Introduction
Over
the past 30 years, wealth has grown exponentially and has become increasingly
concentrated foremost in the upper .01%, then the .1%, followed by the 1% and
the upper 10% - 20%.
The
large scale, long-term concentration of wealth has continued through booms and
busts of the real economy, the financial and IT crises. Wealth grew despite
long-term economic recessions and stagnation, because the so-called recovery
programs imposed austerity on 80% of the households while transferring public
revenues to the rich.
The
so-called ‘crises of capitalism’ has neither reversed nor prevented the
emergence of an international class of billionaires who acquire, merge and
invest in each other’s activities. The growth of wealth has been accompanied by
the pillage of accumulated profits from productive sectors which are stored as
wealth not investment capital.
The
dispossession of capital and its conversion to private wealth subsequently led
to the rapid expansion of the financial and real estate sector. Capital
accumulation of profits has been the source of private accumulation of wealth
at the expense of wages, salaries, public welfare, and state revenues.
The
growth of private wealth at the expense of productive investments is a worldwide
phenomenon that has been facilitated by an international network of banks,
political leaders and ‘regulators’ centered in the United States and England.
The
single most important aspect of private wealth accumulation on a world-scale is
criminal behavior by the elites in multiple locations and involves the
violation of multiple laws and regulations.
The Chain of Illegality: From
Exploitation of Labor to the Pillage of the Nation
The
original source of private wealth is the exploitation of labor by capital, of
which a small percentage of the profits are reinvested in expanding production
in the ‘home market’ or overseas. The bulk of the profits are transferred into
financial networks which, in turn, illicitly channel the funds into overseas
accounts.
The
movements of profits ‘overseas’ takes multiple forms (transfer pricing, phony
invoices, etc.) and they are primarily converted to private wealth. These
‘international movements’ of profits are largely composed of mega-thievery or
plunder by political and business leaders from ‘developing countries’.
According to the Financial Times (17/11/14, p2). “Up to $1 trillion (dollars)
is being taken out of developing countries every year through a web of corrupt
activities involving anonymous shell companies that typically hide the identity
of their true owners”.
The
$1 trillion of stolen profits and revenues from the ‘developing countries’
(Africa, Asia, South America) are part of a “corruption chain” which is
organized, managed and facilitated by the major financial institutions in the
US and UK. According to a World Bank report in 2011 “70 percent of the biggest
corruption cases between 1980 and 2010 involved anonymous shell companies. The
US and UK were among the jurisdictions most frequently used to incorporate
legal entities that held proceeds of corruption” (Financial Times, 17/11/14,
p2.).
This
process of “taking out” or pillage of developing countries feeds into rent
seeking, conspicuous consumption and other non-productive activity in the
‘developed countries’ or more accurately the imperialist states. The principle
beneficiaries of the pillage of ‘developing countries’ by the local elites are
their counterparts in the top 1% of the imperial countries, who control, direct
and manage the financial, real estate and luxury sectors of their economies.
The
very same financial institutions in the imperial countries (and their related
accountancy, legal and consultancy arms) facilitate the pillage of trillions
from the ‘developed’ countries to offshore sites, via massive tax evasion
operations, hoarding wealth instead of investing profits or paying taxes to the
public treasury.
Long-term,
large-scale pillage and tax evasion depends on the central role, at both ends
of the world economy, of the financial sector. This results in the ‘imbalance
of the economy’ – predominance of finance capital as the final arbiter on how
‘profits’ are disposed.
The
extremely narrow membership in the dominant financial sectors means that its
growth will result in greater inequalities between classes. A disproportionate
share of wealth will accrue to those who pillage the revenues and profits of
the productive sector. As a result so-called ‘productive capitalists’ hasten to
join and lay claims to membership in the financial sector.
The
links between ‘productive’ and ‘fictitious’ capital or financial swindle
capital, defy any attempt to find a progressive sector within the dominant
classes. But the effort to enter the charmed circle of the dominant financial
1% is fraught with dangers and risks . . . because the financial sector has a
very dynamic and super-active capacity for swindles.
The
entire process of de-capitalizing the economy is underwritten in the US by the
financial elite’s controls over the executive branch of government, especially
the ‘regulatory’ and enforcement agencies - Security Exchange Commission, the
Treasury and Justice Departments.
Financial
institutions facilitate the inflow of trillions of dollars from the kleptocrats
in the developing countries as well as the outflow of trillions of dollars by
multi-nationals to off-shore tax havens. In both instances the banks are key
instruments in the process of dis-accumulation of capital by dispossessing
nations and treasuries of revenues and productive investments.
The
‘hoarding’ of MNC profits in offshore shell companies does not in any way
prevent speculative activity and large scale swindles in the for-ex, equity and
real estate markets. On the contrary, the boom in high-end real estate in
London, New York and Paris, and the high growth of luxury goods sales, reflects
the concentration of wealth in the top .01%, .1% and 1%. They are the
beneficiaries of ‘no risk’ pillage of wealth in developing countries, receiving
lucrative commissions and fees in laundering the illicit inflows of wealth and
outflows by tax dodging multi-nationals.
