THE DIRTY GAME: Uncovering the Scandal at FIFA by ANDREW JENNINGS

THE DIRTY GAME: Uncovering the Scandal at FIFA

ANDREW JENNINGS

Arrow Books, 2016, 305 pages

Review by Phil Shannon

In 2014, the unravelling of the empire of Sepp Blatter, the multi-millionaire president of world football, began.  Blatter fretted as he presided over that year’s Federation of International Football Associations (FIFA) Congress in Brazil as the corrupt, money-flushed bribe-takers and expense fraudsters from the world’s national and regional football associations, flanked by mounted police, fought their way through protesters who were angrily chanting ‘we want schools and hospitals FIFA-style’.  The next year, eight of Blatter’s thieving peers from the FIFA elite (its Executive Committee) were arrested by police, and Blatter, himself, was forced to announce his impending retirement.

 

How had it come to this?  In The Dirty Game, the British investigative reporter, Andrew Jennings, hangs out FIFA’s dirty laundry.  Jennings played a crucial role in the crumbling of FIFA’s criminal enterprise by providing confidential FIFA documents to the FBI identifying corrupt FIFA officials.

 

Jennings locates the rise of FIFA corruption to 1974, when the head of Brazilian football, João Havelange, the darling of South America’s many military dictators and a bit-player in Brazil’s organised crime network, was elected FIFA president, funding his vote-buying through pilfering $6 million from the Brazilian Federation for Sport which he headed and treated as his personal ATM.

 

Blatter became understudy (FIFA General Secretary) to Havelange and, when he succeeded Havelange as president in 1998, he applied his master’s lessons, such as the power to sign, with no counter-signature, FIFA cheques to himself, to family, to friends and to those needing to be bribed.

 

As big corporate money moved in on global football and its centrepiece World Cup, the scope for major corruption expanded and opened up lush pastures for Blatter and his acolytes to graze on, including fraudulent travel and accommodation expenses, black market rackets with World Cup tickets, and a host of tasty perks and fringe benefits.

 

Their biggest revenue stream, however, was bribery - expensive gifts, suitcases of cash, brown bags stuffed with dollars, cheques made out ‘pay to bearer’ - for their votes on World Cup hosting, sponsorship and broadcasting rights.  All monies received were hidden in FIFA’s “opaque financial reports” and, of course, laundered through their off-shore, tax-haven accounts.

 

There are many corrupt fingers in the corporate-fattened FIFA financial pie but special mention must be made of two master FIFA crooks, Jack Warner and Chuck Blazer.

 

The World Cup self-enrichment of the Trinidadian, Warner (president of CONCACAF, the Central and North American regional football federation), was extensive, including his theft from Australian taxpayers for their 2018 and 2022 World Cup bids which was “in a class of its own”, says Jennings.  Warner wangled a cheque for $462,200 from Football Federation Australia for an ‘upgrade’ to his bogus ‘Centre of Excellence’, purportedly established for Caribbean soccer development but which was, in reality, an expensive leisure and entertainment complex, built and run by thieving $30 million from FIFA and CONCACAF.

 

Warner also took bribes from Blatter to fund his Caribbean business and political interests in return for the three dozen votes he controlled from the region’s micro-states shoring up Blatter’s re-election prospects.

 

The American, Chuck Blazer (CONCACAF’s General Secretary), trousered over $400 million of FIFA and CONCACAF money by automatically garnisheeing 10%  of all CONCACAF television and marketing revenues, supplemented through unspecified ‘commissions’ and ‘monthly fees’.  This financed every dollar of Blazer’s lavish living costs, including luxury apartment rent ($18,000 a month) in Trump Tower in New York.

 

It was Blazer who, when tumbled by the FBI, pulled the plug on FIFA.  A grotesque glutton, Blazer feared, more than anything else, a diet of jail food for the rest of his life, and he sang like Pavarotti, turning informer on dozens of his FIFA cronies.

 

Facing his own come-uppance is Blatter, whose secret salary, expenses and bonuses of around $4 million a year came courtesy of his vast powers of patronage, dispensed through multi-million dollar football ‘development grants’, World Cup ticket boondoggles and the provision of tasty freebies and generous bonuses to the global FIFA crime family to buy their loyalty.  The FIFA fish rots from the head.

