Episode 73: Western Media’s Narrow, Colonial Definition of ‘Corruption’
Citations Needed | April 17, 2019 | Transcript
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Nima: “The scale of corruption in Africa is daunting,” warns The Economist. “Corruption a Cause of Poverty in the Developing World,” DW (Germany) tells us. “Why corruption is holding Africa back,” CNN laments. Everywhere we turn in elite western media and the halls of power we are told the global South is poor, in part or in whole, due to rampant “corruption”.
Adam: But a closer look at the data — and any effort to put notions of corruption in their proper historical context — reveals our limited, racialized definition of corruption in popular discourse is the geopolitical equivalent of complaining about “black-on-black” crime. True in a limited, technical sense but, in practice, little more than a victim-blaming red herring, meant to avoid uncomfortable discussions of white supremacy, deliberate economic dispossession, and the far greater global regime of corruption leveled by the super-wealthy who extract over $2 trillion annually from the global south in illicit outflows using tax shelters, hot money, interests on exploitative IMF loans, trade misinvoicing and a host of routine, totally unscrutinized financial schemes.
Nima: We will be joined today by anthropologist and author, Dr. Jason Hickel. His latest book is The Divide: Global Inequality from Conquest to Free Markets.
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Jason Hickel: So, of course I teach on global economics and, and one of the questions I like to ask my students at the beginning of term is something along the lines of, okay, so we have this massive inequality between global north and global south, rich countries and poor countries, why do you think poor countries are so poor? And I would say, you know, 80 and 90 percent of the students will put their hands up and say they believe it’s because of corruption, you know, because the global south has corrupts leaders. But the problem with that story is it erases, you know, the history of colonization, the history of structural adjustments, the history of unfair trade arrangements. And so it’s a very de-politicized way of thinking about the drivers of impoverishment because the focus is solely on the nation states as opposed to the relationships between nation states and geopolitical regions of the world. And that’s really what I want to draw attention to.
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Nima: We’re excited to have Jason back on the show. He is a fellow of the Royal Society of Arts, serves on the Labour Party Task Force on International Development and is Policy Director for The Rules collective, which is a great group. His book, The Divide, we’ve talked about before on Citations Needed, Episode 58 on the neoliberal optimism industry and development shaming in the global south.
Adam: And like hacky Hollywood producers, we are doing the sequel because people have asked for it.
Nima: That’s what we’re doing. So, The Divide, which is Hickel’s book, has so much more great content in it that we didn’t really get to on the previous episode so we thought we would have him back on to talk namely about this issue of ‘corruption.’
Adam: The part of the book that really popped was this idea of corruption and you begin to sort of dig into it and then you really start to think about what this concept means. So let’s begin with some basic numbers. According to Hickel’s research, the UN Convention Against Corruption, which targets a very specific and narrow definition of corruption, that which is carried about by the leaders and officials via bribery and theft, it costs poor countries an estimated $20 to $40 billion a year. This is the corruption we typically talk about when we talk about poor countries being corrupt. This is certainly a sizable sum and is worth tackling in and of itself but to put it in proper context as a total percent of illicit outflows from poor countries every year it barely is 3 percent.
Nima: By contrast, the group, Global Financial Integrity or GFI, which is a nonprofit based out of Washington, they calculate that the other 97 percent of illicit outflows — which is basically just a fancy word for any illegal movement of money from one country to another — is of a very different nature, one almost never talked about by our media. 65 percent of this total theft comes in the form of commercial tax evasion. Over a trillion dollars — trillion with a ‘T’ — flows illegally out of developing countries and into illegal tax havens overseas every year. So, just to put some of these statistics about tax havens in context, these are some of the figures. 30 percent of total foreign direct investment flows are booked through tax havens. Basically about one sixth of all private wealth on Earth is stored in tax havens. A total of $32 trillion — again, trillion with a ‘T’ — is held in tax havens, which to put that itself in context, that $32 trillion, that’s nearly half the size of the global GDP.
Adam: So before we dig into the specifics of how this rhetorical and legal scam works, we wanted to sort of establish some of the loaded language that’s used by Western media to talk about non Western countries, specifically terms like “kleptocracy,” “thugs,” “oligarchs.” So these are terms that are used to sort of do the thinking for the listener. The rich people in the United States are never referred to as oligarchs, kleptocrats. Kleptocracy is something never applied to the United States despite again the massive Wall Street fraud. These are terms that are only used for batty countries or poor countries or oftentimes countries that are both poor and batty.
Nima: And the deployment of these terms is generally used to label and deliberately de-legitimize troublesome disobedient governments. Thus not only teeing them up for US and European aggression, things like sanctions, embargoes, if not coups or full scale invasions, but also to enable the public receiving these terms constantly having to do with other countries, certain very specific countries and entire regions, enable the public to support these acts due to moralistic pleas to humanity and decency. These thugs are always untrustworthy and shameless. Obviously, they’re thugs. After all, they steal food from the mouths of their people. They allow lawlessness and exploitation to reign in their regimes. They hoard treasure for themselves and their friends via elaborate webs of bribery, embezzlement and cronyism. Corruption is, in our media, the enemy of development, robbing the poor people of the global South of a way up and out of misery and destitution.
Adam: And so this is the number one source for what is and what isn’t corruption is a group called Transparency International. Now Transparency International by its own admission does not measure money laundering or tax evasion or these other illicit outflows, which we’ll get into with our guest and they are largely funded by Western corporations, which of course have an influence in making corruption a uniquely non Western phenomenon. The US arm of Transparency International, they’re big donors, which is $50,000 or more, are Deloitte, Bechtel, Exxon Mobil, Google, Pfizer, PriceWaterhouseCooper. Other big donors include Raytheon, PepsiCo, CityGroup, Lockheed Martin, presumably Lockheed and Raytheon are not corrupt, they’re just building missiles.