The Inverted Pyramid of Wealth
A
small army of accountants, political fixers, corporate lawyers, publicists,
financial scribblers, consultants and real estate promoters make-up the next
15% of the beneficiaries of the pillage economies. Below them are the 30% upper
and lower middle classes who experience tenuous affluence subject to the
economic shocks, ‘market volatility and risks of downward mobility. Below them,
the majority of wage, salaried and small business classes experience declining
incomes, downward mobility, rising risks of mortgage foreclosure, job-loss and
destitution among the bottom 30%.
Despite
wide variations in the class structure between ‘developing’ neo-colonial and
developed imperial states, the top 1% across national boundaries has forged
economic, personal, educational, and social ties. They attend the same elite
schools, own multiple private residences in similar high-end neighborhoods, and
share private bankers, money launderers and financial advisors. Each elite
group has their own national police and military security systems, as well as
political influentials who also co-operate and collaborate to ensure impunity
and to defend the illegal financial flows for a cut of the wealth….
The
investigatory authorities of each developed country tend to specialize in
prosecuting rival financial institutions and banks, occasionally levying fines
– never imprisonment – for the most egregious swindles that threatens the
‘confidence’ of the defrauded investors.
Yet
the basic structure of the pillage economy, continues unaffected – in fact
thrives – because the ‘show’ of ‘oversight’ and judicial ‘charges’ neutralizes
public indignation and outrage.
The Decisive Role of
Dis-Accumulation in the World Economy
While
orthodox economists elaborate mathematical models that have no relationship to
the operations, agencies and performance of the economy and ignore the real
elite actors which operate the economy, Leftist economists similarly operate
with theoretical premises about capital and labor, profits and capital
accumulation, crises and stagnation, which ignore the centrality of pillage,
dis-accumulation, and the dynamic growth of wealth by the international 1%.
The
research center, the Capital Financial Integrity Group provides a vast array of
data documenting the trillion dollar illicit financial flows that now dominate
the world economy.
US
MNCs have ‘hoarded’ over $1.5 trillion dollars in overseas shell companies,
‘dead capital’, to avoid taxes and to speculate in stocks, bonds and real
estate.
Mexico’s
ruling elite organizes massive illicit financial flows, mostly laundered by US
banks, ranging from $91 billion in 2007 to $68.5 billion in 2010. The massive
increase in illicit financial flows is greatly facilitated by the de-regulation
of the economy resulting from the North American Free Trade Agreement (NAFTA).
Contrary to most leftist critics, the main beneficiaries of NAFTA are not
Canadian mine owners or US agro-business or auto manufacturers - it is the US
and Canadian financial and real estate money launderers.
From
1960 to 2010 the Brazilian 1% pillaged over $400 billion dollars. These illicit
financial flows are laundered in New York, Miami, London, Switzerland and
Montevideo. In recent years the rate of pillage has accelerate: between 2000
-2012 illicit financial flows averaged $14.7 billion a year. And under the
self-styled ‘Worker’s Party” (PT) regime of Lula DaSilva and Dilma Rousseff,
$33.7 billion in illicit outflows were laundered annually – 1.5% of the GDP.
Much of the pillage is carried out by private and public “entrepreneurs” in the
so-called “dynamic” economic sectors of agro-minerals, energy and manufacturing
via ‘trade mispricing’, import overpricing and export underpricing invoices.
According
to a study published in the Wall Street Journal, (10/15/12), China’s elite’s
illicit financial flows top $225 billion a year – 3% of national economic
output. China’s 1%, the business-political elite, finance their children’s
overseas private education, providing them with half million dollar condos.
Illicit flows allow Chinese ‘investors’ to dominate the luxury real estate
markets in Toronto, Vancouver, New York and London. They hoard funds in
overseas shell companies. The Chinese corporate kleptocrats are the leaders in
the drive to deregulate China’s financial markets – to legalize the outflows.
The
scale and scope of China’s elite pillage has provoked popular outrage that
threatens the entire capitalist structure – provoking a major anti-corruption
campaign spearheaded by China’s President Xi Jinping. Thousands of millionaire
officials and business people have been jailed, causing a sharp decline in the
sales of the world’s luxury manufacturers.
India’s
capitalists- as kleptocrats - have long played a major role in de-capitalizing
the economy. According to the Financial Times (11/24/14, p3) the Indian elite’s
illicit financial flows totaled $343 billion dollars from 2002 to 2011. The
Indian Finance Ministry immediately threw up a smoke screen on behalf of the
1%, claiming the Indian elite had only $1.46 billion in Swiss accounts. Most of
India’s wealthy have taken up with holing their illicit wealth to Dubai,
Singapore, the Cayman and Virgin Islands as well as London
India’s
neo-liberal policies eased the illegal outflows. Massive corruption accompanied
the privatization of public firms and the allocation of multi-billion dollar
assets such as mobile phones, coal fields and energy.
