There are parts of this life where we know enough about the shadows that we’re all-but-certain what objects are casting them to begin with. It’s like Plato’s cave but folks aren’t fooled. We’re pretty sure it’s there, it’s a thing, we’ll proceed on the assumption that it’s the Way Things Are.
Occasionally information comes along that confirms what everyone presumes is occurring, and that is what the Panama Papers are all about:
Mossack Fonseca is not a household name, but the Panamanian law firm has long been well known to the global financial and political elite, and thanks to a massive 2.6 terabyte leak of its confidential papers to the International Consortium of Investigative Journalists it’s about to become much better known. A huge team of hundreds of journalists is poring over the documents they are calling the Panama Papers.
The firm’s operations are diverse and international in scope, but they originate in a single specialty — helping foreigners set up Panamanian shell companies to hold financial assets while obscuring the identities of their real owners. Since its founding in 1977, it’s expanded its interests outside of Panama to include over 40 offices worldwide, helping a global client base to work with shell companies not just in Panama but also the Bahamas, the British Virgin Islands, and other notorious tax havens around the world.
The documents provide details on some shocking acts of corruption in Russia, hint at scandalous goings-on in a range of developing nations, and may prompt a political crisis in Iceland.
But they also offer the most granular look ever at a banal reality that’s long been hiding in plain sight. Even as the world’s wealthiest and most powerful nations have engaged in increasingly complex and intensive efforts at international cooperation to smooth the wheels of global commerce, they have willfully chosen to allow the wealthiest members of Western society to shield their financial assets from taxation (and in many cases divorce or bankruptcy settlement) by taking advantage of shell companies and tax havens.
If Panama or the Cayman Islands were acting to undermine the integrity of the global pharmaceutical patent system, the United States would stop them. But political elite of powerful western nations has not acted to stop relatively puny Caribbean nations from undermining the integrity of the global tax system — largely because western economic elites don’t want them to.
The rest is a really fine explainer by Matt Yglesias for some of the aspects of this subject. But it really can be boiled down to pulling back the curtain on a global economy that has been constructed to distribute vast sums of money to the wealthy and then help them avoid paying taxes on the largesse of their creation. They are who we thought they were, and they’re doing what we believed they were doing.
It’s their world and we’re just toiling in it.