 

Jennings’ book focuses on the detailed forensics of how a dogged journalist uncovered FIFA corruption rather than developing a broad analysis of the money culture of FIFA but Jennings deserves praise for his patient pursuit of the corporate exploiters and the financial bloodsuckers from the world’s soccer bureaucracies who engorge themselves off the people's game.

PARTY ANIMALS: My Family and Other Communists by DAVID AARONOVITCH

PARTY ANIMALS: My Family and Other Communists

DAVID AARONOVITCH,

Jonathan Cape, 2015, 309 pages

Review by Phil Shannon

Party Animals, a memoir by David Aaronovitch, columnist with Britain’s establishment newspaper, The Times, seems, at first blush, to be a critical but sympathetic account of the lives of the socialists, including Aaronovitch and his parents, in the post-war Communist Party of Great Britain.  In Part Two of his book, however, Aaronovitch warms to the role of bitter ex-Communist and gives us the “real story” of what he sees as a monstrous, self-deluding ideology.

 

David’s father, Sam, a poor, atheist Jew, became a Communist in 1934 to combat poverty and fascism, and spent 25 years as a leading Party official.  Soap-box, loudhailer and self-education were his tools of choice, and, by all accounts, he was “charming, inspiring, a great teacher, a wonderful public speaker …”.  David’s mother, Lavender, from an upper class family, was likewise a tireless Party stalwart.  Whatever their illusions in the Soviet Union, Sam and Lavender were not ridgy-didge Stalinists – they were, rather, “people who cared about the downtrodden and the oppressed” and they devoted their lives to building a better world.

 

David Aaronovitch followed in his parents’ politically-outsized footsteps, as did many other baby-boomer ‘red diaper babies’ (in the fifties, “a third of the membership of the Party still had parents who were Communists”).  Despite regretting some “eccentricities” (no Beano comics because the publisher was non-union), Aaronovitch concludes that his Party upbringing was “not a poor heritage, but an oddly rich one”. 

 

Now, however, Aaronovitch is older and wiser and he unpicks the “comfortable assumptions” he held in his younger years about his parents and their politics.  Like a recovering alcoholic fervently severing all ties to the demon drink, Aaronovitch, the recovering Marxist, renounces his socialist addiction, discovering that strikes are awful, that his father led a campaign to censor lurid and violent US comics, that the Party harboured spies, and that it is a slippery slope between Stalin and a hypothetical British communist government which would eagerly “sentence dissidents to slave labour in the Welsh salt mines”.

 

Rather than openly tub-thump his neo-conservative/neo-liberal epiphany, however, Aaronovitch seeks to explain his political volte-face through the mysteries of “the psyche” as they played out in his family’s relationship pathologies and traumas.  Sam’s energetic adultery made his real family dysfunctional, says Aaronovitch, and it explains Sam and Lavender’s steadfast commitment to their substitute, idealised ‘family’, the Party, despite all its communist wickedness.

 

Aaronovitch’s rejection of his parents’ transgressions of infidelity and wilfully blind party loyalty accounts, he says, for his rightwards political trajectory.  Thus does Aaronovitch rationalise his anti-socialist spittle-flecked, ‘God-That-Failed’ anger as caused by psychology, not his political choice to go the full Thatcher.  In Party Animals, we get discount psychoanalysis not measured political analysis.

DARK MONEY: The Hidden History of the Billionaires Behind the Rise of the Radical Right JANE MAYER

DARK MONEY: The Hidden History of the Billionaires Behind the Rise of the Radical Right

JANE MAYER

Doubleday, 2016, 449 pages

Review by Phil Shannon

Like ‘dark matter’ (the vast amount of invisible mass which holds the cosmos together), “dark money” is the astronomical quantity of hidden corporate money which holds the conservative US political universe together.  This is the conclusion to be drawn from the meticulously documented book by Jane Mayer, investigative journalist at The New Yorker, on how America’s richest capitalists buy Republican Party politicians and shape their policies.

 

At the core of this corporate political power are two billionaire industrialist brothers, Charles and David Koch, whose combined personal fortune of around $90 billion is the largest on the planet.  The Kochs’ wealth exerts a strong gravitational force on some four hundred other ferociously-rich Americans, pooling their wealth in a Koch-run network that seeks to radically remake US politics in the cause of ultra-free-market extremism.

