-Caveat Lector- from: http://www.zmag.org/crimeandcapital.htm Click Here: <A HREF="http://www.zmag.org/crimeandcapital.htm">Crime</A> ----- Crime, the world's biggest free enterprise THICK AS THIEVES ____________________________________________________________________ LE MONDE DIPLOMATIQUE April 2000 http://www.monde-diplomatique.fr/en/2000/04/05debrie By allowing capital to flow unchecked from one end of the world to the other, globalisation and abandon of sovereignty have together fostered the explosive growth of an outlaw financial market. Indeed the engine of capitalist expansion is now oiled by the profits of serious crime. From time to time something is done to give the impression of waging war on the rapidly expanding banking and tax havens. If governments really wanted to, they could right this overnight. But though there are calls for zero tolerance of petty crime and unemployment, nothing is being done about the big money crimes. By CHRISTIAN de BRIE Financial crime is becoming less visible, periodically coming to light in one country or another in the guise of scandals involving companies, banks, political parties, leaders, cartels, mafias. This flood of illicit transactions - offences under national law or international agreements - has come to be portrayed just as accidental malfunctions of free market economics and democracy that can be put right by something called "good governance". But the reality is quite different. It is a coherent system closely linked to the expansion of modern capitalism and based on an association of three partners: governments, transnational corporations and mafias. Business is business: financial crime is first and foremost a market, thriving and structured, ruled by supply and demand. Big business complicity and political laisser faire is the only way that large-scale organized crime can launder and recycle the fabulous proceeds of its activities. And the transnationals need the support of governments and the neutrality of the regulatory authorities in order to consolidate their positions, increase their profits, withstand or crush the competition, pull off the "deal of the century" and finance their illicit operations. Politicians are directly involved and their ability to intervene depends on the backing and the funding that keep them in power. This collusion of interests is an essential part of the world economy, the oil that keeps the wheels of capitalism turning. Three factors have combined to improve the workings of capitalism. The end of the 1980s saw the complete liberalisation of capital movements, taking them beyond national or international control. Then the revolution in communications technology accelerated the expansion of financial transactions. Finally, tax havens, that planetary archipelago of centres specialising in the tolerance of financial crime, became more "reliable". Revolution, said Mao Zedong, is not a dinner party. Neither is competition. It has little to do with the tournaments of gallant knights celebrated by the troubadours of the free market, where by the grace of God the best always wins - the best product or the best service at the best price. As in feudal combat, if you want to win the economic war, anything goes - and the dirtier the better. The arsenal is well supplied with weapons: restrictive practices, cartels, abuse of dominant position, dumping, forced sales, insider dealing and speculation, takeovers and dismembering of competitors, fraudulent balance sheets, rigging of accounts and transfer prices, the use of offshore subsidiaries and shell companies to avoid and evade tax, embezzlement of public funds, bogus contracts, corruption and backhanders, unjust enrichment and abuse of corporate assets, surveillance and spying, blackmail and betrayal, disregard for regulations on employment rights and trade union freedoms, health and safety, social security, pollution and the environment (1). Not to mention what goes on in the world's growing number of free zones, including those in Europe and in France, where the ordinary rule of law does not apply, especially in social, tax and financial matters (2). Such goings on can be found in all major sectors and on all markets: arms, oil, public works, civil aviation, air, rail and sea transport, telecommunications, banking and insurance, chemicals and food, to name but a few. They result in massive misappropriations of funds which disappear from the transnationals' bona fide accounts only to resurface in some tax haven. An incredible plunder, the full extent of which will never be known. All this would be impossible without the power of the state and international and regional organizations, especially their ability to keep restrictive regulations to a minimum, to abolish or override such rules as do exist, to paralyse inquiries and investigations or put them off indefinitely, and to reduce or grant amnesty from any penalties. In exchange, they offer to "fund democracy" by financing parties' election campaigns, promoting the most promising political personalities and senior officials; they have them followed and closely watched by armies of lobbyists who can be found close to every decision-making authority and whose brief is to help them "make