Why is the global south so poor compared to the global north?
One of the main explanations given in mass media is corruption in those countries. Episode 73 of the podcast Citations Needed (audio | transcript) was a very eye-opening discussion on corruption on the global stage, and the real reasons why some countries are poorer than others.
We use a narrow definition of corruption to paint those countries as rife with it and ours as squeaky-clean. But corruption is more varied than the obvious forms of when a tyrant leaches funds for a suite of mansions or an official has to be bribed at a checkpoint. And it takes place between countries, not just within them.
Only 3% of illicit outflows of cash from poor countries are caused by their corrupt leaders. Global corporations and wealthy governments are responsible for the lion’s share. Hot money, the IMF and World Bank, transfer mispricing, and tax evasion account for much of the poverty on the global scale. Especially tax evasion – nearly half of global GDP is held in tax havens!
I knew Britain is dodgy on the global stage. But here’s a section that really hit home with how cartoonishly corrupt it is. (Italics mine)
Jason Hickel: The sun never sets on tax havens, yeah, exactly. I mean, it’s interesting because again, this is a residue of the British colonial era. So a lot of these little territories, Britain never relinquished control over now remain as tax havens effectively perpetuating this extractive relationship that Britain, you know, used to have with the south and it still does. But yeah, the key elements of this system is the City of London. Now when most people hear the City of London, they assume it just means London, the city. But in fact the City of London is a small council in the very center of London, the city. And it’s interesting because it’s this ancient artifact from the 1100s where it has its own police force, it is exempt from parliamentary oversight and exempt from freedom of information rules, most importantly, and as a consequence it functions as the very center of the British tax haven network, which extends around the world. Okay. So, the City of London is where a huge proportion of the money that’s extracted illegally from the global south into tax havens flows through and they have their own mayor, which is called the Lord Mayor of London, which is quite different from the Mayor of London, which is the one we normally think of. And what’s interesting about the Lord Mayor is that the Lord Mayor respects the authority of no one but the monarchy. So it’s not subject to parliamentary oversight again. Right? And the job of the Lord Mayor of London is to promote the interests of the financial sector in the City of London. And in order to do that, he has, it’s always a man for the past thousand years, he has a multibillion pound slush fund that is for use and I quote “to expound the virtues of financial liberalization around the world” and effectively to build the city’s tax haven network in different countries. So it’s quite, you know, it’s sort of institutionalized corruption, really, which everyone seems to sort of accept as normal. But the point I want to make here is that if you look at, again, you know, who’s responsible for the rules that sort of facilitate the possibility of these illicit financial flows and the institutions that facilitate them, they’re global north countries, right? Tax havens are controlled by the global north. The WTO rules are effectively controlled by the global north and yet how do they get away with this clean rating from Transparency International despite the fact that they facilitate these incredible heists from the global south every year. That is a massive, significant and actively known cause of impoverishment and under development.
Adam: Well, the City of London is celebrating its 1000th anniversary in 2075 and I hope I live long enough to ring in that thousand years of evil colonial corruption. That’s a hell of a, it’s a hell of a marker.
Whenever there’s a big charity event going on, there are also concerned discussions of the type, ‘won’t their leaders just take the money? How can we be sure it gets to the people, and does what it’s meant to? Will giving money ever really solve this anyway?’
As Jason, Adam and Nima point out in the episode, it’s not that the commonly noted sort of corruption doesn’t exist or isn’t a problem – it is. But a far more significant element of the problem is right at home. Our well-off countries and companies are effectively stealing vast sums. And we don’t really hear about it.