Nima: In 2012, the U.S. arm of Transparency International actually gave its annual integrity award to none other than the Coca-Cola company as well as then-Secretary of State Hillary Clinton. So it’s, it’s sort of seen as an effective arm of the, in many ways in an arm of the U.S. State Department, which the State Department routinely uses the specter of corruption as a way of de-legitimizing governments that it sort of doesn’t like, which again plays into this Westernized notion of what is and what isn’t corruption. What transparency international does, so it puts out a very kind of highly-touted, everyone reports on it when this comes out annually, it is the Corruption Perceptions Index and it always includes a very fun map with a color coded system, color graded to, you know, who is the most corrupt, who is the least corrupt and unsurprisingly the global north is always kind of a light yellow, maybe a little gold, and that all of Africa is some variant of red. So is Eastern Europe, obviously Russia and most of South America, just deep shades of red, of rampant corruption. While Western Europe, the US, Australia and New Zealand obviously don’t suffer that much from this plague of corruption.
Adam: Similar to what we discussed in Episode 8: The Human Rights Concern Troll Industrial Complex back in 2017, there we talked about how at the time it was 39, but now it’s 42, 42 out of 42 people indicted by the International Criminal Court are African. So if I’m an alien species and I come down, I would think that the only war crimes ever committed are by Africans, because the court is set up by, the policie, are established by Western largely white nations. Our definition of these terms will reflect how we perceive them and just the same, right? It’s not as if there aren’t people, African leaders who commit war crimes. It’s not as if there aren’t African leaders who aren’t corrupt. Of course they are. But the reason why we zoom in the definition to meet a very particular criteria is because that definition has to indemnify, it has to exclude the powers that set up these very institutions and hand wringing about corruption as this sort of thing separate from these power structures is a similar idea.
Nima: And so you see official enemies of the United States, for example, routinely referred to by these terms. John McCain in 2013 called Vladimir Putin someone who rules by “corruption, repression and violence.” He, you know, called him a “thug” at every opportunity. This is repeated endlessly through the media. You can find endless examples of this. “Cuba Is A Kleptocracy, Not Communist,” The Daily Beast reported in 2014. “As Its Own Citizens Suffer, Venezuela Exports Corruption,” reported Freedom House in 2017. Mike Pompeo, the secretary of state, released an official statement just earlier this year in 2019 entitled, “Actions Against Venezuela’s Corrupt Regime.” The Guardian also wrote “Corrupt Maduro has broken his country. Now, democracy must have its day.”
Adam: So corruption is, again, something that only applies to poor countries and their leaders, unless they’re kind of compliant American client states at which point they’re not corrupt, they’re pro-freedom. One thing to note is that Transparency International, the way they measure it is perception, it’s self reporting. It’s how people perceive corruption. So let me again, corruption in a lot of countries I want to be clear is an issue, right? It’s an issue for your average person that every time I go past a checkpoint, I have to bribe someone or every time I want to start a business, I have to bribe a minister. That is an extremely overt and unsophisticated form of corruption where, again, we’ll go into this further with our guest, but what happens in the west is a more opaque, more sophisticated version. We don’t see it. It’s similar to how we can see online trolls that come from Russia because for the most part they’re extremely shitty. But the online persona management done by more sophisticated version of online propaganda is by definition not something we can really detect even though we know it has a budget of $100 million as of 2011 so like this is fundamentally a scope issue. Its an epistemological issue. It is how do we, how do we know what we don’t know? And, and the reason why self reporting is not the best criteria for corruption is that it centers a very cartoon, very direct form of corruption that doesn’t really talk about someone picking your pocket. Right? So we prioritize muggings over someone taking our wallet when you don’t notice.
Nima: Or prioritize, you know, stealing something off the back of a truck as opposed to rampant wage theft.
Adam: Exactly. Certain crime is highlighted. We’ve talked about this a number of times where it’s wage theft, which is greater than the totality of all burglaries, car jackings, home invasions and muggings combined. We don’t ever ever talk about wage theft even though it’s literally the same thing.
Nima: Exactly. So we’ve mentioned these sort of indexes before. There’s, you know, one’s on democracy. There’s ones on violence. This one is about corruption. As Adam said earlier, there are maps about human rights abuses and it all depends on who is telling what stories. So, that’s why you see, when it’s about Iran, Atlantic Council will report “Iranian Crackdown on Corruption May Only Be Superficial.” You’ll see “Iranian anger at elite corruption grows as sanctions bite” from the Financial Times. You’ll see “Confronting Iran: The Trump Administration’s Strategy”, a big foreign affairs piece written by Mike Pompeo at the end of 2018 where he describes North Korea and Iran as “outlaw regimes” where basically the elite resembles a “mafia” in its racketeering and corruption. And so these terms are used again and again to prop up the notion that these leaders over here are stealing from their people and someone needs to save the people from their corrupt leaders. Who are going to be the saviors? Always Western Europe and the United States.
Adam: And this is, this is obviously used for China. It’s very common with Russia because again, we’re narrowing the definition of corruption. It means something very specific. The Economist, “The scale of corruption in Africa” from 2015. 2016: CNN, “Why corruption is holding Africa back.” One of the things that is interesting is how when reporting on fascist or far right-wing governments, especially in Latin America, they’re held up as noble fighters of corruption, which is traditionally seen as something uniquely left-wing. That they have a sort of keep the trains running on time and keep things squeaky clean mentality.
