The Panama Papers and Capitalism’s Perpetual Myths

"Bosses of the Senate." by Joseph Keppler, 1889. At the height of the Gilded Age, private oligopolies in cahoots with the state controlled much of society.

“Bosses of the Senate.” by Joseph Keppler, 1889. At the height of the Gilded Age, private oligopolies became as powerful as, if not more so than, states.  The more things change…

Alas, capitalism, we hardly knew ye! Actually, we’ve known ye all along, and we know that you can sometimes be a real sumbitch.’ But thanks to the not-surprising-yet-still-infuriating revelations highlighted in the Panama Papers, we know at lot more about the world’s most notorious open secret: global capitalism has allowed private interests to thrive unencumbered by the whims of states, democratic or otherwise.

In fact, you might say that capitalism as practiced by the neoliberal global order is really just a front for perpetuating a modern feudal system. The Road to Serfdom indeed.

On April 3, 2016 the International Consortium of Investigative Journalists (ICIJ) unleashed 11.5 million confidential documents held by the shady Panamanian law firm Mossack Fonseca. The firm’s sleezeball financial dealings were first leaked to German newspaper Süddeutsche Zeitung in 2015, but when wider news organizations caught whiff of the unmistakable stench of neoliberal “freedom,” the you-know-what hit the fan HARD. The resulting revelations will undoubtedly be a keystone moment in history that exposes 21st-century global capitalism as an elaborate money-laundering scheme that would make your average Tony Soprano blush with jealousy.

The Panama documents expose how the global 1 Percent set up so-called shell corporations to stash trillions in funds in order to shield their wealth from taxation. The figures whose names pop up in the papers include over 50 heads of state, as well as numerous plutocrats and low-level legal toadies.

Commentators from across the political spectrum have already speculated on the Panama leak’s implications for capitalism’s public image. Time’s Rana Foroohar, for example, thinks the leaks could trigger capitalism’s “great crisis.” The Panama Papers, Foroohar writes, reveal how “globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot.” This offshoring of labor and tax evasion has perpetuated “an elite that flies 35,000 feet over the problems of nation states and the tax payers within them.”

Meanwhile, Bloomberg’s Megan McArdle thinks the Panama Papers actually reflect well on capitalism, chiefly because the individuals implicated therein all come from “countries that have weak institutions and a lot of corruption.” Indeed, McArdle notes that only one American has shown up in the papers so far, and she suggests that this fact legitimizes an American Exceptionalism bolstered by a respect for the rule of law that non-American countries just don’t share, doggone it! “What we seem to have learned from the documents so far is that this particular sort of corruption isn’t a big local problem for the U.S.,” she writes. While she admits that America does have “some law breakers,” McArdle thinks that the kind of corruption revealed by the Panama Papers is really a “mass habit you see in parts of the developing world.” Chalk one up for Team U.S.A.!

Mossack Fonseca, the firm at the center of global tax evasion by wealthy assholes.

Mossack Fonseca, the firm at the center of global tax evasion by wealthy assholes.

Of course, McArdle, like most apologists for capitalism’s excesses, parrots a perpetual myth about free markets that Americans have been telling themselves for over a century.

The myth goes something like this: capitalism is merely the free exchange of goods and services between consenting parties in pursuit of a profit. Any corruption that stems from such arrangements is primarily the fault of human greed, not capitalism itself, and any attempts by governments to “interfere” in this mystical, organic market system inevitably creates further corruption and impoverishment. Indeed, left to its own devices, the myth goes, capitalism, in accordance with the rule of enlightened law, will create wealth for all. The rich will benefit more than others, of course, but their wealth will trickle down to the masses, and freedom will reign, eagles will fly, Rambo will single-handedly win the Vietnam War, etc.

What McCardle and others miss, however, is that capitalism can’t be everything and nothing at once. When capitalism creates wealth, alleviates poverty, and spawns multiple flavors of Oreos, it is the greatest system in human history. But when capitalism impoverishes people, pollutes the earth, and allows a tiny fraction of humanity to horde obscene amounts of wealth, the system is powerless against the timeless onslaught of human moral corruption.

