Introduction:
Over the past 30 years, wealth has grown exponentially and has become
increasingly concentrated foremost in the upper .01%, then the .1%,
followed by the 1% and the upper 10% – 20%.
The large scale, long-term concentration of wealth has continued
through booms and busts of the real economy, the financial and IT
crises. Wealth grew despite long-term economic recessions and
stagnation, because the so-called recovery programs imposed austerity
on 80% of the households while transferring public revenues to the
rich.
The so-called ‘crises of capitalism’ has neither reversed nor
prevented the emergence of an international class of billionaires who
acquire, merge and invest in each other’s activities. The growth of
wealth has been accompanied by the pillage of accumulated profits from
productive sectors which are stored as wealth not investment capital.
The dispossession of capital and its conversion to private wealth
subsequently led to the rapid expansion of the financial and real estate
sector. Capital accumulation of profits has been the source of private
accumulation of wealth at the expense of wages, salaries, public
welfare, and state revenues.
The growth of private wealth at the expense of productive investments
is a world-wide phenomenon which has been facilitated by an
international network of banks, political leaders and ‘regulators’
centered in the United States and England.
The single most important aspect of private wealth accumulation on a
world-scale is criminal behavior by the elites in multiple locations and
involves the violation of multiple laws and regulations.
The Chain of Illegality: From Exploitation of Labor to the Pillage of the Nation
The original source of private wealth is the exploitation of labor by
capital,of which a small percentage of the profits are reinvested in
expanding production in the ‘home market’ or overseas. The bulk of the
profits are transferred into financial networks which in turn illicitly
channel the funds into overseas accounts.
The movements of profits ‘overseas’ takes multiple forms (transfer
pricing, phony invoices, etc.) and they are primarily converted to
private wealth. These ‘international movements’ of profits are largely
composed of mega-thievery or plunder by political and business leaders
from ‘developing countries’. According to the Financial Times (17/11/14,
p2). “Up to $1 trillion (dollars) is being taken out of developing countries every year through a web of corrupt activities involving anonymous shell companies that typically hide the identity of their true owners”. (my emphasis)
The $1 trillion of stolen profits and revenues from the ‘developing
countries’ (Africa, Asia, South America) are part of a “corruption
chain” which is organized, managed and facilitated by the major
financial institutions in the US and UK. According to a World Bank
report in 2011 “70 percent of the biggest corruption cases between 1980
and 2010 involved anonymous shell companies. The US and UK were among
the jurisdictions most frequently used to incorporate legal entities
that held proceeds of corruption” (Financial Times, 17/11/14, p2.).
This process of “taking out” or pillage of developing countries feeds
into rent seeking, conspicuous consumption and other non-productive
activity in the ‘developed countries’ or more accurately the imperialist
states. The principle beneficiaries of the pillage of ‘developing
countries’ by the local elites are their counterparts in the top 1% of
the imperial countries, who control, direct and manage the financial,
real estate and luxury sectors of their economies.
The very same financial institutions in the imperial countries (and
their related accountancy, legal and consultancy arms) facilitate the
pillage of trillions from the ‘developed’ countries to offshore sites,
via massive tax evasion operations, hoarding wealth instead of investing
profits or paying taxes to the public treasury.
Long-term, large scale pillage and tax evasion depends on the central
role, at both ends of the world economy, of the financial sector. This
results in the ‘imbalance of the economy’ – predominance of finance
capital as the final arbiter on how ‘profits’ are disposed.
The extremely narrow membership in the dominant financial sectors
means that its growth will result in greater inequalities between
classes. A disproportionate share of wealth will accrue to those who
pillage the revenues and profits of the productive sector. As a result
so-called ‘productive capitalists’ hasten to join and lay claims to
membership in the financial sector.
The links between ‘productive’ and ‘fictitious’ capital or financial
swindle capital, defy any attempt to find a progressive sector within
the dominant classes. But the effort to enter the charmed circle of the
dominant financial 1% is fraught with dangers and risks . . . because
the financial sector has a very dynamic and super-active capacity for
swindles.
The entire process of de-capitalizing the economy is underwritten in
the US by the financial elite’s controls over the executive branch of
government, especially the ‘regulatory’and enforcement agencies
-Security Exchange Commission, the Treasury and Justice Departments.
Financial institutions facilitate the inflow of trillions of dollars
from the kleptocrats in the developing countries as well as the outflow
of trillions of dollars by multi-nationals to off-shore tax havens. In
both instances the banks are key instruments in the process of
dis-accumulation of capital by dispossessing nations and treasuries of
revenues and productive investments.
The ‘hoarding’ of MNC profits in offshore shell companies does not in
any way prevent speculative activity and large scale swindles in the
for-ex, equity and real estate markets. On the contrary, the boom in
high-end real estate in London, New York and Paris, and the high growth
of luxury goods sales, reflects the concentration of wealth in the top
.01%, .1% and 1%. They are the beneficiaries of ‘no risk’ pillage of
wealth in developing countries, receiving lucrative commissions and fees
in laundering the illicit inflows of wealth and outflows by tax dodging
multi-nationals.