 

The Koch brothers’ wealth owed everything (namely, a $300 million inheritance each) to their father, Fred Koch, who made his fortune in the 1930s in the Soviet Union (powering Stalin’s brutal ‘rapid industrialisation’) and in Nazi Germany (fuelling Hitler’s war machine) with oil refineries that used his invention of an improved process for refining crude oil.

 

As his choice of international business clients would suggest, dictatorial control also defined Fred Koch’s domestic child-raising regime.  His sons claim that their authoritarian upbringing accounted for their embrace of the political philosophy of ‘libertarianism’, the absolutist rejection of state intervention, particularly taxation and government regulation, in private life.

 

That their libertarianism was merely an intellectual mask for corporate self-interest became obvious when David Koch, winning just 1% of the popular vote as the Libertarian Party’s Vice-Presidential candidate in 1980, and his elder brother decided that the 1% that really mattered politically was to be found elsewhere, amongst their capitalist peers.

 

As the fossil-fuel-based Koch Industries grew to what is now the second largest (and biggest polluting) private, family-owned company in the US, the Kochs waged war against ‘big government’ through slashing corporate taxes, extinguishing environmental protections and tearing up the welfare safety net.

 

Their particular innovation was to maximise the political purchasing power of their fellow billionaires, who gather at the Kochs’ six-monthly, invitation-only ‘donor summits’ held under intense secrecy and tight security.  These are the “invisible rich”, says Mayer, subject to miniscule public disclosure obligations, whose much-prized anonymity allows them to launder their political bribes through the Koch organisation which exerts an “outsize influence over American politics”.

 

Their combined financial clout is dedicated to pushing American conservative political culture, and its centrist neighbour, ever more rightwards, through donations to (overwhelmingly Republican) politicians, the hiring of lobbyists, and the ‘philanthropic’ funding of ostensibly independent but tightly-controlled ‘educational’ foundations, think-tanks and university institutes. 

 

The Koch-driven expansion and masking of dark money has been aided by Koch-initiated court cases in 2010 which abolished all caps on political funding and restricted public accountability.  The American political system is more than ever “awash in unlimited, untraceable cash”, says Mayer.  The Koch political funding model is the cash-stuffed ‘brown envelope’ on steroids.

 

The Koch network’s national political apparatus is as big as the Republican Party’s, and its aggregated $889 million pledged for the 2016 election cycle rivals the $1 billion election budget of both the Republicans and Democrats.  The tentacles of the ‘Kochtopus’ reach far and deep, ensnaring Republican politicians at Presidential, Senate, House and state levels.

 

Donald Trump, the billionaire 2016 Republican presidential nominee, appears, however, to have eluded the Koch grasp.  Mayer notes that Trump’s wealth means he “can afford to ignore the Koch billions”.  Mayer, however, does not further explore the Trump-Koch relationship and what it tells us about the disconnect between the Republican Party’s Koch-aligned elite and its rank-and-file (and their populist mascot, Trump), a deepening political rift between the rich and the rest that also plays out in the Democratic Party and in wider society.

 

Trump was the only Republican Presidential hopeful the Kochs did not invite to their summit auditions because he is too moderate for the Kochs’ liking, especially on taxation, free trade agreements, cheap immigrant and overseas labour, government welfare for the needy, and foreign policy.  Trump appeals to blue-collar workers whose jobs are threatened by the neo-liberal, globalisation agenda that the Kochs promote.  Part of Trump’s success with his white working class supporters is due to the perception that he is not in the pocket of what he calls the ‘donor class’ - Trump had dismissed his Republican nominee-contenders as Koch ‘puppets’.

 

Has Trump trumped the Kochs?  Not quite.  Some of Trump’s senior campaign personnel are veterans of the Koch machine, and, whilst Trump may have been able to largely finance his own donor-free race in the primaries, a Trump-led Republican Party will covet the resources of the Koch network for the much more expensive and sophisticated full election.  There are also significant policy overlaps between Trump and the Kochs, including global warming denialism and opposition to raising the minimum wage, where Trump does not need to be bribed.

 

Conventional politicians in bourgeois parliamentary democracies are in hock to their moneyed  masters.  Corporate wealth - whether Trump’s self-financed billions, or Hillary Clinton’s $275,000 Wall Street speeches, or routine corporate political donations, or the Kochs’ subterranean ‘dark money’ - corrupts democracy by buying political influence and control on behalf of the super-rich few.