Those on the Right are quick to excuse any perceived problems with capitalism as merely the results of human failing, not the failing of the system itself, as if a socio-economic system created and orchestrated by human beings were somehow exempt from human behavioral traits. But to honestly discuss capitalism’s past and future requires, thinking people need to recognize its successes AND its failures.

This brings us back to the Panama Papers. If nothing else, these documents throw fresh dirt on the zombified corpse colloquially known as the “free market.” The mythical market is not an abstract, organic, quasi-sentient being whose efficient functioning is hampered by the “interference” of the state. Humans create markets. Humans also create states. Those states, in turn, establish and exercise control over markets through laws, contracts, and regulations which can either be lax or excessive, but which always define and shape the contours of economic activities. In the case of modern globalization, extremely lax laws are perpetuating private powers unbeholden to any authorities but themselves.

What the Panama Papers reveal is not, as Megan McArdle contends, the excessive corruption of non-American states. Rather, these documents highlight a system that, by its very nature, facilitates the hoarding of wealth and the spurning of such antiquated notions as the “common good.” While it’s true, for example, that hardly any Americans have yet to show up in the Panama Papers (and I really emphasise yet), this is because American laws already make it easy for corporations and wealthy individuals to set up shell companies and evade taxes. As one tax justice advocate notes, “Americans really don’t need to go to Panama.”

Thousands of Icelanders gathered to demand the resignation of their tax-evading prime minister.

Thousands of Icelanders gathered to demand the resignation of their tax-evading prime minister.

So entwined is capitalism with the American state that a self-described libertarian like McArdle can unironically claim that, “Global capitalism didn’t create the issues plaguing weak states.” Of course, she writes the latter while tacitly acknowledging the symbiotic relationship between the American state and the American economy. Moreover, she also compliments the strength of the American state (in contrast to more corrupt “weak” states) which, in most other circumstances, she derides as freedom-squashing, efficiency-smothering Big Government.

Beyond highlighting the loopy logic of libertarians, however, the Panama Papers demonstrate how the U.S. has been able to export its brand of neoliberal capitalism across the whole world in all of its tax-evading, plutocrat-coddling glory.

In their book The Making of Global Capitalism, Sam Gindin and Leo Panitch write that the expansion of global capitalism over the past century has occurred not despite the American state, but because of it. In the years after World War II, the United States not only emerged as the world’s great military victor, but also the great economic victor. As Gindin and Panitch write, flush with its new status of post-war Pax Americana, “the American state, in the very process of supporting the export of capital and the expansion of multinational corporations, increasingly took responsibility for creating the political and juridical conditions for the general extension and reproduction of capitalism internationally.”*

American post-war capitalism as depicted in 1946. It just couldn't sit still.

American post-war capitalism as depicted in 1946. It just couldn’t sit still.

While Americans loathe to think of their freedom-exporting nation as an “empire,” it was indeed the empire of American capitalism that brought McDonald’s to North Vietnam and turned turbocharged, stateless tax evasion and race-to-the-bottom outsourcing into the go-to weaponry of a new global elite who are content to watch the socio-economic fabric of the world burn while they stoke the flames from their private jets overhead.

Make no mistake, capitalism will survive the Panama Papers. It will even most certainly thrive. It might even be able to save itself. But if nothing else, the Panama Papers have dumped a major bucket of slime over the persistent myth that markets function best without state interference, that capitalism creates an ideal system of just winners and deserved losers, and that American Exceptionalism excuses America’s role in creating a new global order in which obscene profits and limitless opulence continue to justify the kind of inequalities that once brought the guillotine to the Place de la Concorde.

* See Sam Gindin and Leo Panitch, The Making of Global Capitalism: The Political Economy of American Empire (London: Verso, 2012), 6.

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