Indonesia,
- percentage-wise is the leader in the outflow of illicit flows – fully 23% of
annual output. The 1% elite of foreign and domestic capitalists, plunders
natural resources, timber, metals, agriculture and dis-accumulates. Profits
flow to foreign accounts in Tokyo, Hong Kong, Singapore, Sydney, Los Angeles,
London and Amsterdam.
Ethiopia,
with per-capita income of $365 dollars, is the site of vast pillage by its
ruling elite. From 2000 to 2009, over $11.7 billion dollars in illicit
financial flow was laundered mostly by US banks. These outflows enriched the
Ethiopian and the US 1% and provoked famine for Ethiopia’s 90%.
Conclusion
The
illicit financial flows surpass the capital invested in productive activity.
The process of dis-accumulation of capital through relocation is channeled to
overseas shell corporations and private bank accounts and beyond into financial
holdings and real estate. The accumulation of private wealth exceeds the sums
invested in productive activity generating investments and wages. Massive
perpetual tax evasion means higher regressive taxes on consumers (VAT) and wage
and salaried workers, reductions in social services, and austerity budgets
targeting food, family and fuel subsidies
The
past thirty years of deregulated capitalism and financial liberalization, is a
product of the financial takeover of state regulatory agencies. The signing of
free trade agreements has provided the framework for large-scale long-term
illicit financial flows.
While
illicit financial flows have financed some productive activities, the bulk has
vastly expanded the financial sector. The absorption of illicit flows by the
financial elite has led to greater inequalities of wealth between the 1% - 10%
and the rest of the labor force.
Illicit
earnings via mega swindles among the largest and most respected US and EU
banks, has curtailed the amount of capital that is available for production,
profits, wages and taxes. The circuits of illicit capital flows militate
against any form of long-term economic development – outside of the wealth
absorbing elites who control both the financial and political centers of
decision-making.
The
growth and ascendancy of financial elites who pillage public treasuries,
resources and productive activity, is the result of an eminently political
process. The origins of de-regulation, free trade and the promotion of illicit
flows are all made possible by state authorities.
First
and foremost, finance capital conquered state power – with the cooperation of
“productive capital”. The peaceful transition reflected the interlocking
directorates between banks and industry, aided and abetted by public officials
rotating between government and investment houses.
The
entire African continent was pillaged by billionaire rulers, many former
nationalist politicians (South Africa), ex-guerilla and ‘liberation leaders’
(Angola, Mozambique, Guinea Bissau), in collaboration with US, EU, Chinese,
Russian and Israeli oligarchs. Trillions of dollars were laundered by bankers
in London, New York, Zurich, Tel Aviv and Paris. Growth of the commodity sector
bolstered Africa’s decade long expanding GDP – and the mega-outflows of illicit
earnings.
Worldwide,
billionaires multiplied profits ‘received’, but wages, salaries, pensions and
health coverage declined! Swindles multiplied as outflows accelerated in both
directions. The higher the growth in China, India, Indonesia and South Korea
the bigger and more pervasive the corruption and outflows of wealth-led by
“Communist” neo-liberals in China, Indian “free marketers” and Russian “economic
reformers”.
The
World Bank’s and IMF’s proposed “economic reforms” ‘freed’ the incipient
political kleptocrats of controls and unleashed two-sided illicit financial
flows – laundering funds from abroad and establishing trillion dollar offshore
tax dodging citadels.
Illicit
swindles dwarfed earnings from ‘capital accumulation’. The relations between
capital and labor were framed by the organization and policies dictated by the
directors and operators of the trillion-dollar financial networks based on the
pillage of treasuries and the wealth of nations.
The
center of China’s growth is shifting from manufacturing and the exploitation of
labor, to real estate and “financial services”, as worker’s demand and secure
double-digit increases in wages. The exploiters of labor turned predators of
the national treasury. Under the pretext of “stimulating” the construction
sector, real estate speculators in tow with Communist Party officials,
absconded with over a trillion dollars from 2009 to 2014. According to Jonathan
Anderson of the Emerging Advisors Group “over a trillion dollars” has gone
missing in China in the past five years (Financial Times, 28/11/14, p 1.).
Factories
still produce, agro-business still exports, the paper value of high tech
companies has risen into the high billions, but the ruling 1% of the system
stands or falls with the illicit financial flows drawn from the pillage of
treasuries. To replenish pillaged treasuries, regimes insist on perpetual
‘austerity’ for the 90%: greater pillage for the 1%, less public revenues for
health care which results in more epidemics. Less funds for pensions means
later retirement --- work ‘til you die.
The
plunder of the economy is accompanied by unending wars – because war contracts
are a major source of illicit financial flows. Plunder oligarchs share with
militarists a deep and abiding belief in pillage of countries and destruction
of productive resources. The one reinforces the other in an eternal embrace –
defied only by insurgents who embrace a moral economy and who proclaim the need
for a total change – a new civilization.
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