the right choices", to corrupt them (3). On occasion they have no compunction about using the services of professional organized crime. In most of their subsidiaries and offshore suppliers in the southern hemisphere, workers have to contend with thugs hired by the bosses, blackleg trade unions, strike-breakers, private police and death squads. In Japan, recalcitrant shareholders are watched by yakusas at general meetings. Or they take out "contracts" on intermediaries that have become too much of a nuisance or on over-inquisitive investigators: numerous businessmen, bankers, politicians, judges, lawyers and journalists have "committed suicide" drinking a cyanide-laced cappuccino, hanged themselves or fallen from a tenth floor window with their hands tied behind their backs, shot themselves twice in the head, drowned fully clothed in a puddle or in the bath, slipped under a bus or into a vat of concrete or acid, fallen naked from their yachts into the sea under their bodyguard's very eyes, disappeared on a flight or car journey. More than anything else, banks and big business are keen to get their hands on the proceeds - laundered - of organized crime. Apart from the traditional activities of drugs, racketeering, kidnappings, gambling, procuring (women and children), smuggling (alcohol, tobacco, medicines), armed robbery, counterfeiting and bogus invoicing, tax evasion and misappropriation of public funds, new markets are also flourishing. These include smuggling illegal labour and refugees, computer piracy, trafficking in works of art and antiquities, in stolen cars and parts, in protected species and human organs, forgery, trafficking in arms, toxic waste and nuclear products, etc. Every country has its criminal underworld. The biggest organizations and the ones that have been active the longest can be found in the hubs of capitalism: the United States (Cosa Nostra), Europe (the Sicilian mafia) and Asia (the Chinese triads and Japanese yakusas). Others have also emerged over the last few decades, such as the Colombian cartels in Latin America and the Russian mafias. Hundreds of rival groups share the national and international crime markets. They enter into alliances and subcontracting agreements, tending to break up into small, flexible, mobile units specialising in a market sector or a profitable niche. The annual profits from drug trafficking (cannabis, cocaine, heroin) are estimated at $300-500bn (not to mention the rapidly mushrooming synthetic drugs), that is 8% to 10% of world trade (4). Computer piracy has a turnover in excess of $200bn, counterfeit goods $100bn, European Community budget fraud $10-15bn, animal smuggling $20bn, etc. In all, and counting only activities with a transnational dimension, including the white slave trade, the world's gross criminal product totals far above $1,000bn a year, nearly 20% of world trade. Even allowing for overheads (production and suppliers, intermediaries and corruption, investment expenditure, management costs, losses from seizures and crackdowns) amounting to roughly 50% of turnover, that still leaves annual profits of $500bn. Over ten years that makes $5,000bn, more than three times the foreign currency reserves of all the central banks (5), one quarter of the capitalisation of the world's top five stock markets and ten times that of Paris (6). All that remains is for this fantastic wealth to be managed, impossible as it is to dispose of in small denomination notes (7). It is enough to set the world's financial brains spinning. But these are the people whose help the criminal organisations need if they are to launder all this money and recycle it through legal channels. They are willing to pay the price, and they do. The cost is about one third, $150bn shared between banking networks and intermediaries: lawyers, brokers and trust managers. The upshot is that over $350bn are laundered and reinvested annually, that is $1bn a day. No sector of activity comes anywhere near these figures and none can match that capacity, representing as it does between one half and two thirds of direct foreign investment (DFI) (8). Close watchers of the markets and of globalization which they understand perfectly, the multinational criminal organizations have no time for savings banks. They go for the highest gains: hedge funds, inflating the bubble of financial speculation, emerging markets, property, new technologies. At the same time, they secure for themselves a solid return from the finest of industry and commerce. In permanent partnership with the transnationals in which they invest and the banks that manage their investments, they are the oil in the wheels of the extraordinary expansion of modern capitalism. And they still have enough money left over to maintain their lifestyle and help to fund and corrupt the political parties and leaders that are best placed to preserve the system that serves them so well. That is precisely the service that the third partner, political power and bureaucracy, renders in exchange for the financial assistance that allows it to stay in place, to recover from every setback and to get richer in the process. It gives the illusion of a permanent struggle, constantly stepped up and internationally