SPAIN IN OUR HEARTS: Americans in the Spanish Civil War 1936-1939

ADAM HOCHSCHILD

Macmillan, 2016, 438 pages

Review by Phil Shannon

The Spanish people were too darn democratic for their own good in 1936.  For not only did they elect a centrist-leftwing national government, they also experimented with revolutionary democracy, taking control of farms, factories and offices as well.

 

General, Francisco Franco, who launched a military counter-revolution, was not the only one to spot the danger of the daring Spanish flirtation with socialism.  Franco’s backers, Mussolini and Hitler, were also alert, the fascists providing weapons, submarines, planes, pilots.

 

As Adam Hochschild recounts in his history of American involvement in the Spanish Civil War, the outcome, and the innumerable horrors of the world war that were to follow, could all have been so different, if more leaders of the bourgeois democracies had shown the same spirit of the 2,800 Americans who volunteered to cross an ocean and fight for the Spanish Republic.

 

Like the forty thousand other volunteers from fifty countries who comprised the International Brigades, the Americans in the ‘Abraham Lincoln battalion’ were under-armed, under-resourced, under-trained and under-fed.  They were over-exposed as shock troops of the resistance, suffering an exceptionally high mortality rate of one in four.  Two hundred died just getting to Spain from France, crossing the frigid Pyrenees at night.

 

The prototypical American volunteer was a New Yorker, worker, trade unionist, and communist.  The Communist Party link brought the benefits of discipline, coordination and centralisation to disjointed militias.  The communist brigaders put winning the war ahead of making revolution – even the leftwing but anti-communist British writer and volunteer, George Orwell, who initially believed that to counterpose war and revolution was a false choice, was later critical of the ‘revolutionary purism’ of some militias when ‘the one thing that mattered was to win the war’ in a backs-to-the-wall struggle for survival of the Republic.

 

The communist dimension, however, came at a cost.  In return for military aid from the Soviet Union, Stalin’s agents, paranoid about Trotskyists and other anti-Stalinist leftists, took control of the Spanish government’s internal security apparatus.  Socialist dissenters were killed by Stalinist heresy-hunters in street fighting and in prisons.  Hochschild concludes, however, that although the Stalinist-instigated civil war within the Civil War was humanly wasteful, politically damaging and militarily unhelpful, it was not the fatal factor in the defeat of the Republic.

 

This was provided by the politicians and corporate executives in Washington.  Because Franco couldn’t pay up-front cash for the oil necessary to wage his fascist-backed war (Spain’s gold reserves were held by the Republican government), and because Germany and Italy had to import most of their oil, the fuel for the fascist armed forces came courtesy of Texas, sold to Franco on credit, by American corporate oil giants, including Texaco, Shell and Standard Oil.  Also joining in the profitable overseas business opportunity were General Motors, Studebaker and Ford (trucks), and Firestone (tyres), which they sold to Berlin and Rome. 

 

Texaco’s global network of ports also supplied maritime intelligence services to Franco.  The information they provided on oil shipments to Republican Spain allowed the identification of potential naval targets for fascist pilots and submarine captains (29 oil tankers bound for Republican Spain were sunk).

 

Roosevelt’s Democratic federal government in the US facilitated the Francoist-fascist war against Republican Spain by letting this corporate aid proceed unhindered, whilst both the Democrat and Republican  parties, fearful about Spain’s socialist revolution becoming contagious, supported a crippling ‘non-intervention’ policy – a 1937 resolution in both houses of parliament prohibiting military assistance to Spain steamed through by 491 votes to 1, dooming the Republic.

 

Hochschild is quietly outraged by Spain’s bourgeois deserters and capitalist aides in America, and is highly sympathetic to the Republic’s international volunteers.  He is, however, sceptical of their socialist ambitions.  Albeit courageous and idealistic, the communist volunteers’ political aims were “illusory”, he says.  The socialist flowering of cooperatives, land worked in common and worker-controlled factories was always an “impractical and romantic dream”, even in peacetime, he adds.

 

Hochschild’s specialty is not socialist advocacy but narrative historical journalism, focusing on stories of the personal (romance amongst the bullets) and the military (heroic stands, chaotic retreats, the everyday drudgeries of soldiering).  Within these limits, his book excels in providing a vivid account of the lived experience of the Spanish Civil War.

 

The last surviving American volunteer, Delmer Berg, died in February, 2016, aged one hundred.  Before signing up, he was a dishwasher.  What the world still needs is more dishwashers and fewer oil executives.