The Inverted Pyramid of Wealth
A small army of accountants, political fixers, corporate lawyers,
publicists, financial scribblers, consultants and real estate promoters
make-up the next 15% of the beneficiaries of the pillage economies.
Below them are the 30% upper and lower middle classes who experience
tenuous affluence subject to the economic shocks, ‘market volatility and
risks of downward mobility. Below them, the majority of wage, salaried
and small business classes experience declining incomes, downward
mobility, rising risks of mortgage foreclosure, job-loss and
destitution among the bottom 30%.
Despite wide variations in the class structure between ‘developing’
neo-colonial and developed imperial states, the top 1% across national
boundaries has forged economic, personal, educational, and social ties.
They attend the same elite schools, own multiple private residences in
similar high end neighborhoods, and share private bankers, money
launderers and financial advisors. Each elite group has their own
national police and military security systems, as well as political
influentials who also co-operate and collaborate to ensure impunity and
to defend the illegal financial flows for a cut of the wealth….
The investigatory authorities of each developed country tend to
specialize in prosecuting rival financial institutions and banks,
occasionally levying fines – never imprisonment – for the most egregious
swindles that threatens the ‘confidence’ of the defrauded investors.
Yet the basic structure of the pillage economy, continues unaffected –
in fact thrives – because the ‘show’ of ‘oversight’ and judicial
‘charges’ neutralizes public indignation and outrage.
The Decisive Role of Dis-Accumulation in the World Economy
While orthodox economists elaborate mathematical models that have no
relationship to the operations, agencies and performance of the economy
and ignore the real elite actors which operate the economy, Leftist
economists similarly operate with theoretical premises about capital and
labor, profits and capital accumulation, crises and stagnation, which
ignore the centrality of pillage, dis-accumulation, and the dynamic
growth of wealth by the international 1%.
The research center, the Capital Financial Integrity Group provides a
vast array of data documenting the trillion dollar illicit financial
flows which now dominate the world economy.
US MNCs have ‘hoarded’ over $1.5 trillion dollars in overseas shell
companies, ‘dead capital’, to avoid taxes and to speculate in stocks,
bonds and real estate.
Mexico’s ruling elite organizes massive illicit financial flows,
mostly laundered by US banks, ranging from $91 billion in 2007 to $68.5
billion in 2010. The massive increase in illicit financial flows is
greatly facilitated by the de-regulation of the economy resulting from
the North American Free Trade Agreement (NAFTA). Contrary to most
leftist critics the main beneficiaries of NAFTA are not Canadian mine
owners or US agro-business or auto manufacturers – it is the US and
Canadian financial and real estate money launderers.
From 1960 to 2010 the Brazilian 1% pillaged over $400 billion
dollars. These illicit financial flows are laundered in New York, Miami,
London, Switzerland and Montevideo. In recent years the rate of pillage
has accelerate: between 2000 -2012 illicit financial flows averaged
$14.7 billion a year. And under the self-styled ‘Worker’s Party” (PT)
regime of Lula DaSilva and Dilma Rousseff, $33.7 billion in illicit
outflows were laundered annually – 1.5% of the GDP. Much of the pillage
is carried out by private and public “entrepreneurs” in the so-called
“dynamic” economic sectors of agro-minerals, energy and manufacturing
via ‘trade mispricing’, import overpricing and export underpricing
invoices.
According to a study published in the Wall Street Journal,
(10/15/12), China’s elite’s illicit financial flows top $225 billion a
year – 3% of national economic output. China’s 1%, the
business-political elite, finance their children’s overseas private
education, providing them with half million dollar condos. Illicit flows
allow Chinese ‘investors’ to dominate the luxury real estate markets in
Toronto, Vancouver, New York and London. They hoard funds in overseas
shell companies. The Chinese corporate kleptocrats are the leaders in
the drive to deregulate China’s financial markets – to legalize the
outflows.
The scale and scope of China’s elite pillage has provoked popular
outrage that threatens the entire capitalist structure – provoking a
major anti-corruption campaign spearheaded by China’s President Xi
Jinping. Thousands of millionaire officials and business people have
been jailed, causing a sharp decline in the sales of the world’s luxury
manufacturers.
India’s capitalists- as kleptocrats – have long played a major role
in de-capitalizing the economy. According to the Financial Times
(11/24/14, p3) the Indian elite’s illicit financial flows totaled $343
billion dollars from 2002 to 2011. The Indian Finance Ministry
immediately threw up a smoke screen on behalf of the 1%, claiming the
Indian elite had only $1.46 billion in Swiss accounts. Most of India’s
wealthy have taken up with holing their illicit wealth to Dubai,
Singapore, the Cayman and Virgin Islands as well as London.
India’s neo-liberal policies eased the illegal outflows. Massive
corruption accompanied the privatization of public firms and the
allocation of multi-billion dollar assets such as mobile phones, coal
fields and energy.