Nima: Yeah, fascism is somehow never corrupt. So for example, The New York Times during the Pinochet regime in Chile routinely reported on that country, obviously, but made a point of noting that of all things, it was not a corrupt society. So you’ll see articles like this in the Times from September 4th, 1983 “Can Pinochet Fight Off Mounting Oppostion?” And you have this: “Chile’s military is proud and highly professional, noted for its lack of corruption and Prussian-like loyalty to the chain of command. Even today, after 10 years of rule by the General, it stays mostly out of politics.”
Adam: This is from The New York Times from May of 1986: “Pinochet Is In No Hurry To Relax An Iron Grip.” There is no mention of the CIA coup in the piece itself, and they say: “Aside from the toughness that General Pinochet has demonstrated to more than one high-level Washington envoy, Chileans say he has a number of qualities that set him apart from most other authoritarian rightist rulers.” ‘Chileans say.’ ‘Some say.’
Nima: (Laughs.) ‘Some say.’
Adam: It goes on: “The corruption issue is always at the top of their list.” They’re quoting someone here: “‘I don’t think Pinochet is corrupt or that this is a corrupt Government,’ said one of the countless civilians who have served in the Pinochet Cabinet until falling into disfavor. ‘There’s a little corruption,’ the former minister added, ‘but it’s not a way of life in Chile. We do not have an Imelda.’” — they are referring to Imelda Marcos the wife of the dictator of the Philippines. It will go on to say: “‘You are not going to find Gucci shoes all over the place.’” So this idea that rightist leaders fight corruption. This was a very popular pitch for Bolsonaro. Of course corruption was the pretense that did a soft coup against the Lula and left-wing government in Brazil. Everybody was corrupt, but we selectively picked the ones that we wanted to get rid of. And so Bolsonaro, this is a Washington Post headline, “Brazil’s populist new president on women, Venezuela and his love for Trump.” It would go on to say quote, “Now he must revive a stagnant economy, attract foreign investment, reduce crime and corruption at home.” He’s Elliot Ness. He sort of above reproach the AFP would tweet out “New Brazil President Bolsonaro takes aim at crime, corruption.” So this idea that he’s going to take on, because he’s a fascist with an iron fist, he can sort of, he is above reproach, right?
Nima: What it really serves to do is also prop up the West writ large as being superior to the global south and to colonial societies, to postcolonial societies and certainly to anti-colonial societies that coming out of severe oppression and violence that the new leaders are all thugs and despots and smugglers and gun runners and so therefore these societies are just doomed and really all you need to have is is a little more colonialism back and maybe they would get on track. There is this real kind of comparison idea where when you hear so much negative shit about the countries you’re supposed to look down on, because you’re supposed to think that the West can do whatever it wants and the way it’s going to do whatever it wants is if the countries it’s doing those things to deserve it or are unworthy of ruling themselves and so you have something very similar to what famed Nigerian author Chinua Achebe has written and it’s this: “The West seems to suffer deep anxieties about the precariousness of its civilisation and to have a need for constant reassurance by comparison with Africa.” To discuss this more, we’re going to be joined by Dr. Jason Hickel, anthropologist, author and Policy Director for The Rules. His latest book is The Divide: Global Inequality from Conquest to Free Markets. Stay with us.
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Nima: We are joined now by anthropologist and author, Dr. Jason Hickel. Jason, thank you so much for coming back on Citations Needed.
Jason Hickel: Yeah, my pleasure. Thanks for having me.
Adam: So, today obviously we’re talking about the notion of corruption. I thought every part of your book was great, but for some reason to me the corruption part really spoke out or jumped off the page being like, okay, here’s our notion of corruption. This extremely loaded word, we all agree is bad. While popular notions of corruption, I think we would all agree are our true in a technical sense, they kind of miss a much bigger picture of how money is stolen specifically from the global south. You throw out the number 3 percent which you argue is the sort of scope of the traditional notion of corruption, specifically the most popular or I should say “pop” notion of corruption which is the Transparency International Index. What is the other 97 percent? Can we sort of set the table by explaining what we call corruption and what the, uh, sort of epistemological scope of corruption is presently and what it ought to be in your opinion?
Jason Hickel: Yeah, yeah, totally. So, yeah, so the Transparency International Corruption Perceptions Index that covers the, you know, the sort of theft and bribery from government officials, which is significant, let’s not, you know, let’s not beat around the bush. It’s between $20 and $40 billion lost from global south countries per year, which is a lot. And of course that’s, it’s big enough to warrant our attention as an obstacle to development and the cause of poverty and so on, which is the main focus of the corruption narrative. But if we broadened our view and put this figure into perspective, then it becomes clear that this kind of corruption is a very small proportion of total illicit flows that leak out to the developing world each year. Right? Which is, okay, so it’s about 3 percent and the rest is in the form of primarily commercial tax evasion, which accounts for about 65 percent of total illicit flows. And total illicit flows amount to about $1.1 or even more trillion US dollars per year. So vastly, vastly outstripping the kind of bribery and corruption that Transparency International focuses on. The biggest issue by far really is commercial tax evasion. And then there was some other, you know, little parts like dodging capital controls, laundering money, etcetera, etcetera. But the biggest chunk of illicit flows by far is commercial tax evasion.
Adam: What is the total number of illegal tax evasion or tax evasion? And can you delineate between illicit and illegal? Is that really a meaningful distinction for the sake of defining what is corruption?