coordinated, by governments, police and judiciary against financial crime (bribery, trafficking, laundering) while not affecting the system's operation. Changing everything so that everything stays the same. The failure of over 30 years of international war against drug trafficking is testimony to the formula's "success". The same fate awaits the fight against money laundering and corruption, ostentatiously relaunched by the G7 at the Arch Summit, Paris, in 1989 and, in addition to the member countries, involving the United Nations, the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), the Bank for International Settlements (BIS) and the European Union. Specialist organizations have been set up (9) and international conventions signed and ratified for the prevention of corruption on international markets (10) and for police cooperation and mutual judicial assistance (11), while conferences and studies, commissions of inquiry and reports have multiplied. All this has been accompanied by the most strongly worded declarations and promises from those in authority, but the system of financial crime has not been the least bit shaken. It is poised to win by attrition the battle that the best are bent on waging against it; the weariness overtaking police and judges engaged on the exemplary Operation Clean Hands in Italy is evidence of this. So is the lack of response to the alarm (the "Geneva Appeal") sounded by seven specialist European judges at the end of 1996 (12). There is no question of doing away with tax havens, those places of refuge for financial crime, only of encouraging them to adopt codes of good conduct. This would be as effective as asking the mafia to provide security vans, with a moral obligation to submit its vehicles to a MOT. Nor is there any question of setting up any form of permanent international cooperation, or even a European judicial area, only of considering discussing it. Yet it takes 18 months for a request for judicial assistance to make the round trip between Paris and Geneva. Better still, under the aegis of international financial crime's number one partner, the US, we are seeing a rationalization, or rather, Americanization, of corruption techniques, seeking to replace the somewhat archaic practices of palm-greasing and secret (or open) "commission" payments by lobbying, which is more effective and presentable. It is a service industry in which the Americans have a considerable lead over their competitors, not only in know-how, but also in the vast financial and logistical resources they are able to make available to their multinationals; these include the secret services of the world's most powerful state apparatus, which, with the cold war over, have moved into economic warfare. This is evidenced by the media success of the publication of an annual league table of bribe paying and taking countries drawn up by Transparency International, a lobbying association and CIA correspondent funded by governments and corporations, especially American ones, that are experts in the matter. These include Lockheed, Boeing, IBM, General Motors, Exxon, General Electric and Texaco (13). The only objective of the anti-corruption campaigns taken up by international organizations (World Bank, IMF, OECD) is the "good governance" of a financial crime that is now an integral part of market globalisation under the leadership of the American democracy, the most corrupt on the planet. The headlong rush for profits and capital accumulation by any means is refle cted in the widespread robbery of the fruits of men's labour and of common wealth and the moral corruption of the ruling classes. The robber barons are giving way to the pillaging princes. Globalisation Observatory (1) Znet Commentary, a Canadian site, offers a ranking of the top 100 criminal firms. (2) On free zones, see Le Monde diplomatique, English edition, March 1998. (3) Over 40,000 lobbyists in Washington, thousands in Brussels, hundreds at the WTO. (4) $5,250bn in 1998. (5) The central banks' official reserves totalled $1,636bn at the end of 1998 (source: 1999 Report of the Bank for International Settlements). (6) New York (New York Stock Exchange and Nasdaq), Tokyo, Chicago and London total $20,000bn (source: International Federation of Stock Exchanges). (7) $1bn in $100 bills stacked up would be 1,000m high. (8) $650bn in 1998, $450bn in 1997 (source: 1998 Report of the United Nations Conference on Trade and Development - Unctad). (9) In particular the Financial Action Task Force (FATF), which works with banks to prevent financial crime and has been churning out recommendations for ten years. (10) The most recent concerns the OECD convention on combating bribery of foreign public officials. (11) The European Council meeting in Tempere, Finland, in October 1999 decided to strengthen Europol's powers and to create Eurojust as a test bed for a future European public prosecutor's office. (12) See Denis Robert, La Justice ou le Chaos, Stock, Paris, 1996. (13) Le Canard enchaîné, 3 November 1999. Translated by Malcolm Greenwood Copyright 1997-2000 Le Monde diplomatique. All rights reserved. ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! 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