WHO BOMBED THE HILTON by RACHEL LANDERS

WHO BOMBED THE HILTON

RACHEL LANDERS

NewSouth, 2016, 401 pages

 

Review by Phil Shannon

Even the New Tricks scriptwriters would have a tough time cracking the four-decades-old cold case of Australia’s first terrorist attack, implies Rachel Landers, an ABC and SBS documentary film-maker, in her book on the bombing of the Hilton Hotel in Sydney, which killed two garbage collectors and a police officer in February, 1978.

 

The hotel was the venue for a Commonwealth Heads of Government Regional Meeting (CHOGRM), hosting eleven political leaders from the Asia-Pacific region, including the Indian Prime Minister.  Indian officials had recently been the targets of a global wave of knife attacks and bombings by followers of the Ananda Marga religious sect in response to the jailing of its leader in India for the murder of six defecting members.

 

When the Hilton was bombed (followed by four other related bomb incidents in Australia), the Australian branch of the Ananda Marga (and its mysterious and fanatical Universal Proutist Revolutionary Federation cell) seemed the obvious fit.  But was it just a fit-up, asked the sceptics.  Despite the massive security resources dedicated to CHOGRM, someone, nevertheless, “placed a bomb in a garbage bin which lay undisturbed and uninspected for 48 hours”, contrary to standard security protocol.

 

Perhaps the security services themselves (ASIO and the New South Wales Police’s Special Branch), under the theory of cui bono (‘who benefits’), planted the bomb, intending to ‘discover’ it and so justify their future necessity to ‘national security’ after the 1960s long-haired radicals in the street and the 1970s short-haired reformers in the Whitlam Labor government had outed the political police as anti-democratic bastions of political conservatism.

 

Despite a past documentary exposing “the endemic corruption, the blue walls of silence and the like” in a Special Branch famed for its “nepotism, ineptitude, ‘dirt’ files and good times”, Landers doesn’t believe the secret police bombed the Hilton.  Such speculation, she believes, is the “fanciful” province of conspiracy nutters, and motivated by hatred of the reactionary federal Liberal government of Malcolm Fraser which had sacked its predecessor, the democratically-elected, ASIO-raiding Labor government.

 

Landers also gives short shrift to the public story that three Margiis (Tim Anderson, Paul Alister and Ross Dunn) were the perpetrators.  This was bizarre nonsense, she says, concocted on the unverifiable say-so of a dodgy informer, a self-serving convicted armed robber, and an ex-Margii, supplemented by planted evidence and police verballing.  The frame-up of the three Margiis was, says Landers, a terrible “miscarriage of justice”, as the courts later agreed when all were freed on appeal.

 

Landers leaves a lingering question mark over the three Margiis, however.  She “stands by” what the official 1985 inquiry into the bombing concluded about the three local Margiis - ‘doubt remains as to their guilt’ but ‘strong suspicion’ lingers.

 

Their Svengali, she believes, was Abhiik Kumar, the Ananda Marga spiritual leader in Australasia, a globe-trotting, terror-seeding evil plenipotentiary whose “proximity to so many international acts of violence involving Margii or Proutist foot soldiers” fingers him as the Australian bombing mastermind.  She claims, without elucidation however, that the Australian Government, ASIO and police later had no doubt that Kumar was the perpetrator but that he has not been prosecuted because they could not prove it in court.

 

The recurring accusations against Ananda Marga, resurrected by Landers, are, however, flimsy, based on only circumstantial evidence.  Security service responsibility for the bombing-gone-wrong is at least as viable.  Landers is too ready to dismiss this possibility.  Her book is the result of forensic trawling through hundreds of boxes of records held at NSW State Records.  This primary archival resource is rich but partial, possibly tampered with, and presents the Hilton bombing through police eyes only.  If they had had any vested interest in staging the bombing, the establishment record could be expected to stay sthtum about it.

 

As a true-crime/murder-mystery, Who Bombed the Hilton is a ripping read but it gets us no further to a solution to the crime, possibly Australia’s most scandalous political crime of the last century.