Jason Hickel: Yeah. So, um, yes, so illicit financial flows are all illegal but are done regularly and almost never punished, right? So that the biggest chunk of these illicit flows escapes the global south through a mechanism known as transfer mispricing, which is basically when multinational companies steal money from global south countries through the trade system by basically lying on their invoices and using that mechanism for shifting money into tax havens. Okay. So it all depends on services conducted in tax havens or secrecy jurisdictions known as reinvoicing services, which are openly advertised even though they’re illegal. I mean you can, you can get on Google right now and type in reinvoicing services and find all sorts of tax havens that offer them. And this is a huge drain of wealth from the global south that would otherwise be taxed and go into public health and education, poverty eradication programs, you know, public sector wages, etcetera, etcetera. And this is basically stolen every year, it outstrips the aid budget and even the foreign direct investment budget flows, you know, many times over. So it’s a significant outward flow that we need to take account of.
Nima: That’s, yeah, it’s kind of a remarkable number and the stats in your book are just staggering in that way. I mean, so the way that I’m thinking about this, a very common criticism of Wall Street say in the United States is that it is legalized corruption. You could say the same thing about what lobbying or big kind of political action committees, like these are all legalized ways of using money in illicit ways, sometimes hiding it, sometimes paying off officials effectively, so just making routine and banal things that then are criticized in global south countries as being the kind of essence of illegality. That essence of thuggery. How much do you think the idea of Wall Street as legalized corruption holds water? Like, is that the correct way to think about it and how has that distinct from then the accusations thrown at the global South?
Jason Hickel: Yeah, I would say that the Wall Street example is interesting as an example of legalized corruption I mean if you look, if you just look at like, um, well, I mean some of it is illegal, right? So if you look at the financial crisis in 2008 I mean that was, you know, the consequence of profound corruption in the financial sector in the US, almost none of which was punished, right? But then if you look at what happened afterwards with the bank bailout, I mean that was the tune of $16 trillion US dollars effectively handed from public coffers into private banks, right? I mean, so you have this massive transfer of wealth from public hands into private hands. I mean, is that not just the definition of corruption effectively? And that, you know, that is legalized. The stuff that’s happening in terms of this massive extraction from the global south is a little bit different because it is all illegal. What’s crucial about this is that the Corruption Perceptions Index that Transparency International publishes, you know, shows the global north in kind of this happy yellow, which is the sign of no corruption at all. And then the global south is just smeared and this kind of stigmatizing red. And this fits with our assumptions about how the world works, which is that global north countries are transparent, democratic, etcetera, etcetera. Whereas, um, you know, the south is just riddled with corrupt dictators and corrupt public officials and so on. And that fits with our stereotypes. But in fact, if we look at like who’s really facilitating this extraction, this illegal extraction from the south every year, one way that it works is, again, as I said through the trade system, which wasn’t possible before 1994. So in 1994, this is when a key change happens when the World Trade Organization is founded, then they abolish what was known as the Brussels Definition of Value. This is a bit technical, but basically in the past, customs officials could catch this kind of corruption because whenever somebody lied on their invoices, their trade invoices, customs officials could just hold up the transaction and say, ‘this looks completely out of whack, like a ballpoint pen should not be worth $1,000. It should be worth, you know, a few cents.’ And so whenever there was sort of suspicious transactions they could hold them up, but the World Trade Organization argued that this list of standard values was inefficient. It made customs transactions inefficient and so they abolished it and they instructed customs officials that they had to take invoices at face value. So as a consequence, even when customs officials in the global south see wildly inflated, clearly untrue claims on trade invoices, they have to let them go through, which is what makes it so easy for corporations to affect this extraction of illegal money from the south. And that’s crucial because the World Trade Organization, I mean, who controls that, right? If you look at bargaining power in the World Trade Organization, it’s held entirely by rich countries because it’s all by GDP size basically. So the richest countries are the ones that have been able to affect and perpetuate this trade system that effectively allows illicit financial flows to happen. But the other key element to keep in mind here is that none of this would be possible without tax havens and secrecy jurisdictions. And those are almost entirely controlled by global north countries. Right? So in Europe you places like Switzerland, the Netherlands, Luxembourg. In the US, you know, tax havens like Manhattan, Florida and Delaware and then you know the US Virgin Islands and the Marshall Islands and other little US colonies effectively, and then you have Britain and its overseas territories. Again, these sort of former colonial territories-
Adam: Real quick, cause I think our listeners are going to be fascinated by this and I want to make sure we’re clarifying. So the trade misinvoicing is, is a way of inflating costs to take that actual monies that’s the difference between the nominal and the real value of that which is being invoiced. And then basically just hiding that somewhere that the local tax authorities have no way of actually knowing about. Is that, is that a, is that a good description of what’s going on? Cause I feel like people are gonna want to clarify that a little bit since it is such a huge number.
Jason Hickel: Yes, let’s clarify that. Yeah. So, um, if two companies are making an exchange through different parts of the world, or even I guess even in the same country as well this could happen, there would be an invoice issued for the actual value of the goods exchanged and that would be issued through a tax haven. And then the invoice for the other side of the exchange, the buyer versus the seller would also go through a tax haven and they would not match. Okay. And so on the face of it, they would look legitimate. But the difference between the two is what gets stashed away in the tax haven and then diverted to an offshore account. And so that’s kind of how it works. It’s the buyer and seller using different invoices for the same transaction and that’s the way the money is stolen. But there’s another mechanism for stealing money through illicit flows called transfer mispricing. This is actually a legal practice that’s practiced by multinational companies that have franchises and branches in different countries. Okay. And what they do is they, they shift profits from high tax jurisdictions to low tax jurisdictions illegally by trading within the company basically. And again, inflating the prices of the things that are trading. And there’ve been some really crazy examples of this, like a kilogram of toilet paper from China, priced at $4,000 a liter of apple juice from Israel priced at $2,000 etcetera, etcetera. I mean those are ways of just flagrantly lying on your invoices as a way of shifting money to lower tax jurisdictions within the same company. And again, customs officials and not allowed to hold those up because they have to take invoices at face value.
