ukraine, which is near the no-return point of pandemic. This corruption will kill British men too. I hear they come to Ukraine. But they also return home. What will happen if the British do not close down their tax havens? I will be deeply, negatively, impressed.