STALIN’S ENGLISHMAN: The Lives of Guy Burgess by ANDREW LOWNIE

STALIN’S ENGLISHMAN: The Lives of Guy Burgess

ANDREW LOWNIE

Hodder & Stoughton, 2015, 427 pages

 

Review by Phil Shannon

Guy Francis de Moncy Burgess was, as his very name suggests, cut from Establishment cloth, and he effortlessly climbed the ladder of Britain’s top institutions – Eton, Cambridge, the BBC, MI5, MI6, the Foreign Office, impressing all the right people mid-twentieth century.  Because of their ‘class blinkers’, however, as Andrew Lownie quotes Burgess in Stalin’s Englishman, none of his elite peers suspected that one of their own could be a communist secretly spying for the Soviet Union for over a decade.

 

Radicalised during the 1930s Depression, when even exclusive Cambridge glowed Red, Burgess joined the British Communist Party.  He was an exemplary socialist activist, intellectually sharp and destined for the upper echelons of the civil service, qualities which made Burgess attractive to Soviet intelligence.

 

Keen to advance the revolutionary cause at a time when Stalin’s Soviet Union was all but equated with socialism by supporters and opponents alike, Burgess readily accepted the prestigious post of Soviet spy.  He had to volubly renounce his true political convictions, and make a pretence of sympathy with Nazism, to gain the full trust of the Establishment.  The Cambridge history professor, G. M. Trevelyan, was just one of those taken in by the deception, declaring, in a job reference for Burgess with the BBC, that Burgess had been cured of the ‘communist measles that so many of our clever young men go through’. 

 

Burgess’ aptitude for making personal connections amongst Britain’s elites culminated in his position in the Foreign Office as private secretary to the deputy Foreign Minister where he was at his most productive, passing over four thousand secret diplomatic documents to Moscow in the early 1940s.  With exposure imminent following the breaking of Soviet intelligence codes, however, Burgess was extracted to Moscow in 1951 where he spent his last twelve years in a life of classical music, books, cheap liquor and homosexual longing.

 

He sorely missed London, New York and his English friends, including more Old Etonian homosexual Marxists than one would think possible.  He remained totally unassimilated to Russia.  Visitors found him looking tired and sad but politically unrepentant, if frustrated – ‘I’m a communist … but I’m a British communist, and I hate Russia’, he exasperatedly told one caller.

 

Why did Burgess spy?  Lownie opts for psychology - espionage gave Burgess a moral purpose and satisfied his “love of mischief”, it enabled him to assert power and to control people, it flattered his desire to belong to an elect social group.  One of his Soviet contacts, however, gave a more succinct, and more fundamental, answer – ‘Guy Burgess believed that world revolution was inevitable’ and, despite ‘having reservations about Russia’s domestic and foreign politics’, he ‘saw Russia as the forward base of that revolution’.

 

Lownie grants little legitimacy to this core ideological motivation – his book has the obligatory reference to Burgess (and the other famous Cambridge spies) as unpatriotic ‘traitors’ but this conventional meaning of treason was conceptually irrelevant to the Marxist Burgess whose betrayal was proudly aimed at the capitalist class and its political system, however deformed his aim was by being refracted through the distorting mirror of Stalin’s bureaucratic police state.

 

Burgess was no respecter of capitalist state secrets (which showed the imperialist reality of US-UK state planning for a post-war capitalist order) but by only leaking to a rival state, however, Burgess has no claim to be a political ancestor of contemporary whistle-blowers.  Burgess’ legacy would have shone more brightly had he stuck with organising early morning picket lines to support bus strikes, joining Hunger Marches, or becoming a Marxist professor.

 

Lownie rarely broaches these higher-order issues.  Instead, we get a worm’s-eye, not a bird’s-eye, view – a mass of pedestrian narrative and unsynthesised character assessments of Burgess from those who knew him.  These reveal a flamboyant, if slovenly and conceited, lover of ideas and conversation, alcohol and men.  Lownie’s book, however, is much less forthcoming on Burgess the dedicated socialist, sadly wasted by the Stalinist betrayer of all things socialist.

THE HIDDEN WEALTH OF NATIONS: The Scourge of Tax Havens by GABRIEL ZUCMAN

THE HIDDEN WEALTH OF NATIONS: The Scourge of Tax Havens

GABRIEL ZUCMAN

University of Chicago Press, 2015, 129 pages

Review by Phil Shannon

Criminal heists don’t come any bigger than the global theft every year by the ultra-rich of around US$200 billion courtesy of the off-shore tax-haven banking industry.  In The Hidden Wealth of Nations, Gabriel Zucman, economics professor at the London School of Economics and Political Science, estimates that a staggering US$7.6 trillion, or 8% of the world’s entire individual financial wealth, is held in the tax-shelter banks of Switzerland and a handful of other countries.

