Sunday, June 11, 2017
Read Panama Papers for bearish worldview, avant garde journalism, and the red pill
There are some books which aim to deliver a sweeping commentary of the state of the world and humanity. They take you on a whirlwind tour of countries and cities, of ways of doing things (designing rockets, electric cars, managing offshore companies, illegal arms dealing, spying, etc), and different human motivations (save the world, make money, etc). I am currently liking such books. There are some books of this kind that make you bullish on the prospects of humanity - like Elon Musk by Ashlee Vance. Electric cars and Mars colonies to save the world. And then there are those that make you bearish- such as Panama Papers- very rich people enriching themselves even further at the expense of visibly poor they who can see around them everyday. There is deep pursuit in the common advancement of human consciousness (Elon Musk), vs. deep pursuit of advancement of an individual's consciousness (consciousness = bank balance in these cases) at the cost of the collective human consciousness. On the fiction side, there is Timelike Infinity- an impressive sci fi romp in which the last few humans together fight to save the race from anti-matter creatures, vs. The Night Manager - the fight of a few humans against the wrongful government / system.
Anyway, specifically on Panama Papers: I will not be too specific, of course- I don't want a contract put on my head: But impressive effort on the investigation- a worldwide consortium assembled quickly and working towards a collective goal over a year. Spectacular assemblage of bad guys- heads of states from really impoverished countries, sports stars, criminals, what not. A peep into new age investigative journalism- it's all about the data (terabytes of it). The movies Spotlight and Citizen 4 (On Edward Snowden), and now Panama papers- these three over the last couple of years have given me a good view.
I feel pleased with the fact that not a single Indian features in the book- perhaps one indication that our country does not fare too bad, relatively. If you compile a list of the Offshore country wrongdoing multiple- defined as the number of people of a country indicted by the book, divided by the country's per-capita-GDP - then India is right at the bottom of the list. Top most must be Guinea, and certain other African countries.
There is a powerful conflict of interest running in our current economic system. Politicians are financed by rich folk- who own the shell companies. So politicians are unlikely to support a clean-up drive. Media, too, is predominantly business owned - there again lies is a problem. Hard to see how clean-up drive will happen.
This book is like a "red pill" for the 99%- those who pay their taxes through the normal route. They are truly in the matrix! There is a great essay by the anonymous whistleblower at the end of the book- really nerve-tingling is the fact that we don't know who this person is, but we can read his thoughts and writing in a best selling book. The essay highlights several key issues in the economy today in the backdrop of shell companies, and also brings out his or her own fears- reg. how whistleblowers in the past have been given the cold shoulder.
So, imagine I'm Morpheus and you are Neo, a taxpayer who pays TDS. I am standing in front of you. In one hand I hold the TV remote, letting you go back to the Champions Trophy cricket. On the other hand, I have the Panama papers book. Neo- Blue pill, or red?
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Appendix: Shell company 101:
What is : Shell companies legally allow the owners of the companies to not be disclosed. Certain jurisdictions legally allow shell companies to exist.
Example deal: A company wants to bribe a dictator. They will just transfer the funds to a shell company owned by the dictator. Because the ownership is opaque, no one knows who owns the shell co.
First layer of protection: The offshore havens like Panama and Canary islands- allows shell companies to be registered, with undisclosed owners.
Second layer of protection: Nominee directors: Might be just a random struggler in a Panamian slum. In fact, the book identifies one such woman- a director in 25,000 shell companies. A nominee director is in the statement of incorporation of a shell company- the "Real owner" is not named. If the investigators investigate, they will be given the name of the nominee director.
Third layer of protection: "Inception": The shell company is owned by multiple shell companies, all of whom are incorporated in different tax havens. Like the Russian Matryoshka dolls, or like in Inception- dream in a dream in a dream.
Fourth layer of protection: Friends and relatives: the dictator himself is not the real owner, close friends of the dictator are.
Anyway, specifically on Panama Papers: I will not be too specific, of course- I don't want a contract put on my head: But impressive effort on the investigation- a worldwide consortium assembled quickly and working towards a collective goal over a year. Spectacular assemblage of bad guys- heads of states from really impoverished countries, sports stars, criminals, what not. A peep into new age investigative journalism- it's all about the data (terabytes of it). The movies Spotlight and Citizen 4 (On Edward Snowden), and now Panama papers- these three over the last couple of years have given me a good view.
I feel pleased with the fact that not a single Indian features in the book- perhaps one indication that our country does not fare too bad, relatively. If you compile a list of the Offshore country wrongdoing multiple- defined as the number of people of a country indicted by the book, divided by the country's per-capita-GDP - then India is right at the bottom of the list. Top most must be Guinea, and certain other African countries.
