Pandemic profiteers and a transparency check-up

Hi, welcome to Oligarchy, where we are tracking how the super rich are changing the world for the rest of us.

HAPPY ANNIVERSARY

Some years are longer than others, and the last twelve months seems to have stretched over an age. Still, it was in fact only a year ago that most of us entered lockdown for the first time, so it seems a good time to look at how the oligarchs have managed.

Americans for Tax Fairness publishes a daily-updated list, showing quite how much US billionaires’ wealth has grown over the last twelve months. Spoiler alert: it’s been a lot, a cumulative gain of around $1.3 trillion. What I found particularly striking about the figures is not so much what a great year Elon Musk has had (net worth up 524.1%!), or Jeff Bezos, but how there has been a general across-the-board increase for everyone who measures their wealth with nine zeros at the end, including even those furthest from the funky new economy of online shopping and bitcoin-powered electric cars. Even the Walmart-owning Waltons saw their wealth increase by more than 15%.

  • “The pandemic profiteers are extracting windfalls of wealth during a time of widespread suffering for the majority of people,” said Chuck Collins, director of the Institute for Policy Studies’ Program on Inequality. “They exploit the artificial markets created by the pandemic, including having their Main Street competition shuttered and our increased dependence on online technologies.”

Sadly, we don’t have equivalent up to the minute figures for the rest of the world’s billionaires but, at the end of 2020, Oxfam estimated that – over the course of the pandemic to that date – the mega-rich had added around $3.9 trillion to their net worth. 

The International Labour Organization has tried to conduct a similar audit for how the pandemic has affected the prosperity of ordinary people. Last year, worldwide, some 8.8 percent of all working hours were lost, a hit four times greater than that suffered during the 2009 financial crisis, and one equivalent to a quarter of a billion full-time jobs.

  • “Global labour income (before taking into account income support measures) in 2020 is estimated to have declined by 8.3 per cent, which amounts to US$3.7 trillion,” the ILO concluded.

Clearly, government schemes to support workers’ incomes have helped take the edge off that, but that expenditure is piled onto government debt, and thus will weigh on governments’ ability to spend on other programs for decades to come. And there’s no getting away from the fact that billionaires have gained — at the very least — $200 billion more than the rest of us have lost.

So, what to do about it? If we know anything about oligarchs, it’s that they only trust the opinions of other oligarchs, so it’s lucky that a millionaire has popped up with a plan that would actually work: making rich people pay more tax.

  • “Now that even some of us millionaires are speaking out in favour of a wealth tax, it is getting much harder for trickle-down politicians and newspapers to resist. So they accuse us of virtue signaling, or of thinking ourselves heroes. Let us be clear then,” wrote Danish entrepreneur Djaffar Shalchi, founder of Millionaires for Humanity, this week. “The real heroes are the nurses, the teachers, the frontline aid workers. We millionaires do not have what they have. But we have money. A wealth tax on millionaires will enable those nurses, teachers and frontline aid workers around the world to save and change millions of lives.”

He estimates that a one percent wealth tax on millionaires would raise $1.7 trillion a year, which would be a pretty useful sum. A trillion here, a trillion there, and pretty soon you’re talking real money.

HOW’S TRANSPARENCY COMING ON?

Of course, before we can tax a billionaire’s wealth, we need to know where it is, which is why corporate transparency is so important. But it’s a lot easier to pass a law demanding transparency than it is to actually impose it on the world’s largest economy, as FinCEN (the financial crimes bureau of the U.S. Treasury Department) is now discovering. It has to create a framework that is strict enough to work as it’s intended, while also being sufficiently flexible that professionals are able to use it. 

  • “We need the financial industry’s perspectives and insights to help inform our rulemaking,” FinCEN Director Kenneth A. Blanco told a bankers’ conference in Florida last week. “Help us shape the rules of the road that will govern your industry and serve to protect the communities and people of this country.”

There is of course nothing sinister about getting as much feedback as possible. However, I see those words and I worry, because I’ve seen how skilled financial institutions have been at neutering efforts to improve corporate transparency in the UK, particularly efforts to reform the notorious Scottish Limited Partnerships (I can’t give you a good link to this, because I haven’t published my new book yet, but believe me, it’s a big problem. Despite years of reports of SLPs’ misuse to hide the theft of billions of dollars, they remain as wide-open to fraud as ever, as this latest report shows). Professionals are good at appearing to support change, while all the time they’re really shunting reform efforts onto a parallel track where they will do no harm. Officials need to be on their guard to prevent equivalent efforts in the US.

Last week, Congresswoman Carolyn Maloney (who sponsored the Corporate Transparency Act) asked Treasury Secretary Janet Yellen to tell her what steps her department is taking to advance transparency; and fortunately, the secretary spoke strongly in its favor. 

  • “It’s a very important piece of legislation, and it is one of our highest priorities to implement this promptly and to get it right. We have a hiring plan, we recognize that significant resources will be required, and we’re trying to obtain them,” Yellen said.

UKRAINE AGAIN

Regular readers of this newsletter will know that I have a very soft spot for Ukraine, and its committed campaigners against corruption. One campaign victory in recent years was the establishment of a transparent system which allowed citizens to see how the government was spending their money. This was part of an effort to outlaw the kind of egregious over-spending that previously allowed insiders to steal large amounts of money from the budget.

Normal rules enforcing competitive tenders for government purchases were suspended at the start of the pandemic (to allow quicker action in the face of the emergency) and now, a year on, we can see that – sadly, and as a result – many of the old tricks have returned. Analysts from Nashi Hroshi, an anti-corruption group, found that some drug prices had been inflated seven-fold, and procured through murky Cyprus-registered shell companies, as in the bad old days. Similarly, hospitals took the opportunity of reduced oversight to rush through purchases of things with little connection to fighting COVID-19, like extremely expensive furniture.

Fortunately, the Anti-Corruption Action Centre was on hand to check what officials are up to. The moral of the story is: transparency on its own is not enough, we also need oversight.

WHAT I’M READING

Ukrainian activists often talk about how their country is fighting on two fronts at once: against corruption in Kyiv, and against Russia in the East. On this note, I recommend you read this impressive investigation by the Organized Crime and Corruption Reporting Project, which lays out how Ukrainian politician Viktor Medvedchuk, who favors closer ties with Russia, appears to have been sold lucrative Russian assets at knockdown prices. The profits from the deal allowed him to fund his political campaigns.

Last month, the government in Kyiv imposed sanctions on Medvedchuk. In response, Medvedchuk – who denies any wrongdoing — said Ukraine was “one step closer to becoming a dictatorship.” 

See you next Wednesday,

Oliver

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Oliver Bullough

Oliver Bullough is an author and journalist from Wales, who specializes in writing about financial crime, often when it has links to the former Soviet Union. His most recent book is Moneyland, why thieves and crooks now rule the world and how to take it back, and he is currently trying to write another one despite lockdown.

@OliverBullough