I apologize for obsessing about the Panama Papers, but the episode points out one of the essential truths of world politics: the international global economy, particularly capital in that economy, pays no attention to territory; the international political system is hopelessly rooted in territoriality. Gabriel Zucman, an economist and the author of The Hidden Wealth Of Nations: The Scourge Of Tax Havens, has estimated that about $7 trillion worth of wealth is hidden in states that allow capital to be completely disguised from any political authority (other authors estimate that the number is likely 2 or 3 times that amount). His breakdown is as follows:
Offshore Wealth and Resulting Tax-Revenue Loss (in Billions), 2014
Region Offshore Wealth Share of Wealth Held Offshore Revenue Loss
Europe $2,600 10% $78
USA $1,200 4% $35
Asia $1,300 4% $34
Latin America $700 22% $21
Africa $500 30% $14
Canada $300 9% $6
Russia $200 52% $1
Gulf Countries $800 57% $0
Total $7.600 8% $190
Source: Uri Friedman, “The Geography of Financial Secrecy,” The Atlantic, 9 April 2016, accessed at: http://www.theatlantic.com/international/archive/2016/04/panama-papers-tax-havens-world/477042/
James S.Henry of the Tax Justice Network (no quiz questions will be asked about this source) argued that:
A significant fraction of global private financial wealth–by our estimates, at least $21 to $32 trillion as of 2010–has been invested virtually tax-free through the world’s still expanding black hole of more than 80 offshore secrecy jurisdictions. We believe this range to be conservative, for reasons discussed below. Remember: this is just financial wealth. A big share of the real estate, yachts, racehorses, goldbricks–and many other things that count as non-financial wealth–are also owned via offshore structures where it is impossible to identify the owners.
He goes on to argue:
[P]rivate banking has long since become virtual. So the term “offshore” refers not so much to the actual physical location of private assets or liabilities, but to nominal, hyper-portable, multi-jurisdictional, often quite temporary locations of networks of legal and quasi-legal entities and arrangements that manage and control private wealth—always in the interests of those who manage it, supposedly in the interests of its beneficial owners, and often in indifference or outright defiance of the interests and laws of multiple nation states. A painting or a bank account may be located inside Switzerland’s borders, but the all-important legal structure that owns it—typically that asset would be owned by an anonymous offshore company in one jurisdiction, which is in turn owned by a trust in another jurisdiction, whose trustees are in yet another jurisdiction (and that is one of the simplest offshore structures)—is likely to be fragmented in many pieces around the globe.
In short, one of the key assumptions of world politics–that states control what goes on within their borders–no longer appears to be valid for a major source of power in the world.
I have received some questions about how rich someone has to be to enjoy the benefits of offshore banking. In truth, the states that host shell companies do not charge a great deal. But the legal costs of setting up those shell companies are formidable. Joe Pinkser gives an estimate of what it typically costs:
“So how big would your garden have to be for it to make sense to buy a backhoe? ….individuals start being able to afford Mossack Fonseca-level wealth defense once their annual earnings (from both work and assets combined) cross a threshold of about $3 million to $5 million.”
It doesn’t make sense for ordinary wage earners to contemplate setting up a shell company.
Even though violence has flared up between Armenia and Azerbaijan over the contested region of Nagorno-Karabakh, Russia plans to keep selling military equipment to both sides. Russia clearly intends to maintain its influence in these two states which were once part of the former Soviet Union. Unfortunately, violence between the two states only serves to consolidate Russian influence over them.
One of the most worrisome trends in the world today is the decline of center-left politics. The right-wing and the center-right seem to be in ascendancy, and there are signs that the left is slowly coming alive (Bernie Sanders, Syriza in Greece, Podemos in Spain). But, at least in European politics, the center-left has been the guardian of income protections for the middle and lower middle classes. Its share of the votes in recent elections seems to be declining precipitously.
World Politics News 
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