Indonesia, – percentage-wise is the leader in the outflow of illicit
flows – fully 23% of annual output. The 1% elite of foreign and domestic
capitalists, plunders natural resources, timber, metals, agriculture
and dis-accumulates. Profits flow to foreign accounts in Tokyo, Hong
Kong, Singapore, Sydney, Los Angeles, London and Amsterdam.
Ethiopia, with per-capita income of $365 dollars, is the site of vast
pillage by its ruling elite. From 2000 to 2009, over $11.7 billion
dollars in illicit financial flow was laundered mostly by US banks.
These outflows enriched the Ethiopian and the US 1% and provoked famine
for Ethiopia’s 90%.
Conclusion
The illicit financial flows surpass the capital invested in
productive activity. The process of dis-accumulation of capital through
relocation is channeled to overseas shell corporations and private bank
accounts and beyond into financial holdings and real estate. The
accumulation of private wealth exceeds the sums invested in productive
activity generating investments and wages.
Massive perpetual tax evasion
means higher regressive taxes on consumers (VAT) and wage and salaried
workers, reductions in social services, and austerity budgets targeting
food, family and fuel subsidies. The past thirty years of deregulated capitalism and financial
liberalization, is a product of the financial takeover of state
regulatory agencies. The signing of free trade agreements has provided
the framework for large scale long-term illicit financial flows.
While illicit financial flows have financed some productive
activities, the bulk has vastly expanded the financial sector. The
absorption of illicit flows by the financial elite has led to greater
inequalities of wealth between the 1% – 10% and the rest of the labor
force.
Illicit earnings via mega swindles among the largest and most
respected US and EU banks, has curtailed the amount of capital which is
available for production, profits, wages and taxes. The circuits of
illicit capital flows militate against any form of long-term economic
development – outside of the wealth absorbing elites which control both
the financial and political centers of decision-making.
The growth and ascendancy of financial elites which pillage public
treasuries, resources and productive activity, is the result of an
eminently political process. The origins of de-regulation, free trade
and the promotion of illicit flows are all made possible by state
authorities. First and foremost, finance capital conquered state power – with the
cooperation of “productive capital”. The peaceful transition reflected
the interlocking directorates between banks and industry, aided and
abetted by public officials rotating between government and investment
houses.
The entire African continent was pillaged by billionaire rulers, many
former nationalist politicians (South Africa), ex-guerilla and
‘liberation leaders’ (Angola, Mozambique, Guinea Bissau), in
collaboration with US, EU, Chinese, Russian and Israeli oligarchs.
Trillions of dollars were laundered by bankers in London, New York,
Zurich, Tel Aviv and Paris.
Growth of the commodity sector bolstered
Africa’s decade long expanding GDP – and the mega-outflows of illicit
earnings. World-wide, billionaires multiplied profits ‘received’, but wages,
salaries, pensions and health coverage declined! Swindles multiplied as
outflows accelerated in both directions. The higher the growth in China,
India, Indonesia and South Korea the bigger and more pervasive the
corruption and outflows of wealth-led by “Communist” neo-liberals in
China, Indian “free marketers” and Russian “economic reformers”.
The World Bank’s and IMF’s proposed “economic reforms”
‘freed’ the incipient political kleptocrats of controls and unleashed
two-sided illicit financial flows – laundering funds from abroad and
establishing trillion dollar offshore tax dodging citadels.
Illicit swindles dwarfed earnings from ‘capital accumulation’. The
relations between capital and labor were framed by the organization and
policies dictated by the directors and operators of the trillion-dollar
financial networks based on the pillage of treasuries and the wealth of
nations.
The center of China’s growth is shifting from manufacturing and the
exploitation of labor, to real estate and “financial services”, as
worker’s demand and secure double-digit increases in wages. The
exploiters of labor turned predators of the national treasury. Under
the pretext of “stimulating” the construction sector, real estate
speculators in tow with Communist Party officials, absconded with over a
trillion dollars from 2009 to 2014. According to Jonathan Anderson of
the Emerging Advisors Group “over a trillion dollars” has gone missing
in China in the past five years (Financial Times, 28/11/14, p 1.).
Factories still produce, agro-business still exports, the paper value
of high tech companies has risen into the high billions, but the ruling
1% of the system stands or falls with the illicit financial flows drawn
from the pillage of treasuries. To replenish pillaged treasuries,
regimes insist on perpetual ‘austerity’ for the 90%: greater pillage for
the 1%, less public revenues for health care which results in more
epidemics. Less funds for pensions means later retirement — work till
you die.
The plunder of the economy is accompanied by unending wars – because
war contracts are a major source of illicit financial flows. Plunder
oligarchs share with militarists a deep and abiding belief in pillage of
countries and destruction of productive resources. The one reinforces
the other in an eternal embrace – defied only by insurgents who embrace a
moral economy and who proclaim the need for a total change – a new
civilization.
NOTE: This article is originally published at this website:
http://www.99getsmart.com/dis-accumulation-on-a-world-scale-pillage-plunder-and-wealth
