It also carries a clear message for ordinary citizens: no matter how hard you try, you will pay the bills for the elite’s excesses. It was a lesson ordinary folks learned quite well, as recently as the global economic crisis in 2008-09.
Among the firms on the list of 132 Cyprus account holders who made a timely escape from the island before banks closed and capital controls came down, is DTEK, an energy holding owned by Ukraine’s richest man Rinat Akhmetov. The company claims the transactions were motivated by growing concerns about financial stability in the country. Yet the fact that multiple accounts were emptied completely just ahead of what some in the industry call “confiscation day” arouses suspicions of insider information, to which Akhmetov’s System Capital Management offers an innocent explanation: That it was good business to move out of risky Cyprus.
But this is by no means just a Ukrainian problem. Companies and individuals from Russia and Kazakhstan emptied their accounts, as well as a subdivision of ExxonMobil, the American energy giant, illustrating once again that there are no borders when it comes to potential insider deals.
A deeper look at the changing global economy is even more troubling. Recent decades have been marked by what economists call a race to the bottom – lowering effective tax rates on corporations to ensure the hyper-mobile capital doesn’t move to the neighboring jurisdiction.
In its extreme this has taken the form of tax havens, which often shield dirty money from sunlight and tax collectors, creating a fiscal barrier between lawyered magnates and the riff-raff. To fill up budget holes, states have had to turn to ordinary citizens and small business. Occupy Wall Street, and other movements it spawned, was an attempt to protest it.
As if this grand robbery of individuals was not enough, a dual system of justice has emerged from this mess. Ordinary citizens are crushed for straying outside the lines while giant financial corporations like HSBC get a slap on the wrist for laundering money for drug cartels and terrorists.
Selective application of regulation does not stop there, though. While Cyprus (whose banking sector was worth seven times the economy) is being investigated, Luxembourg’s banks – worth over 20 times gross domestic product – are not.
Unfortunately, Ukraine fits right into this trend. Here, bureaucracy and corruption strangle small businesses, while giant industrial groups operate as monopolies. Ukraine’s authorities voice intentions to tackle transfer pricing, a haven-based tax evasion scheme that empties state coffers. But, just as elsewhere, it seems justice will be applied selectively.
