The Weekly Sift

There are reasons why you should care.

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Last week, a vast trove of documents called the Pandora Papers became available to the public, and stories based on these documents started appearing in newspapers around the world. The documents reveal much about the wealth that the global elite keep hidden.

If that story sounds familiar, it should. This is the third round of such revelations from the International Consortium of Investigative Journalists (ICIJ), following the Panama Papers in 2016 and the Paradise Papers in 2017. That’s why The Wall Street Journal’s Joseph Sternberg responded with “Everyone already knows this stuff.“

In other words: Yeah, the world is corrupt and here’s more of it. But so what? The super-rich play by a different set of rules — always have, always will. What’s the point of looking into how it all works?

It’s hard to imagine a more corrosive take on this story. It’s one thing if a few masterminds are so clever that their crimes escape detection. But if no one cares when hidden crimes are exposed — or if a few scapegoats are punished, but the system rolls on unchanged — then the world is very sick indeed. As The Washington Post’s editorial board observed:

[T]he big picture — of a vast, no-questions-asked-zone, open to legitimate and illegitimate transactions alike — is concerning. Corruption and cronyism can undermine political stability and legitimacy as surely as violence can, albeit more insidiously. To the extent the world’s offshore havens are facilitating official malfeasance, they are contributing to the global decline of democracy.

So while I could spend my time exploring how the offshore systems works, or raising outrage about extreme cases, or reacting in some other way, I think the most valuable thing I can do is try to answer that basic so-what question: Why should you care about all this?

After looking at what a variety of other people are saying and talking to a few insightful friends, I think the answers boil down to these:

• The importance of corruption as a central issue connecting all other issues.
• The accomplishments of previous rounds of revelations.
• The momentum of ever-larger exposures of secrets.
• America’s role in building and maintaining the corrupt system has to end.

Corruption. It’s not an exaggeration to say that corruption is the most important issue of our time. Money buys power, and power gathers more money. No matter what issue you care about, progress is impeded (or maybe blocked completely) by wealthy special interests that can influence the course of events in ways that go well beyond you and your vote and your voice in the public square.

Brooke Harrington points out that the issue is not just money.

“[T]ax havens” aren’t really for avoiding taxes: They exist to help elites avoid the rule of law that they impose on the rest of us. The offshore financial industry is generating much of the economic and political inequality destabilizing the world.

It’s one thing when money works its influence openly. If some giant corporation runs ads telling us all how wonderful it is, if it puts out press releases telling us what public policies it wants, and if it endorses and supports candidates who promise to implement those policies, then the People can judge. Climate-denying Senator James Inhofe, for example, is widely known as “the Senator from Exxon-Mobil”. But if the voters of Oklahoma know that and elect him anyway, that’s democracy.

What’s really destructive, though, is secret money in all its forms: lobbyists who work behind the scenes, writing laws that legislators attach their names to; candidates supported by political action committees with benign names, whose donors are not known; “academic” research whose conclusions are dictated by invisible donors, and so on.

The ultimate form of secret money is wealth whose owners can’t be identified at all, and which can be transferred from one person to another without any traceable transaction. Such wealth allows dictators to siphon their nation’s wealth away, and to hang onto it even after they lose power. It allows bribes of any size to go to officials in any country.

The existence of secret wealth and a system for transferring it from one malefactor to another is more than just a tax on the legitimate economy, it corrodes the public trust that is necessary for collective action. Conspiracy theories of all sorts seem more plausible, given the extent of what we know we don’t know. The vague awareness of an untouchable global elite can motivate authoritarian populism, the desire for a man-on-horseback who can sweep it all away without being caught in the tangle of corrupt laws and contracts.

Past accomplishments. Sternberg’s so-what take on the Pandora Papers roots itself in the assumption that the Panama and Paradise Papers turned out to be “duds”.

There they go again. Another year, another breathless media uproar over “revelations” of the financial comings and goings of the world’s super-rich. Reporters spend many months combing through documents extracted—we’re never told how—from various law firms and other service providers presumably because the reporters think exposing this information will accomplish . . . well, we’re never sure what.

He notes that only one world leader — the prime minister of Iceland, if you call that a world leader — had to resign. But Pakistani Prime Minister Nawaz Sharif’s 10-year prison sentence should count for something, even if he was already out of office. And that’s not the only kind of impact. For example, by 2019, the Panama Papers had led to governments recovering $1.2 billion in taxes.

