Economic ‘level playing field’ undermined by inequality
THOMAS FRIEDMAN STATED ‘The World is Flat’ in his bestselling book of the same name on the effects of globalisation which was first published in 2005.
A confirmed ‘free-trader’, Friedman describes the modern world as a ‘level playing field’ in terms of commerce, where all competitors have equal opportunities. Friedman had been impressed by the views from a golf course in Bangalore, India, where his shots had been guided by the positions of the IBM, Microsoft, H-P and Texas Instruments buildings.
I’m sure you, like me, have been irritated by demands to take a copy of my passport and a utility bill along to a bank branch or lawyers office in order to ‘prove’ your identity. Quite often these requests are clearly absurd, such as the time that the lawyers for a company that I had both invested in and had been chairman of for some time asked me for evidence of my identity – who did they think had been chairing their board for the previous 5 years?
I am often asked by various bits of a major Scottish high street bank to confirm my identity, and I always refuse because I have been banking with that particular bank for over 40 years and they really ought to know me by now.
Still, we put up with all these checks because we understand that money laundering is a very serious problem and, as the world is flat, surely everybody will be subject to the same petty fogging bureaucracy won’t they? Well, no, apparently not.
It seems that if you are an Iranian dictator, subject to international sanctions on getting access to your illegal oil money, or if you run a Mexican cocaine cartel, and need to transfer billions of dodgy dollars from Mexico to the USA, all you had to do was to find a friendly bank manager in ING or HSBC, and they handled it all for you.
The checks that apply to all of us clearly didn’t apply to the people doing the money laundering. The banks concerned have been fined and a few people have resigned or been reassigned, but nobody has been put in jail for supporting these criminal activities.
If you are an ordinary business desperately trying to survive in the current recession, you still have to pay all your taxes whether you can afford them or not, but if you are a multi-national corporation you really don’t have to bother with such things. Because if, like an Apple or Google, you can construct your business into a ‘double Irish with a Dutch sandwich’ you find that you will be liable to very little tax indeed. Last year, Apple, the world’s biggest business, paid less than 10% of its profits in tax.
The Tax Justice Network has recently updated their estimate of the amount of private wealth which is ‘invisible’ to authorities worldwide: it has risen from US$11.5tn in 2005 to between US$21tn and US$32tn today, or about one third of the world’s total GDP. This “huge, secretive offshore industry has truly become the dark side of globalisation” the report concludes.
For the very rich, taxation is optional. As Leona Helmsley memorably once said: “We don’t pay taxes. Only the little people pay taxes”.
It seems the ‘world is not flat’ after all. For if you are very rich, there seem to be lots of hidden valleys and crevices through which vast amounts of wealth can be transported and stored, away from the prying eyes of the authorities or the rest of us.