Adam: Yeah, any kind of global policing mechanism seems to be toothless or nonexistent. Is that a fair?
Jason Hickel: Yeah, exactly. And, and the rationale was that, you know, this regulation inhibits free trade, right? And so if we want to have free trade, which everybody seems to believe is great, you know, then you have to cut all these regulations including the ability to stop, you know, obviously fraudulent trade transactions. And so global south customs officials are basically hamstrung and they’re incapable of stopping what is obviously illegal.
Nima: Can you talk a little bit about hot money, which is like another little aspect of this?
Jason Hickel: Yeah, hot money also accounts for a portion of illicit financial outflows from the global South. And that’s basically investors that shift money between countries really rapidly to take advantage of changing interest rates or, you know, currency conversions and so on. So it’s basically a speculative flows that move really quickly. And for big economies like the U.S. and the UK, this is not really a problem, but for small economies in the global south, these kind of hot money outflows can completely decimate an economy, right? So they’re very, very destabilizing. And not all hot money is illegal, but hot money becomes an avenue for illegal outflows. It’s basically an avenue through which illicit flows can happen. Now what’s interesting again is that this is also a consequence of neoliberal globalization because the idea was capital controls slow down the movement of capital around the world. And so, whereas in the past, if an investor or a company wanted to move money offshore, then they would have to go through a process whereby they tell the governments what they’re planning to do and they would have to pay taxes on the money that’s leaving and there would be a waiting period of say a year or three years before they can make that transfer and so on. All of that has been abolished in favor of sort of increasing the speed at which financial transactions can happen around the world. And because of the abolition of those capital controls, it becomes easy to use that system to steal money.
Adam: Hey man, liquidity.
Jason Hickel: Exactly.
Adam: It’s a religious-like market. You ask an investor banker like what do you do that’s good for society? ‘Oh, I create liquidity.’ ‘Oh liquidity. Okay.’ Oh nevermind then. We’re liquid. That’s what’s important.
Jason Hickel: It sounds great.
Nima: Can you tell us about the Lord Mayor of the City of London?
Jason Hickel: (Laughs.) Yeah. So Britain controls about 50 percent of the world’s tax havens. Okay. And most of those are controlled straight via the City of London.
Nima: The sun never sets on tax havens.
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 this 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.
Nima: (Laughs.) Yeah. Does the Lord Mayor, like, ride around in like a gilded carriage? It just, it seems so outrageous.
Jason Hickel: He actually does. It’s bizarre. But there’s this Lord Mayor show every year where the Lord Mayor literally does ride around in kind of a golden carriage.
Nima: (Laughing.)
Adam: Wow, we were just being sarcastic.
Jason Hickel: I believe he carries a mace, things like that.
Nima: (Laughing.)
Jason Hickel: I mean it’s quite, it’s quite extraordinary really. It’s a, it’s an ancient institution.
Adam: On one level I appreciate that they kind of just lean in to being evil.
Nima: (Laughs.) Right.
Adam: I kind of respect that. There’s no like Tony Blair like 2.0 rebooting of empires. Just ‘no we’re going with the gold carriage and the wigs, we’re going to bring back the wigs.’
Nima: Right.
Jason Hickel: Exactly. And what’s amazing is if you think about the history of the City of London it has a very ancient relationship to the very possibility of colonialism. I mean, you know, the early sort of financial operation of colonization was run through the City of London and to this day it has this kind of residue of colonial extraction to it. It’s quite, it’s quite remarkable.
Adam: I’m just envisioning that table from Spectre, you know, not to trivialize it because it actually is evil but, um, so we have this sort of direct and kind of more opaque forms of corruption. Now one of the problems is, you note with Transparency International, is that it largely kind of self identified or kind of self reporting, which is not necessarily an objective metric. It’s sort of solipsistic in its nature and obviously, you know, robberies that happen or muggings that happen right outside of my window are going to be different than muggings that happen somewhere else. So it’s hard to sort of know what that looks like. And what is the challenge for kind of liberal reformist or left-wing reformists in the global south? The analogy we use is that it’s kind of a geopolitical equivalent of black-on-black crime, which is to say it’s sort of strictly true, but it’s done to kind of obscure a broader system of frankly white supremacy. And we’ll get into the racial dynamic later, but also kind of broader injustice, but at the same time the same problem emerges where you want to address black-on-black crime or you sort of want to address corruption but you have to balance that with saying, ‘okay, well look, there’s these other things that go wrong, there’s these other ways in which the global south is exploited.’ How in your opinion, do sort of balance that rhetorically for people who are in the global south and have the challenge of dealing with real sort of more traditional notions of corruption but also want to draw attention to the broader injustices?
Jason Hickel: So, of course I teach on global economics, and one of the questions I like to ask my students at the beginning of term is something along the lines of, okay so we have this massive inequality between global north and global south, rich countries and poor countries, why do you think poor countries are so poor? And I kid you not. I would say, you know, 80 and 90 percent of the students will put their hands up and say they believe it’s because of corruption. You know, because the global south has corrupt leaders and the problem with this, okay, maybe that might be true in some cases and we should not dismiss that. But the problem with that story is it erases, you know, the history of colonization, the history of structural adjustments, the history of unfair trade arrangements, etcetera, etcetera. And so it’s a very, to me, a very deep politicized way of thinking about the drivers of impoverishment because it focuses solely on the nation states as opposed to the relationships between nation states in geopolitical regions of the world. And that’s really what I want to draw attention to.