Brooke Harrington observes that impacts on the reputations of the rich and powerful are also important. Subjects of ICIJ revelations may stave off legal consequences, but the embarrassment stings.

And focusing on what the people exposed by the Panama and Paradise Papers got away with is not the full story: The whistleblowers also got away with it. The ICIJ succeeded in shielding their sources from exposure.

Five years on, we still do not know the identity of “John Doe,” who leaked the Panama Papers, nor of the person or people who leaked the Paradise Papers four years ago.

And that’s one reason why the troves of leaked documents are getting bigger: The Pandora Papers come from 14 different financial services companies, where the Panama Papers all came from one.

Brooke Harrington:

As I found in talking with wealth managers all over the world, a significant number understand that their work has contributed to dangerous levels of economic and political inequality; they want to do something, and many understand that one of the most effective uses of their insider position would be to pull back the veil of secrecy that makes so much of offshore corruption possible.

As whistleblowers are emboldened, potential clients of the offshore industry may be discouraged: The firm that promises you secrecy may not be able to fulfill that pledge.

Momentum. So the right metaphor for the various “papers” is hammer blows against a wall. The first blow didn’t bring it down, and neither did the second — though each left a mark. The third probably won’t bring it down either, though we can hope for a bigger mark, or maybe even a few chips flying.

But it’s not going to stop.

What the ICIJ has done during these five years is construct an infrastructure for attacking financial secrecy. And that makes these revelations fundamentally different from past Pulitzer-winning exposé from the point of view of one crusading newspaper like The New York Times or The Washington Post. ICIJ has constructed a searchable database that allows each local news outlet to research the story most relevant to its audience.

So while the national papers tell us about the King of Jordan‘s secretly purchased $106 million mansions in Malibu, Georgetown, and London, or the Czech prime minister‘s $22 million chateau in France, The Miami Herald writes about the local mansion secretly owned by empoverished Haiti’s richest man. (The Czech opposition parties gained enough seats in this weekend’s election that they may be able to unseat the prime minister, who has a nice chateau to retire to.)

In Florida, the Bigios have lived behind protective gates in the most exclusive of zones, Indian Creek Island. They’ve enjoyed protection from local police officers who around the clock staff the entrance gate to the private island community. Property records show their home is held in the name of two corporations: Agro Products and Services, registered in Florida, and Porpoise Investments Ltd., a shell company registered in the Isle of Man, a self-governing low-tax British Crown dependency in the Irish Sea.

In other words, there’s not just a mechanism for protecting people who reveal the secrets of the super-rich, there’s a path for getting that information to the people who will care most about it.

The ultimate point of these hammer blows is not to send some scapegoat to prison or embarrass another one into retiring from politics. The point is to change public opinion in ways that change the landscape of what is politically and legally possible. Changing public opinion always seems impossible until it happens. (Same-sex marriage is a good example.) But once it starts happening, it can move quickly.

Change starts at home. We’re used to thinking of offshore tax havens as tiny island nations like the Bermuda, or places with a long tradition of secrecy like Switzerland. But perhaps the most shocking thing I learned from the Pandora Papers articles I read was that South Dakota now rivals Zurich, the Cayman Islands, and other famous wealth-hiding havens. One Dominican family’s money came from exploiting poor workers in the sugar cane fields; it now sits in trusts in Sioux Falls, where it should be safe against worker lawsuits.

Other states competing to lure wealth include Alaska, Delaware, Nevada and New Hampshire.

Think about how you felt a few paragraphs ago, when you read about “the world’s offshore havens … facilitating official malfeasance [and] contributing to the global decline of democracy” or “help[ing] the elite avoid the rule of law”. Maybe you got angry at some imagined remote island paradise, where corporations are headquartered in post office boxes.

Nope. It’s the United States (and the UK). The people undermining the rule of law and contributing to the global decline in democracy? It’s us.

It’s got to stop.

This isn’t somebody else’s problem that we can feel superior about or shake our fists helplessly at. If public opinion is going to turn against secret money anywhere, and if popular resolve is going to force the system to change, it’s got to start here.

So sure, the overall story of the Fill-In-the-Blank Papers is hard to get a handle on. The topic is intentionally confusing, the examples are too diverse to sum up easily, and the time scale is longer than stories we usually think about. But don’t lose track of this, because it’s important, things are happening, and it’s your problem too.