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The Panama Papers Show That There's Enough Money to Solve the World's Problems - It's Just in the Wrong Hands

07/04/2016 08:54

I was once told that economics isn't a zero-sum game. I'd just published an article on the damage inequality does to society, to which the predictable response from some of Twitter was to refer to me as a 'commie f***wit' and the like, but this one response stood out as a little more thoughtful than the rest. Market-based economies are laudable in many ways because they do, as my critic suggested, make trade and hard work mutually beneficial to many people- commerce did away with the medieval notion that you could only gain by taking away from others. This doesn't mean that all gain is good for everyone, or that the profit motive doesn't do terrible things to society when pursued single-mindedly, however.

When a CEO is allowed to hand himself millions in bonuses whilst the workers toil away on the minimum wage, this is a zero-sum game: there is a set amount of revenue out of which the company can pay its workers - choosing to give much of this to the top few deprives the many. The same is true of tax avoidance - it's a zero sum game because by keeping the wealth in off shore accounts, national treasuries have less, which means the poor have less- they are robbed twice in many ways. This is the reason why the most startling thing about the Panama Papers is not that the mega rich do this, or that they are allowed to, but rather what the world would look like if they didn't.

The Tax Justice Network estimated in 2005 that the tax revenue lost globally to off shore havens like the one the Panama papers has revealed to the world in such dramatic fashion (which is really just the tip of the iceberg) is around $255billion ($273billion in today's money) every single year. If we'd have stopped this lost tax flowing out of our countries in 2002, the TJN calculate that 'global poverty would be permanently eradicated, way beyond the goals of the international targets on halving global poverty by 2015'. That's quite difficult to read in 2016, when over a billion people still live in poverty and 22,000 children a day die because of it - it doesn't have to be like this.

Off-shore tax havens are just one way we lose tax revenue - the figures rise to astronomical levels when all the other avenues for avoidance and evasion are factored in. Tax Research UK have estimated that the EU alone loses up to $1 trillion a year in tax revenue, of which shadow economies and, you guessed it, off-shore havens are significant drains. A similar figure has been touted for developing countries, and the US has been placed at $385 billion- $2.4 trillion a year lost, and that's only on 3 continents.

The International Energy Agency has concluded from its research that providing the entire globe's energy via 'low carbon' sources would cost somewhere in the region of $36-44trillion dollars: this means that if the world recouped all of its lost tax revenue (what people should legally be paying) then we could switch to a low carbon planet in less than 20 years. Tax Research UK highlighted in their report that stopping tax evasion across Europe could eliminate public debt across the entire EU in less than nine years - by 2045 we could have no public debt and no global warming, if people just paid their tax.
Eradicating global poverty and halting climate change in its tracks - perhaps the two biggest challenges the human race faces- and we've solved them both without any new laws. All of this so far has been what would happen if tax levels stayed exactly as they are - but what if we increased them, even by small margins?

Some estimates suggest that a one-off wealth tax of 20% on the top 10% richest individuals in the UK could raise as much as £800billion- shaving off almost half of Britain's entire debt burden (that's the debt, not the deficit - £800billion would equal more than four times the amount of the deficit). Another suggestion of a 0.05% tax on financial transactions could raise up to £250billion globally a year. As the site promoting the tax states, the revenue acquired from just three minutes of the tax would be enough to employ a teacher, a nurse AND a police constable. Every three minutes. Imagine what we could with the revenue from a whole term in Parliament.

And these are just the direct, raw figures- there are plenty of indirect effects too. As Kate Lyons pointed out in the Guardian, houses being bought up in the UK through the capital stored in these offshore funds is pushing up property prices, pricing many of my generation out of an affordable home. Offshore tax havens can encourage rapid transfers of large amounts of capital, linked to destabilising financial markets, particularly common in developing countries. The inequality that prompts the few to hide their immense wealth from the taxman has been shown to hold economies back by staggering levels, as well as lead to a slew of social and health problems. Many will tell you higher taxes will reduce investment but the economic benefits of having a better distribution of wealth, rigorously supported empirically, outweigh the concerns of the fear-mongers.

Since the financial crisis in 2008 many western countries have been given a taste of what global monetary institutions like the IMF have been forcing onto developing countries for decades. We have been fed the message that we must reduce our spending, that the money has run out and that the dreams of robust welfare services, free education and sustainable local services are unfeasible. My generation has had so much taken away from it by a generation that had everything. We have been forced into a lethargic slump when it comes to tackling issues like climate change and poverty because they seem too monumental, too expensive for us to really engage with. This has all been a lie- the 1% own as much as the rest of the planet combined and they are hoarding it out of sight and out of use. The money we desperately need to fix the world's growing problems is there, but we have an economic and political system that ensures it stays in the wrong hands, for a reason no more noble than greed. A better world is possible, but only by challenging the dominance and privilege of the rich.

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