Adam: It’s just a moral failing.
Jason Hickel: Yes, exactly. It’s the equivalent of saying like when you pass a homeless guy on the street, it’s equivalent of saying, ‘oh, it’s because they’re too lazy or didn’t work hard enough.’ Or you know, ‘they got addicted to drugs’-
Nima: ‘Just get a job!’
Jason Hickel: ‘Just get a job,’ you know, and so it’s, it’s intellectually lazy, I think. And it distracts our attention from thinking critically about the broader arrangements of the global economy that drive inequality and perpetuate poverty in the first place. But I think there’s another key part of the story and that is that even if you do look at the most corrupt dictators in history, you see that a good proportion of them were put in place by Western superpowers after coups affected to take down democratically elected progressive leaders. Right? And so I was just looking at Transparency International’s list of most corrupt leaders in recent history. And, and a lot of them actually were installed by the U.S. I mean, you know, uh, Mabutu as a classic example, there was the U.S. and Belgian backed coup against Patrice Lumumba, the first democratically elected leader of the Congo, and they replaced him with Mabutu, who ran the country into the ground, is one of the most cartoonishly corrupt dictators in history. But the same can be said of, you know, the U.S. backed coup in Indonesia that puts Suharto into power, one of the most corrupt dictators in history. The Shah of Iran put in place by a British-backed coup. Idi Amin put in place by a British-backed coup. Pinochet but in place by a U.S.-backed coup. You know, look at today, look at Iraq, South Sudan, Afghanistan, Somalia. These are all some of the most corrupt countries in the world. And yet US intervention is clear in each of those places. And so I think that we have to think also about, you know, who is more corrupts the petty dictator or the superpower that installs him? I think that’s an important question for us.
Nima: Well, so as we talk about this colonial imperial system, the installation of dictators around the world and then the almost absolution of the puppet string pullers behind the scenes, there’s this very obvious racial dynamic to all of this. And there’s a reason why the Transparency International Corruption Perception Index is a perception index. And so it’s not necessarily based on cold hard metrics in the same way that, you know, other kind of rating systems may or may not be, but it’s the perception and there’s this implicit racism built into this. The idea that corruption rests on assumptions that countries in the global south especially, let’s say African nations, which we hear about all the time, simply don’t have the quote “institutions” or the quote “culture” or the “rule of law” that the global north respects and you know leads on the kind of liberal world order. And so because of these deficits deemed inherent in these African countries, these Middle Eastern countries, these global south countries, there’s this idea that this is just a racial problem. Like how does this fit in with other broad narratives of colonialism and the neo liberal residue of all of this? Like how does all this fit together?
Jason Hickel: Yeah, it’s interesting. I mean for me the main problem with Corruption Perceptions Index is exactly what you’re saying. It’s about perception. So what it does is it reinforces already existing biases. And so when you ask the average person in Britain or the US do you think of your country as being corrupt? Then they will of course say no because you know they are subject to a very powerful ideology that leads them to believe that their countries are in fact, not. That they’re the paragons of transparent virtue and democracy and so on. But for all of the reasons that I’ve described, in fact, there’s this hidden undercurrent of very profound corruption, that operates on a global scale right out of these countries that we deem to be so clean. And so in a way I think that Transparency International ends up actually creating the very perceptions that it seeks to measure in fact, if you think about it, because they produced this, this Corruption Perceptions Index map every year to great fanfare and gets covered by the media. And again, the global south just comes out bad, bad, bad compared to the global north. And so the media narrative around this perpetuates this idea that the south is corrupt in the north is not. And then when you start asking people each year for the survey what they think of their countries, they just tell you, you know, back to your face what Transparency International that has told them to believe. And so the method I think is ludicrous actually. There’s, there’s no objective value that they’re measuring. And what’s interesting here is a lot of people in the global south end up buying into this same notion, the same narrative that their countries are poor because of corruption. Of course people in social movements and you know, left leaning political parties recognize that, but also recognize the kind of broader historical and political narrative that’s important. But a lot of people don’t. And so I think that there is, um, there is misperception on both sides, you know, and that’s really a problem we need to tackle. We need a different kind of narrative about corruption that points to the, you know, the structural drivers of impoverishment and inequality in a much broader way than typical corruption discourses allow.
Adam: Let’s talk a bit about, you mentioned the start of 1994 as a kind of where this really got ramped up and then specifically the WTO and the IMF, which operate in sort of near secrecy, very little transparency, very little government oversight. In your book, you note that’s sort of changed, but not really. How do these sort of opaque trade negotiations and the asymmetrical nature of these institutions play into this kind of global regime of illicit outflows? Are our worst fears of the WTO that emerged in the nineties, do you think that largely sorta came to bear empirically?
Jason Hickel: Yeah, I mean the WTO these days is a little bit of a, it’s kind of in a stalemate I guess because global south countries have realized how destructive it’s policies have been to them and they’re not really allowing it to do the damage that it, that it would want to do I suppose, but, but there are some key issues that remain in as much as the WTO continues to function in the more mundane sense and governing global trade every day. And that is that when it comes to making decisions about global trade rules, while the WTO is technically a democracy with each country getting one vote inreality, all of the key decisions are made in sort of these secret backroom discussions known as green room discussions. And normally it’s only the most powerful economies that are invited to these. And if you are a trade representative from a global south country and try to get into a green room discussion at a WTO meeting, then you may well be forced out by security if you can believe it. I mean, it’s quite, it’s quite extreme. And so there’s a tremendous lack of transparency in the WTO that remains a real problem. And this is a public institution that’s supposed to govern trade around the world. And uh, and yet is deeply anti-transparent. And the same is true, I think, of the World Bank and the IMF. I mean, again, these are supposed to be institutions of public governance and so you’d expect them to uphold the highest standards of transparency and democracy that the west, you know, claims to expect of the rest of the world. But in fact, apartheid actually operates within the World Bank and the IMF when it comes to voting power with rich countries like the US, UK, Germany, France, controlling, you know, the lion’s share of voting power. Where’s the global south, which has 85 percent of the world’s population, it’s only about 50 percent of the vote. I mean it’s deeply anti-democratic at the very center of global economic governance. Joseph Stiglitz has called these institutions, the least transparent institutions in the world. I mean if that’s not a definition of corruption, I don’t know what it is and yet it operates at the very center of global economic governance and that’s a real problem.