 

There, it annually dodges some $190 billion in interest, dividend and capital gains taxes on the income it generates, whilst also escaping any wealth and inheritance taxes, which would otherwise be payable in the depositors’ home countries should the owners of the hidden wealth, as 80% of them do, choose not to declare these assets to their national tax collector.

 

Swiss bankers like to claim that their 1935 banking secrecy law, which legalised the fabled, anonymous ‘Swiss numbered bank account’, originated as a noble act to protect the savings of persecuted Jews in Germany.  As Zucman shows, however, only 1.5% of non-Swiss depositors who opened accounts between 1933 and 1945 were Nazi victims.  Switzerland’s banking ‘big bang’ happened well before Hitler took power, in the 1920s, with the biggest growth spurts fuelled by wealthy French depositors following the years when France increased its top marginal tax rate.

 

Swiss banks have continued their services for the world’s high-wealth elite who want to cheat on their taxes.  Corrupt Russian oligarchs and African dictators are eager clients but Europe’s wealthy lead the crime wave with US$80 billion in tax evaded through off-shore tax hidey-holes.

 

The major method for disguising the true identity of the wealth-owners these days is a devastatingly simple accounting sleight-of-hand.  Sixty per cent of foreigners’ bank accounts in Switzerland confer customer anonymity through de-identified shell companies, trusts or foundations registered in the British Virgin Islands, the Cayman Islands, Liechtenstein, Luxembourg, Bermuda, Jersey and  other no-taxing micro-states.  These empty financial fronts can be quickly set up for a few hundred dollars, lickety-split, in bank offices in Berne or Zurich.

 

Many millionaires derive their wealth from their majority shareholdings in multi-national corporations (their “ownership of the means of production which leads to true economic and social power”, says Zucman).  These companies often engage in the scam of profit-shifting to low or zero tax jurisdictions.  For example, over half of the total overseas profits made by US multinationals (accounting for 20% of total US corporate profits) takes refuge in tax-havens, avoiding US$130 billion dollars a year in corporate tax that would otherwise be payable at home.

 

Governments rhapsodising about tax fairness have ritually pledged to deal with tax-havens by getting off-shore banks to report the identity of their account-owners to the relevant national taxation agencies but, as night follows day, weak, simplistic, partial and easily circumvented policies have followed the rhetorical fanfare.  Procedural failure was built into a G20 scheme in 2009, for example, which trumpeted an ‘end to banking secrecy’ but which impotently oversaw a 25% increase in the wealth hidden in tax-havens.

 

New arrangements proclaimed by the G20 (now headed by the Australian Government) have obtained pledges by most tax havens to cooperate from 2017-18 but defeat looks guaranteed here, too, because nowhere does the new protocol deal with the identity-covering “opacity of financial intermediation chains” of shell corporations and such-like, nor with verification procedures or penalties for failure to comply.

 

Zucman proposes more radical measures.  A global financial register of tax-haven accounts, run by the International Monetary Fund, would identify (and therefore make taxable) which of the tax-haven foreign clients own exactly what wealth, tracked through all links in the pea-and-thimble wealth-hiding game.  This would be backed by economic sanctions such as customs duties and tariffs on non-cooperating banks.  Profit-shifting by multinationals would also be stymied by a sales-based formula which apportions global consolidated profits on the basis of the country where each corporation does actual business rather than the low-taxing country where it is formally headquartered.

 

Zucman desperately wants to tame the power of money, unlike governments which, he notes with considerable understatement, “have not been stellar in their boldness or determination” to tackle tax-haven theft.  Zucman doesn’t ask why this is so, however.

 

Millionaires and corporations (including the tax-haven banks which profit massively from wealth management fees) do not want to pay their fair share of tax because this would cut into their wealth and profits.  To their agreeable politicians - almost all of whom are in the pockets of their corporate donors, or who (like Australia’s Prime Minister, Malcolm Turnbull) are tax-sheltering multi-millionaires themselves, or who share the political ideology of profit maximisation - a genuine assault on tax havens is anti-capitalist heresy and therefore inconceivable.

 

The tax-defrauding capitalist class needs to be politically challenged by those the working class taxpayers they regularly steal from.  Don’t expect the world’s capitalist governments to be leading that fight.