April 10, 2016

The Panama Papers

Prabhat Patnaik

EDWARD Snowden, the NSA whistleblower from the United States, has called it the “biggest leak in the history of data journalism” ever to have occurred in the world. Mossack Fonseca, a law firm based in Panama, had made it its business to arrange investments by the rich and the wealthy all over the globe in several off-shore companies in a clandestine manner, which, it had promised its clients, could never be breached. Some 11.5 million files however were leaked from Mossack Fonseca by a source, whose identity naturally remains unknown but whose motive apparently sprang from a feeling of revulsion at this entire “rotten business” of corruption and misdemeanor, to a German newspaper Suddeutsche Zeitung.

The information in the files leaked by this source covered the period from 1977 to December 2015. The material contained in them was so immense that the journalists poring over it at the German newspaper decided to share it with the International Consortium of Investigative Journalists, of which they themselves are members and which believes in sharing information among its members. The files, examined by this International Consortium of Investigative Journalists, show how several actual heads of State across the world, the friends and relatives of other top leaders and functionaries, and business and showbiz tycoons, have used this route to secretly stash away enormous fortunes in off-shore companies, in defiance of the laws of their own countries, including of course tax laws, by using the services of Mossack Fonseca.

Among the actual heads of State who have allegedly resorted to this illegal practice are the prime minister of Iceland, a country that shot into prominence because of the crisis of its financial sector following the world financial crisis in 2008; the recently-elected right-wing president of Argentina (whose dealings began when he was the mayor of Buenos Aires); and the president of Ukraine. And among the heads of State whose close relatives are shown to be involved are: David Cameron of Britain (whose father used Mossack Fonseca), Vladimir Putin of Russia (whose close friend did the same), Bashar al-Assad whose cousin is implicated, and Hosni Mubarak the former Egyptian president whose son is implicated. The list is long and even includes the names of some members of the Chinese elite. The prominent names from India are those of Amitabh Bachchan, KP Singh of DLF, Aishwarya Rai Bachchan, and Vinod Adani, the elder brother of Gautam Adani who is the chairman of the Adani group that is close to Prime Minister Narendra Modi.

These revelations have unleashed a spate of activity. Iceland saw one of the biggest demonstrations in its history demanding the resignation of its prime minister who has in fact stepped down. Elsewhere, in the UK, France, New Zealand and Australia, investigations have been promised into charges of money-laundering and tax evasion against leading figures.




In India too a special investigation team has been set up, consisting of officers drawn from the investigative units of the Central Board of Direct Taxes, the Reserve Bank of India and other concerned agencies. But apprehensions have been expressed about how far this team, drawn from within the government itself, will be allowed to probe the matter, in view of the proximity of the Modi government to many of the accused. Some time ago a Special Investigation Team into “black money” had been set up by the Supreme Court; but even that team has complained of lack of co-operation from government agencies, which only underscores how lukewarm the government is to such probes anyway. And when the probe specifically concerns persons close to it, the lukewarmness is likely to be even greater.

There is an additional reason for fearing this. The Modi government, presiding over an economy mired in a deep crisis, has no idea of how to cope with it, other than by giving even more concessions  to the corporate-financial oligarchy and to foreign capital, in order to induce them to “make in India”. The “Mauritius route”, it may be recalled, which was used for avoiding taxes by foreign capital that undertook investment in India, had been sought to be closed at one stage; but, under pressure from the multinationals, this attempt was completely abandoned. The Modi government has not only continued with the “Mauritius route” but has even assured the corporates recently that all retrospective taxation will be eschewed. The “Make in India” campaign is bound to come a cropper anyway because very little investment is occurring anywhere in the world at present; but the more the “Make in India” campaign flops, the more concessions the Modi government will make to corporates and multinationals in its desperation. Pushing the Panama Papers under the carpet is therefore the most “natural” thing for it to do, which is why it is essential that the probe into the matter is taken out of the hands of the Modi government and is entrusted to an independent investigative agency.




The Panama Papers throw much light on the working of contemporary capitalism. There are three aspects in particular to which they draw attention. The first, and the most obvious, is the massive tax avoidance by the rich and the mighty, who use tax havens for this purpose, and make clandestine investments in off-shore companies in order to avoid paying taxes in their own countries. The second is the enormous scale on which what in liberal parlance is called “conflict of interest” operates in today’s world. The same heads of State who are secretly stashing away, either in their own names or in those of their friends and relatives, vast fortunes in offshore companies, are also taking decisions, ostensibly in the “national interest”, that impinge on the growth of these fortunes. And what is more, the people do not know that these decisions affect the fortunes of the leaders themselves, because the leaders have never declared before the people their possession of these fortunes.

The case of the Iceland prime minister illustrates this point. The offshore company in which he and his wife had huge investments held a large number of bonds of Iceland’s banks. When the banks were being bailed out by the government, the prime minister of that government was in effect protecting his own fortune, but the people knew nothing about it.

The third aspect relates to the close intermingling between the fortunes of the rich and the powerful and those of drug cartels, terrorist outfits and others against whom these very leaders make daily public pronouncements. There is in short a de facto obliteration of the distinction between “ethical” and “unethical”, “legal” and “illegal”, “legitimate” and “illegitimate” even though these distinctions continue to be repeated ad nauseam in public.

The publication of the Panama Papers has been seen by many as providing an opportunity for a “cleaning up” of the system, for punishing the “guilty” and ensuring that those who resort to tax avoidance and defraud of the people should be brought to justice. While this demand for “cleaning up” the system and punishing the “guilty” must be supported, there should be no illusion that we can ever have a “clean monopoly capitalism”. The impossibility of a “clean monopoly capitalism” of course is not an argument for opposing or being indifferent to the demand for a “cleaning up” of the system; on the contrary, support for a “cleaning up” of the system is incumbent upon us precisely for this reason. It constitutes a “transitional demand” that would make clear to the people the reality of the system that underlies, and necessarily underlies, the phenomenon of “corruption”.

Writing in 1916, Lenin had suggested in his opus, Imperialism the Highest Stage of Capitalism, how a “personal union” developed between the big financiers, the big industrialists and the State personnel, in the era of monopoly capitalism. Lenin of course was looking at a situation where this “personal union” (a term originally used by Rudolf Hilferding) operated at the level of the “nation”, of German finance capital being enmeshed with the German State, of British finance capital being enmeshed with the British State, and so on. In the current era of globalisation of finance, the “personal union” between State personnel and finance capital that develops is also at the global level, where even the heads of Nation-States stash their fortunes in foreign lands, away from the boundaries of their own “nations” and use “global channels” for making these fortunes grow, by defrauding their “nations” of tax revenues.

It is indeed ironical that at a time when the BJP has been attacking freedom of thought and expression in all the university campuses across the country by apotheosizing a “nationalism” that is defined by itself, its favoured capitalists who have risen to riches under its own direct patronage are shown to have been busy defrauding the nation.