Nima: And they get the nice yellow color.
Jason Hickel: Exactly. The leaders of the World Bank and the IMF are not elected but rather are appointed. The US government appoints the leader of the World Bank and Europe gets to appoint the leader of the IMF. Totally anti-democratic given that the majority of the world’s population is in neither of those places. I guess one thing that I really want to focus on are some of the effects of these institutions is the structural adjustment programs that the World Bank and the IMF imposed on the global south during the eighties and nineties I would like to think of this as a kind of corruption because, think about it, like it was effectively a strategy for plundering public money in the global south in order to pay back bankrupt banks in the United States. Okay. And the global south, you know, lost on average $480 billion per year during that period. It was a total financial catastrophe for them. The World Bank under those programs privatized some $2 trillion worth of public assets. I mean this is a massive transfer of value from public hands in poor countries to private banks in the US. Again, I think that’s a pretty solid example of corruption and yet we never think of it that way. And I think we need to change our standards because there’s clearly a double standard at stake here.
Adam: So let’s ask what your standard is. Under a Hickel regime, you become the global dictator of the world tomorrow.
Jason Hickel: Oh, I’d love that.
Adam: Yeah. I know who you’re like, ‘actually corruption will be the least of my worries. I’m going to fly around in my G5 and do booger-sugar.’ No. Um, what is under the Hickel regime? What is in your opinion, like a more robust and fair and sort of nod head patting, patronizing David Brooks racist corruption regime. What does that look like? What does this sort of more objectively correct metric?
Jason Hickel: Well, okay, well that’s two questions. What’s like a correct way of seeing corruption and what’s like a good metric? I suppose in terms of like just the way we perceive corruption, I think that we need to think of corruption whenever there is a substantial shift of wealth from public hands into private hands. Right? Because you know what’s going on to affect that? I mean that’s effectively what we mean when we talk about corrupt officials in the global south stealing public wealth and putting it in their personal accounts. Right? So do the bank bailouts in the U.S. after the financial crisis counts? I think they probably should. Citizens United versus FEC, which basically gives corporations the ability to spend limitless amounts of on political campaigns to serve their own interests? I think that should probably count as a kind of corruption. But if I was to, you know, if I was to think about a single index, there is one that exists already and it’s called the Financial Secrecy Index. And this doesn’t perfectly capture everything that I would want to cover, but it does help us rethink who is facilitating illicit financial flows around the world, which is I think the main issue we have to think about. And so what it does is it ranks jurisdictions according to their secrecy in the scale of their offshore financial activities. And if you look at the list, it’s a total inversion of the Transparency International list. It has at the very top, the most secretive jurisdictions in the world. Switzerland, the USA, you know, the Cayman Islands, Germany, Taiwan, Netherlands, etcetera. All of the key jurisdictions that facilitate illicit financial flows out of the global south come to the very top of this index. And so I would like to see something like the Corruption Perceptions Index, which is not empirical at all, but rather based on people’s biases. I’d like to see it replaced with something more objective. And I think the Financial Secrecy Index is a good start. And that would, you know, if this was publicized in the same way as the Corruption Perceptions Index, it would totally change the narrative. You know, suddenly we would realize that US and Britain and you know, Switzerland, etcetera sit at the very hearts of a system that extracts enormous amounts of wealth that should be in public hands, uh, into private secret accounts.
Nima: I think, you know, so much of it as you mentioned, is when this annual Perceptions Index comes out, it is all over the media. I mean, it is almost impossible to miss. It’s so flashy and all these, you know, listicles are written about it. Oh, ‘the worst 10 corrupt countries in the world’ and its ‘guess which African nations are on it this time.’ And it’s like, it has to do with, as you said, both reflecting people’s biases but also creating the very perceptions that then they report on and tout as somehow, you know, exemplary of something real as opposed to just pushing further colonial narratives.
Jason Hickel: Yeah, exactly. I mean, if you go back to the, um, to the UN’s very first convention against corruption, which took place in 2003, they made these phenomenal statements. They said it’s true that corruption exists in all countries, but, and I quote, “this evil phenomenon is most destructive in the global south where it’s a key driver of poverty and underdevelopment.” And I agree with them that corruption is a key driver of poverty and underdevelopment, that much is true. And I also agree that it’s evil, but I think, you know, it’s very clear that the most substantial locus of this corruption is in the countries that Transparency International paints this happy yellow rather than the ones that we typically think of. And I think that’s, yeah, I think that’s a crucial transition in our narrative.
Adam: What’s interesting is that it is that it puts corruption in an entirely domestic context. It’s only something that’s done internally from a government to the people. It’s not something one government does to foreign people. Which is a sort of like, you know, for example, they’re not polling Africa to ask if they think of the United States is corrupt, which would probably be far more objective and far more revealing.
Jason Hickel: Yes. I suspect if you were in Syria or Iraq and ask people there if they thought the U.S. is corrupt, you would get an interesting answer.
