Corruption in the City

According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That's a lot of money. But it's an extremely small proportion - only about 3 percent - of the total illicit flows that leak out of public coffers. Tax avoidance, on the other hand, accounts for more than $900bn each year, money that multinational corporations steal from developing countries through practices such as trade mis-pricing.

This enormous outflow of wealth is facilitated by a shadowy financial system that includes tax havens, paper companies, anonymous accounts, and fake foundations, with the City of London at the very heart of it. Over 30 percent of global foreign direct investment is booked through tax havens, which now collectively hide one-sixth of the world's total private wealth. Yet it does not register in the mainstream definition of corruption, absent from the UN Convention, and rarely, if ever, appears on the agenda of international development organisations. The UN Convention is correct to say that poverty in developing countries is caused by corruption. But the corruption has its root in the centres of financial power.

With the City of London at the centre of the global tax haven web, how does the UK end up with a clean Corruption Perceptions Index? The question is all the more baffling given that the City of London, the Square Mile,  is immune from many of the nation's democratic laws and free of all parliamentary oversight. As a result of this special status, the City of London has maintained a number of plutocratic traditions. Take its electoral process, for instance: More than 70 percent of the votes cast during council elections are cast not by residents, but by corporations - mostly banks and financial firms. And the bigger the corporation, the more votes they get, with the largest firms getting 79 votes each. This takes US-style corporate personhood to another level.

A similar story can be told about the Libor scandal in the UK, when major London banks colluded to rig interest rates so as to suck around $100bn of free money from people even well beyond Britain's shores. How could either of these scandals be defined as anything but the misuse of public power for private benefit? The global reach of this kind of corruption makes petty bribery and theft in the developing world seem parochial by comparison.

This kind of corruption is not entirely out of place in a country where a feudalistic royal family owns 120,000 hectares of the nation's land and sucks up around £40m ($65.7m) of public funds each year. Then there's the parliament, where the House of Lords is filled not by election but by appointment, with 92 seats inherited by aristocratic families, 26 set aside for the leaders of the country's largest religious sect, and dozens of others divvied up for sale to multi-millionaires and donors to the main political parties.

But this is just the tip of the iceberg. If we really want to understand how corruption drives poverty in developing countries, we need to start by looking at the institutions that control the global economy, such as the IMF, the World Bank and the World Trade Organisation. During the 1980s and 1990s, the policies that these institutions foisted on the Global South, following the Washington Consensus, caused per capita income growth rates to collapse by almost 50 percent. Economist Robert Pollin has estimated that during this period developing countries lost around $480bn per year in potential GDP. It would be difficult to overstate the human devastation that these numbers represent. Yet Western corporations have benefited tremendously from this process, gaining access to new markets, cheaper labour and raw materials, and fresh avenues for capital flight.

These international institutions masquerade as mechanisms for public governance, but they are deeply anti-democratic; this is why they can get away with imposing policies that so directly violate public interest. Voting power in the IMF and World Bank is apportioned so that developing countries - the vast majority of the world's population - together hold less than 50 percent of the vote, while the US Treasury wields de facto veto power. The leaders of these institutions are not elected, but appointed by the US and Europe, with not a few military bosses and Wall Street executives among them. Joseph Stiglitz, former chief economist of the World Bank, has publicly denounced these institutions as among the least transparent he has ever encountered. They also suffer from a shocking lack of accountability, as they enjoy special "sovereign immunity" status that protects them against public lawsuit when their policies fail, regardless of how much harm they cause.

Local corruption in developing countries does not exist in a geopolitical vacuum. Many of history's most famous dictators - like Augusto Pinochet, Mobutu Sese Seko, and Hosni Mubarak - were supported by a steady flow of Western aid. Today, not a few of the world's most corrupt regimes have been installed or bolstered by the US, among them Afghanistan, South Sudan, and the warlords of Somalia. Which is more corrupt, the petty dictatorship or the superpower that installs it? The biggest cause of poverty in developing countries is not localised bribery and theft, but the corruption that is endemic to the global governance system, the tax haven network, and the banking sectors of New York and London. It's time to flip the corruption myth on its head and start demanding transparency where it counts.

The above is taken from an article by Dr Jason Hickel who lectures at the London School of Economics. He has accurately detailed the hypocrisy in the cause of poverty blame game but fails to go further in his condemnation. Capitalism benefits the selfish interests of a few, the privileged elites of the developed world, and damages the interests of everyone else. Capitalism encourages corruption, competition, and consumerism. Steve Forbes, Editor-in-Chief of Forbes Magazine, admits “There will, of course, be criminals and greedy individuals in a free-market economy, just as there are in all walks of life.” What Forbes fails to acknowledge is that the criminals in the capitalist system are those who are at the controls of the system. Corruption based on capitalist interests pervades every sector of capitalist society. Capitalism portrays the accumulation of money as the greatest achievement. This leads to an incessant pursuit of capital, even if it is attained through unethical means. At no point do the capitalist class feel that they have enough. In this obsession to accumulate, many members of the plutocracy willingly use their power and position to gain more wealth via corrupt operations and schemes. After all, its their purpose in life!