oDR: Opinion

Why the kleptocracy debate lacks bite – and how to change it

The Pandora Papers have exposed the UK’s role in hiding ill-gotten wealth. But we need to challenge the entire system that enables it

Thomas Rowley
13 October 2021, 11.36am
Brazilian economy minister Paulo Guedes has been targeted by protesters after he was found to have offshore accounts
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(c) REUTERS / Alamy Stock Photo. All rights reserved

If you’re wondering what will happen after the Pandora Papers exposed – once again – the role that the UK plays in helping launder cash, assets and reputations, then join the club. While there is interest across the political spectrum in a response from the British government, the chances of real change are slim.

Vested interests present one obstacle. Senior Tories are not likely to be interested in tackling the very systems that their families and their donors use to move wealth around the world. Private equity firms have reportedly lobbied against shell company abuse. And it will take a serious political fight to challenge the impact of foreign cash on the UK housing market.

The way that kleptocracy is often framed doesn’t help, either. The liberal interpretation makes it mainly a question of national elites in the Global South, who loot state assets and hide them offshore. This makes it seem as if embezzlement is the prime reason why developing nations stay poor or fail at social protection – obscuring the role of neoliberal economic reforms, often imposed by Western-dominated institutions such as the International Monetary Fund. In reality, it is more likely a combination of corruption and neoliberalism, along with global market conditions, that has meant less and less protection for working people globally.

The anti-corruption fight risks avoiding difficult political arguments in favour of the rhetoric of ‘good governance’. The implication is often that other forms of extreme wealth are acceptable so long as they’re not illegal

Thanks to the efforts of campaigners, kleptocracy and ‘dirty cash’ are now seen as urgent issues for the UK – which also gives us an opportunity to broaden the terms of debate. So far, the proposed fixes have been mostly technocratic. More powers for Companies House, the UK’s business registry are on the table (though there’s still no timeline yet), along with greater scrutiny of the professional and legal firms that service foreign oligarch and criminal cash and an overseas property register to reveal who owns mansions in Britain.

These are important initiatives that need to go ahead. But they lack direct consequences for those who store vast wealth in the UK. To capture the public’s attention on kleptocracy, they need to go further. The anti-corruption fight risks avoiding difficult political arguments in favour of the rhetoric of ‘good governance’. The implication is often that other forms of extreme wealth are acceptable so long as they’re not illegal.

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The Pandora Papers have exposed the UK’s role in hiding ill-gotten wealth. But we need to challenge the entire system that enables it | (c) Boumen Japet / Alamy Stock Photo. All rights reserved

Indeed, a call by the Uzbek Forum on Human Rights for leading Tory donor Mohamed Amersi to return funds from a notorious Uzbek telecoms deal reminded me that our public debate on kleptocracy is far from having the edge it needs. It was one of the few concrete demands for action that appeared after the Pandora Papers were revealed. More bracing calls are needed, such as seizing kleptocrats’ property and turning it into public housing. This would prompt serious debate about the UK’s role as an offshore jurisdiction and its consequences for citizens.

Asset seizures and returns are not only complex and time-consuming, they are also politically sensitive for several reasons. First, these offshore leaks have shown that a section of the British ruling class is seriously intermingled with their international counterparts. Our domestic rich use the same offshore systems, lawyers and accountants to hide assets, avoid taxes and generally enforce their will (including evading the rule of law) as Russian billionaire oligarchs. As long as this continues, there will never be any consequences for the ‘enablers’ – the professionals who ensure the mega-rich can hide behind their wealth.

Second, as soon as we target kleptocrats’ assets, the question about what level of wealth is ‘moral’ or acceptable in our country immediately comes into focus. And that means we need to tackle the other forms of extreme wealth in the UK.

Foreign oligarchs are among the richest people in the UK, but they are not the only ones. There are others with interests in mining, oil, chemicals, property, hedge funds and transport. They also hide assets and avoid taxes, and try to influence our politics at the highest level. Whether it’s Richard Branson allegedly moving to the British Virgin Islands to escape income tax (a claim he has rejected, citing his love of the place), or the fact that we’re not allowed to know how much Prince Philip’s estate is really worth, the ultra-rich hide their money from scrutiny and tax.

The real barrier to change is the way that all these factors – the alliance between the British ruling class and those overseas, and the UK’s role in funnelling wealth through offshore territories – work together. To make it the focus of political struggle would, in effect, be a declaration of class war. But that would at last make the UK’s responsibility for global kleptocracy a genuinely national political issue.

Empower and protect, don’t prohibit: a better approach to child work

Bans on child labour don’t work because they ignore why children work in the first place. That is why the International Year for the Elimination of Child Labour will fail.

If we truly care about working children, we need to start trying to keep them safe in work rather than insisting that they end work entirely. Our panelists, all advocates for child workers, offer us a new way forward.

Join us for this free live event at 5pm UK time on Thursday 28 October.

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