Adam: And it’s like, of course, of course, like some shithead American is going to be like, ‘we’re number one.’ Like this is not like a fucking mystery. Like it’s like how people always say ‘so-and-so dictator, you know, killed their own people and it’s like, well they can’t say dictator X killed people because we kill people. So you say they killed their own people. That somehow puts it in a different moral category.
Nima: Somehow, right, it’s like very pearl clutching.
Adam: But killing other people’s people. Totally cool.
Jason Hickel: Yeah very good point. I hadn’t thought about it that way. I think you’re right.
Nima: Jason, as part of your, your own work with The Rules collaborative and also on various task force organizations like what are you up to these days and how can we further follow your work and how can our listeners, beyond buying your book, which they should definitely do, how can they keep up with what you’re up to?
Jason Hickel: Oh yeah. Um, well I keep a lot of what I’m writing on my website, JasonHickel.org and I have a blog there where I post my musings, which sometimes makes people angry. In terms of things that are going on right now I think that, look, I mean there’s interesting stuff happening here in the UK with the Labor Party. I mean I realize that the only thing that gets out into the news these days about UK politics is Brexit, which is just so depressing and draining. But right now the Labor party is in an interesting process where they are completely rethinking their approach to, you know, questions of international developments, some of these ideas about changing narratives around corruption are at the hearts of some of their thinking. There’s also really exciting stuff happening that we’re working on in terms of helping develop policy around ecological economics and a green new deal for the Labor Party. So there’s some very exciting stuff happening there. Um, to me it’s kind of a bright spot in world politics right now, although again, very hidden. So similar I suppose to what’s happening in the US with Alexandria Ocasio-Cortez and the debates that she’s sparked there. So let’s see where these things go in the coming years. But hopefully, hopefully they will bear fruit.
Nima: That is great. And your musings, sometimes routine musings on Steven Pinker and his bullshit hearkening back to the first time you were on our show are always a phenomenal read and very important to dispel the myths of ‘everything is wonderful and great as long as you do TEDTalks all the time.’
Jason Hickel: Right.
Nima: So, thank you again for joining us Dr. Jason Hickel, anthropologist, author, professor. His latest book is The Divide: Global Inequality From Conquest to Free Markets. You are Policy Director for The Rules collective, which is a phenomenal group that I would urge everyone to look into and just thank you again for joining us today on Citations Needed. It’s always great to have you.
Jason Hickel: Yeah, my pleasure. Thanks for having me.
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Adam: That was fantastic. Of course people had asked for Hickel so we brought him back. We are if nothing shameless panderers.
Nima: That’s right.
Adam: But, no, that part on corruption in his book, which again I suggest everyone go buy and read it, it has really sort of galaxy brain level stuff. It’s really good.
Nima: Yeah, it’s really great.
Adam: We fancy ourselves cynical and savvy and I was like, I never thought of that, but that’s right. Corruption is a of bullshit concept and you realize that the whole regime is this real sort of kind of David Brooks ‘black people are poor because of their culture’ and it’s like, well, no.
Nima: Right, there is history and power.
Adam: And an ongoing fleecing regime that we just don’t talk about.
Nima: Right. Yeah, the idea that corruption is solely, you know, needing to like break out a wad of bills in order to like get your identification forms passed through more quickly is the tiniest level of corruption when compared to the global scale of what is actually going on.
Adam: Yeah, I mean tax havens especially, we just, it’s weird, it’s like this visceral, we talked about this on the episode about wage theft versus like burglary, right? Wage theft outpaces all traditional kind of law and order theft, but it’s like this, we’ve been so conditioned to view certain types of theft as evil transgressions and other types of theft as, ‘oh, well that’s just, he’s just saying a bottle of apple juice is $2,000 and taking and taking the other, you know, $1,995 and putting it in a bank in the Cayman Islands, but that’s completely normal.’ It’s like passive robbery versus more sort of cartoonish or, or visceral robbery and the ways in which one is highlighted and demagogued and one is just completely 100 percent ignored because the same people who are doing those things, they’re also the ones covering it. Like you said, CitiBank, international corporations that fund these transparency groups, of course they’re going to come up with a transparency metric that absolves the people funding them.
Nima: ‘You guys are a-okay.’ (Laughs.)
Adam: Yeah. It’s like what did you expect them to do? Come up with this sort of savage Marxist critique of capitalism? I mean of course it’s, again, it’s like we talked about in the beginning of the show about the ICC and their definition of war crimes. It’s, it’s extremely like, oh, the ICC doesn’t have a, you know, wars of aggression and invading countries is not a war crime. That that was mysteriously left out. Well why? Well it’s uh, of course the U.S. wanted to preserve the right to do that.
Nima: Yeah, so that will do it for this episode of Citations Needed on corruption. Thanks again to Jason Hickel for joining us and to all of our listeners for urging that Jason Hinkel join us again. It was great to talk to him. You can follow the show on Twitter @CitationsPod, Facebook Citations Needed, become a supporter of the show and our work through Patreon.com/CitationsNeededPodcast with Nima Shirazi and Adam Johnson. And as always, a very special shout out goes to our critic level supporters through Patreon. I am Nima Shirazi.
Adam: I’m Adam Johnson.
Nima: Citations Needed is produced by Florence Barrau-Adams. Production consultant is Josh Kross. Production assistant is Trendel Lightburn. Transcriptions are by Morgan McAslan. The music is by Grandaddy. Thanks everyone for listening. We’ll catch you next time.
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This episode of Citations Needed was released on Wednesday, April 17, 2019.
Transcription by Morgan McAslan.
