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Wednesday, 16 April 2014 06:11

Maxim of the Oligarchy: The Affluence of the Few Supposes the Indigence of the Many

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Profile of Adam Smith. (Photo <a href=" http://commons.wikimedia.org/wiki/File:AdamSmith.jpg" target="_blank"> via Wikimedia Commons</a>)Profile of Adam Smith. (Photo via Wikimedia Commons)ERIC ZUESSE FOR BUZZFLASH AT TRUTHOUT

"The affluence of the few supposes the indigence of the many." -- Adam Smith, guru economist for the gluttonous takers of wealth

According to the most comprehensive analysis ever done of secret, virtually entirely untaxed, offshore wealth, it's "well in excess of US $21 trillion." That was as of July 19, 2012. A subsequent and far less scientific study by Oxfam, on May 22, 2013, said "At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide."

The $21+ trillion estimate was part of a report by James Henry for a team of experts on tax-evasion and avoidance, Nicholas Shaxson, John Christenson, and Nick Mathiason, which was done for the Tax Justice Network (TJN), a nonprofit that is the opposite of libertarians: Instead of saying that tax-cheats are heroes who are "anti-big-government" who should be admired and celebrated by the public, they say tax-cheats are the crooks who steal trillions from the public, and who are the chief source for the impoverishment of billions of people worldwide.

TJN's report is titled "Inequality" You Don't Know the Half of It (Or: why inequality is worse than we thought)." It's author, James Henry, is a "lawyer, investigative journalist and the former chief economist of McKinsey and Co. He has written widely on capital flight, tax havens, Third World debt, and corporate taxation. His work on capital flight has been presented at G20 meetings." The team that commissioned him to do this study have interesting backgrounds, themselves. For example, "John Christensen, a co-author of this paper, used to be Economic Adviser to the UK tax haven of Jersey, where for seven years he was responsible for negotiating the terms of entry of High Net Worth Individuals (HNWIs) wanting to become residents." HNWIs comparison-shop for places officially to "reside," so as to hide the wealth that they do not report on the tax returns where they actually keep their very real, and usually very multiple, palaces and mansions and condominiums and estates, and pay for all of those political campaign commercials to get voters to "elect" "their" "representatives" in "their" "democracies," and go fight, and get crippled or die, in "their" wars, etc.

The TJN report says:

"All studies exploring economic inequality have systematically underestimated the wealth and income enjoyed by the world's wealthiest individuals. The enormous quantity of assets held offshore and in opaque and anonymous structures is not factored properly into anybody's calculations. Not only that, but the trend of rising inequality in many countries appears to be worse than previously thought." They note that an "asset and the income it produces will not be counted in the inequality statistics."

As a consequence, a study is quoted there that found "a disconnect between the data on income inequality and the data on wealth inequality." Whereas income for the top 0.1% has been soaring, it hasn't been showing up in the wealth data -- it has instead been disappearing down the rabbit-hole of secretly held wealth, covered over by layers of corporations and trusts. "A private global infrastructure of lawyers, accountants, bankers and company and trust formation agents are dedicated to hiding the assets of the world's wealthiest individuals."

For example, "the sheer volume of secretly held private assets dwarfs Africa's public debts, making it a net creditor to the rest of the world." Supposedly, Africa derives more in income from the rest of the world than it imports from the rest of the world. But that's only because "the assets accumulated by means of capital flight [offshore tax havens, mainly] are private, while the external debts are public liabilities owed to the creditors [like the World Bank, IMF, Bank for International Settlements, etc.] by the people of Africa through 'their' governments."

So: when the economically advanced countries demand that the poverty-stricken nations cut government expenditures in roads, hospitals, schools, etc., in order to repay the loans from those international institutions, the people who will be suffering will be the public in the poverty-stricken nation, while the aristocrats there will continue hoarding up wealth secretly for them to be spending lavishly on penthouses on Park Avenue, and villas on the Cote d'Azure. The IMF, etc., are demanding that the poorest pay for the corruption by the richest.

Then, people such as Bill Gates set aside tens of billions tax-free as "charity" to go to undo a tiny amount of the harms that aristocrats (perhaps including even Gates himself) have perpetrated upon the publics in those countries.

"In their book, Africa's Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, [Leonce] Ndikumana and [James] Boyce estimate a cumulative $944 bn in accumulated capital flight from 33 African countries in 1970-2008, compared to 'just' $177 bn in external debts, making Africa a net creditor to the world."

TJN's study examines in depth, "Missing Wealth 4: One Hyde Park, London." This is the "most expensive apartment block ever built." "The 56 apartments were listed as having a value of a total ... US$ 2.0 bn ... but of these, only four apartments, with a combined value of [one-twentieth of that] ... were listed in the name of warm-blooded people. The rest, representing nearly 95 percent of the listed value of the properties, were owned anonymously through corporations or trusts, mostly in [tax-havens]. ... Owning the apartments offshore can help the owners avoid various different taxes," all of which taxes are routinely being paid by non-billionaires and by ordinary citizens.

The taxes that the billionaires do not pay, on income that goes down their rabbit-holes and never shows up in any real country, get paid by everybody else, or else doesn't get paid by anyone -- in which cases the results are like in Greece, or Crete, or Ukraine, or other countries that just get stripped by the elites in their own and in the "democratic" nations.

Libertarians are, of course, great admirers of Adam Smith. Smith, in his famous 1776 The Wealth of Nations (TWON), which was sponsored by the Duke of Buccleuch and other aristocrats, said (in Book V, Chapter 1, Part 2):

"For one very rich man, there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy to invade his possessions." In his 1762 Lectures, Smith said: "Till there be property there can be no government, the very end of which is to secure wealth, and to defend the rich from the poor." It's because of such writings as these, that his career was such a success: there was no shortage of aristocratic money coming his way. That's how and why he became a founder of the modern "science" of economics.

And, as a result of that "science," the IMF and other global financial institutions continue holding those nasty poor people hostage to repay the debts that were drawn from those international institutions in order to build the fortunes of the aristocrats while the publics everywhere are being saddled with only the debts, and the unpaved roads, and the filthy water, and the decrepit schools, and the barren hospitals.

All over the world, the prisons are full of the poor, whom Adam Smith described as being "driven by want, and prompted by envy." Here's what Smith said, in this same passage of TWON, about the people who have those secret accounts, the superrich:

"The owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, ... is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate, continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. ...

"The causes or circumstances which naturally introduce subordination, or which naturally and antecedent to any civil institution, give some men some superiority over the greater part of their brethren, seem to be four in number.

"The first of those causes or circumstances, is the superiority of personal qualifications, of strength, beauty, and agility of body; of wisdom and virtue; of prudence, justice, fortitude, and moderation of mind. ...

"The second of those causes or circumstances, is the superiority of age. ...

"The third of those causes or circumstances, is the superiority of fortune, the authority of riches ...

"The fourth of those causes or circumstances, is the superiority of birth. Superiority of birth supposes an ancient superiority of fortune in the family of the person who claims it. ...

"Civil government, so far as it is instituted for the security of property, is, in reality, instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all."

So, since attitudes like that continue to prevail, the poor rot in prisons while the aristocrats go to parties and get buildings named after them, and fly around the world from one residence to another -- and occasionally, fly to their hotel and an obscure post office box in places such as the Cayman Islands.

This, after all, is "the free market." It's the fantasy of Adam Smith, praised and marketed worldwide by aristocrats and their servants, to this day.


Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of  CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.