We looked for a hall that would take 20 to 30 people but this proved quite difficult because all the small sized halls had already been allocated to sub-committees and other side events of the conference. When all efforts failed, we eventually settled on using the main plenary hall which would be empty because participants would be engaged in the sub-committees and other side events.
The plenary hall was organised to take at least 500 people representing all 54 member states of the ECA, partner agencies, observer countries and organisations. We felt that it would be awkward to hold a meeting of 20 to 30 people in such a large room but agreed that since we did not have a choice we would encourage participants to cluster around the first few rows around the centre. When the event started, we were awe-struck. The plenary hall was full to the brim with people standing on all sides. This was how we learnt that there was a thirst, nay hunger to know more about the phenomenon of Illicit financial flows and their impact on Africa. The ministers passed a resolution following that event and as they say, the rest is now history.
The gentleman who sparked this huge interest in illicit financial flows in Africa was Raymond Baker and as a result of his efforts to bring the dangers of illicit financial flows to the attention of African governments and civil society organisations, Baker was appointed to the African Union/Economic Commission for Africa High Level Panel on Illicit Financial Flows from Africa. The work of the HLP showed clearly the scale of illicit financial flows from Africa and its negative impact on development.
Baker’s new book, “Invisible Trillions,’’ has just been published and it throws more light on the work of the HLP including the fact that the impact of illicit financial flows on African economies goes beyond the financial losses occasioned by such outflows and includes the negative impact on governance and opportunity cost of lost investments. One interesting point made by Baker in this new offering, his second in this important area after, “Capitalism’s Achilles Heel,’’ is that while base erosion and profit shifting may lie behind the desire of multinational corporations to move money out of developing countries, their primary motivation seems to be the conversion of soft to hard currencies which is greatly enabled by the financial secrecy system.
Baker has now gone beyond the impact of illicit financial flows on development to make a compelling argument that illicit financial flows which are enabled by a fast expanding global financial secrecy system undermine capitalism and democracy. In, “Invisible Trillions,’’ Baker lays bare the workings of the global financial secrecy system and how it increases inequality and undermines the rule of law in a manner that imperils capitalism and its twin, liberal democracy. Although Baker’s primary focus is the United States, it is clear that the concerns he is expressing apply to the whole world which is not surprising given the leadership position of the United States in global affairs.
Through painstaking, rigorous and detailed research, Baker lays bare the subterfuge that underpins the financial secrecy system and highlights the motives of various actors and enablers whom he identifies using publicly available yet mostly obscure information including from legal sources. He shows how multinational corporations, international banks, large legal and accounting firms, criminal networks and complicit governments have erected a financial secrecy system underpinned by tax havens and financial secrecy jurisdictions that help to hide wealth.
Baker’s purpose though is to show that the financial secrecy system has now come to undermine capitalism which in turn exacerbates inequality and the very foundations of liberal democracy. Quite refreshing despite amassing quite a bit of evidence about the scale and spread of commercial evasions, criminal behaviour or corrupt practices, Baker offers prescriptions about what can be done to stop this tidal wave.
In short, Baker calls for actions to ‘deconstruct secrecy’ and while acknowledging some progress in this regard he calls for further action to tackle disguised corporations, plumps for company by company reporting over country by country reporting and for strong action against trade falsification. Invisible Trillions is also a well timed contribution to the current debate about the crisis of capitalism and the dangers it portends for democracy.
The influential FT columnist Martin Wolf has also been writing about the crisis of democratic capitalism making essentially the same point as Baker that survival of democratic capitalism depends on widely shared prosperity. If global financial secrecy promotes greater inequality then indeed there is cause for concern about the health of democratic capitalism.
- Adeyemi Dipeolu is a former Head of the Secretariat of the High Level Panel on Illicit Financial Flows