There is a powerful conflict of interest running in our current economic system. Politicians are financed by rich folk- who own the shell companies. So politicians are unlikely to support a clean-up drive. Media, too, is predominantly business owned - there again lies is a problem. Hard to see how clean-up drive will happen.
This book is like a "red pill" for the 99%- those who pay their taxes through the normal route. They are truly in the matrix! There is a great essay by the anonymous whistleblower at the end of the book- really nerve-tingling is the fact that we don't know who this person is, but we can read his thoughts and writing in a best selling book. The essay highlights several key issues in the economy today in the backdrop of shell companies, and also brings out his or her own fears- reg. how whistleblowers in the past have been given the cold shoulder.
So, imagine I'm Morpheus and you are Neo, a taxpayer who pays TDS. I am standing in front of you. In one hand I hold the TV remote, letting you go back to the Champions Trophy cricket. On the other hand, I have the Panama papers book. Neo- Blue pill, or red?
----------
Appendix: Shell company 101:
What is : Shell companies legally allow the owners of the companies to not be disclosed. Certain jurisdictions legally allow shell companies to exist.
Example deal: A company wants to bribe a dictator. They will just transfer the funds to a shell company owned by the dictator. Because the ownership is opaque, no one knows who owns the shell co.
First layer of protection: The offshore havens like Panama and Canary islands- allows shell companies to be registered, with undisclosed owners.
Second layer of protection: Nominee directors: Might be just a random struggler in a Panamian slum. In fact, the book identifies one such woman- a director in 25,000 shell companies. A nominee director is in the statement of incorporation of a shell company- the "Real owner" is not named. If the investigators investigate, they will be given the name of the nominee director.
Third layer of protection: "Inception": The shell company is owned by multiple shell companies, all of whom are incorporated in different tax havens. Like the Russian Matryoshka dolls, or like in Inception- dream in a dream in a dream.
Fourth layer of protection: Friends and relatives: the dictator himself is not the real owner, close friends of the dictator are.
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Nice read Ashwin! I have a query - why do you say no Indians feature in the Panama list? I have read about one influential Bollywood family (father, son and daughter in law) whose names were being mentioned in the papers.
Kangkana. Ok, I thought about it. The thing is, they are not mentioned in the book, which means their offense was not egregious enough. And the multiple used in the post is Mentions in the book divided by Per capita GDP.
Is it technically illegal just owning a shell company?
On the other hand, if the book claims that proof exists of these companies being used for willful tax evasion, why havent any cases been registered? (Individuals can approach the courts, even if the govt is complicit?)
On the other hand, if the book claims that proof exists of these companies being used for willful tax evasion, why havent any cases been registered? (Individuals can approach the courts, even if the govt is complicit?)
Nope, nothing illegal in just owning a shell company. However, people holding public office in many countries are supposed to disclose their holdings in all companies, and there are examples in the book of Prime minister level people either outright lying by not disclosing, or at last moment just transferring it to wife or daughter.
SEcondly, no one knows, who owns a shell company. In the example i gave, if i want to bribe a dictator, I will transfer to say ABC Corp, a shell company, some million dollars. But no one knows who owns ABC corp, no one can know because it's registered in Panama, and it'll be buried among 100s of my transactions on my books so hard to zero in on this one transaction.
SEcondly, no one knows, who owns a shell company. In the example i gave, if i want to bribe a dictator, I will transfer to say ABC Corp, a shell company, some million dollars. But no one knows who owns ABC corp, no one can know because it's registered in Panama, and it'll be buried among 100s of my transactions on my books so hard to zero in on this one transaction.
Nice read
I had come across an interesting article based on a similar idea as in the opening paragraph of this blog. You've probably come across arguments by "The New Optimists", as the author calls them, painting a rosy view of the world. Basically claiming that despite the availability bias which makes the world look gloomy, the world has indeed never been better. The supporting logic involves convincing facts about historical crime and poverty rates etc. This article in The Guardian attempts to ascertain whether this rosy world view is the objective truth or a political argument after all. Give it a read.
https://www.theguardian.com/news/2017/jul/28/is-the-world-really-better-than-ever-the-new-optimists
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I had come across an interesting article based on a similar idea as in the opening paragraph of this blog. You've probably come across arguments by "The New Optimists", as the author calls them, painting a rosy view of the world. Basically claiming that despite the availability bias which makes the world look gloomy, the world has indeed never been better. The supporting logic involves convincing facts about historical crime and poverty rates etc. This article in The Guardian attempts to ascertain whether this rosy world view is the objective truth or a political argument after all. Give it a read.
https://www.theguardian.com/news/2017/jul/28/is-the-world-really-better-than-ever-the-new-optimists
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