perspective

Legalize Cocaine to save democracy

Nigel Farage, the leader of the UK’s right-wing Reform UK party, has taken millions of pounds from crypto people, including one convicted of financial crimes in the United States. There are, despite Farage’s insistence to the contrary, questions around whether he followed the rules. Nonetheless, his party has swept local elections. There’s a lesson here for progressive parties everywhere, including in the United States where senators are seeking documents relating to financial ties between the commerce secretary and Tether. What if you get your ‘gotcha’ moment, turn around to the voters with a broad smile… and they vote for your opponents anyway?

Believers in democracy need to start advocating for more transparency, more enforcement and more restrictions on murky finance if they want to stop unaccountable money from buying influence in their countries. It is not enough to rely on journalists and activists to produce the occasional investigation, and expect voters to do the rest: we need properly-resourced agencies that can keep dirty money out of our systems if we want them to remain clean. If history tells us anything, it’s that criminals get elected all too often.

This is urgent. Tether made more than $1 billion in profits this year, in the first quarter, and is thinking hard about the midterms and how candidates might be encouraged to fight for crypto. And that’s just one company. Progressives who believe in fairer finance, a state’s right to regulate its own economy and the power to oversee who’s buying whom, don’t have that kind of money to spend to influence elections, so they need to start making the argument for campaign finance restrictions much more forcefully.

But there’s another point here too. I am working on an article about money laundering at the moment, and was chatting to two UK detectives last week. They led a successful operation in their city (I’ll post the article when it’s done) and I asked if they thought it had made a lasting difference. “With all crime, you take one out and there is another,” one of the detectives told me. “I’d like to think it has made a dent but there will always be more.”

In the case they worked on, gangs were bringing cash generated via the cocaine trade to be laundered into crypto (no prizes for guessing which cryptocurrency they preferred). The detectives identified £53 million in turnover over two years. It’s great that they jailed the ringleaders, but you can see why they’re not getting too carried away. That total is about a quarter of a percent of the UK cocaine market’s turnover, so the gangs really won’t have noticed the loss. And, for the police, it was five years’ work.

To a fairly large extent, since the first U.S. operation in Miami in 1980, when we’ve spoken about fighting dirty money, we have really been talking about stopping cocaine gangs by taking away their ability to make a profit. And, despite occasional successes like the one I’m writing about, this approach has overall been a catastrophic failure. Cocaine is cheaper, more abundant, and more widespread than ever before.

This is important for many reasons, obviously because entrusting the supply of a dangerous substance to criminals is bad, but also because the existence of a vast underground financial system to move the cocaine trade’s profits creates a mechanism through which Russian spies, terrorists and others can hide their cash too. For me though, the real problem is that we have an urgent threat to democracy posed by hidden unaccountable money. Instead of tackling that problem though, our police officers are fighting an endless war against drugs that was lost decades ago.

My modest proposal therefore is to legalise cocaine. It’s available everywhere already, so there’s no downside. We should tax it, regulate it, make sure kids can’t buy it and, as a useful side effect, take all the liquidity out of the underground economy. Our police officers could then stop running to go backwards, and instead fight a battle they might actually win, which is to stop fascists and kleptocrats from buying our democracies.

Use oligarchs to undermine Putin

Here’s a good article from The Economist by “a former senior official in the Russian Government,” arguing that Vladimir Putin is losing his grip. Now, I’m always a little cautious about articles that tell me what I want to hear, as well as the veracity of information and analysis provided by Russian officials, former or current, but it does make some very interesting points.

Of particular interest to me is the idea that Russia’s elite is annoyed with Putin because its members are worried about having their assets stolen, with $60 billion worth of property nationalised or seized by corrupt officials in the last three years. 

“Previously their property rights were outsourced to the West. They used London courts, offshore structures and international arbitration to resolve conflicts or seek protection. Now conflicts must be resolved domestically, without functioning institutions. Demand for rules grows more urgent as redistribution of assets gathers pace,” the article states.

One of the reasons why democracy failed in Russia is because the oligarchs were able to keep their wealth offshore, and thus to essentially colonise their own country, secure in the knowledge they were themselves immune from the unfairness. It would be a pleasing irony if the horrific war in Ukraine ended up undermining not just Putin, but Putinism as a whole.

There is a huge opportunity here for Western governments to capitalise on the dissent, and to start quietly offering sanctions relief to Russians willing to break with Putin, and who’re prepared to surrender a decent chunk of their wealth to help Ukraine in return for being able to keep the rest. There aren’t enough police officers to actually bring the cases needed to investigate, prosecute and confiscate the oligarchs’ wealth anyway (see item above), so we may as well start negotiating and see what they’re willing to do to get it back. In short, this is a big week for me making unfashionable policy proposals.

AI-generated launderers

There’s debate in the United States about getting rid of the Corporate Transparency Act, with Jeff Bezos’ Washington Post supporting repeal, even though the law has never actually been implemented. Opaque shell companies are a weird outgrowth of capitalism that corporations’ original inventors — who wanted to create insurance for entrepreneurs, not getaway vehicles for crooks — never intended to happen, so it’s very odd that they’re now being presented as some kind of human right.

If you want a reason why the appallingly lax American system should be cleaned up, here’s a post on X about someone who tasked two AI agents with making money, and came back to find out they’d registered a Wyoming LLC all by themselves. This suggests the opening of a whole new frontier of automated money laundering, and the consequences are frankly pretty terrifying. The Corporate Transparency Act should be strengthened, not abolished.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.