Global Financial Integrity

 

Op-Eds

India Shows Us the Curse of ‘Black Money’

Raymond Baker

India’s opposition party leader L.K. Advani sparked a political conflagration with pre-election campaign remarks that India was losing tens of billions of dollars each year in illicit financial outflows, or “black money”. He asserted that the National Democratic Alliance would vigorously pursue recovery of these lost assets if voted into power. With the rolling election now in progress, the issue of India’s missing billions has grown progressively thornier, as both sides vie to take the moral high ground.

Whatever the outcome of the election, India’s problem has broader implications both for the developing world and for efforts by the Group of 20 developed and developing nations to craft an effective post-crisis economic plan for the global financial system.

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Is the Sun Setting on Tax Dodgers?

Tom Cardamone

Just before tax day, here is a depressing number: $356 billion. That is the Congressional Budget Office’s new calculation for how much the financial bailout will cost taxpayers, nearly twice the prior estimate.

Who won’t be helping foot the TARP bill? Tax evaders – but they might not get away with it for long.

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For the G20 to Achieve Success, Transparency Must Triumph

Raymond Baker

Increasing transparency has become an uncertain element in the laundry list of reforms, regulations, agreements, and actions expected to be discussed when the G20 meets this week. Of the original three solutions proposed to be addressed by the G20 process: stimulus, regulation, and transparency, it is the first two: stimulus and regulation, which have emerged as dominant themes for Thursday’s meeting. This is a critical misstep as transparency represents the most reasonable and effective means for strengthening and revitalizing the global financial system.

The communiqué following the November 15th meeting of the G20 in Washington was bold and comprehensive, with “strengthening transparency and accountability” well argued and placed ahead of “enhancing sound regulation.” But transparency did not appear in the elements paper preceding the April 2nd meeting in London. Nor did it appear in U.S. Treasury Secretary Timothy Geithner’s statement following the March 14th finance ministers meeting in Horsham. And it appeared only glancingly—“transparency of exposures to off-balance sheet vehicles”—in the general communiqué following that meeting.

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Take Dirty Money off the Table

Jennifer Nordin
Raymond Baker

Last month, we marked the fourth anniversary of the Sept. 11 terrorist attacks, which jolted the United States to a new understanding of the terrorist threat. After the smoke cleared, a second alarm went off: How did the terrorists pay for the crime? With newfound resolve, the U.S. government has made headway in choking off the flow of terrorist money, freezing and seizing some $200 million worldwide, according to the U.S. Treasury Department.

For all the new attention to terrorist financing, the United States has come late to the game. The channels through which terrorists’ money flows have existed for years. Drug cartels, dictators and corporate directors long ago perfected the artful dodge. Terrorist financing is just one aspect of the larger problem of dirty money.

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How Dirty Money Thwarts Capitalism’s True Course

Jennifer Nordin
Raymond Baker

If smuggling drugs across borders is bad, is smuggling profits across borders through abusive transfer pricing also bad? If tax evasion out of one country is harmful, is the inflow of tax-evading money into another also harmful? If money laundering by terrorists is dangerous, is the use of similar techniques by companies also dangerous?

More than at any time in capitalism’s history, our economic system is beset by the tension between what is legal, what is ethical and what serves the common good. This tension points to a fundamental question: which should come first for the global capitalist – maximising profits or pursuing lawful and just business transactions?

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How Dirty Money Binds the Poor

Jennifer Nordin
Raymond Baker

The World Bank in its 2005 World Development Report issued last month calls for governments to promote a “better investment climate” in the developing world and implores the international community to remove trade barriers and offer more aid. “A good investment climate”, it declares, “plays a central role in growth and poverty reduction.” All nice words, but the bank overlooks the shadowy underside of the global economy that conspires to keep poor countries in their place.

For more than 50 years, the World Bank has committed billions of dollars and the brain power of some of the brightest economists to fighting poverty, and yet outright success has been elusive. Even among World Bank staffers, there is a sense that something is missing that might explain the mystery of why so much development aid has done so little good.

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