Globalization produces unexpected results. Whereas it delivered the desired effects, such as free trade, free movement of capital, openness and tolerance, it also became the platform used by many criminals to ply their trade. In doing so, they also take advantage of the fragmentation of the global world into national jurisdictions, that are more or less competing between themselves, more or less selfish, and that are sometimes even criminal themselves. Those international crimes tend to be considered more and more in a sanitized way and trivial occurrences.
Globalization and the trivialization of terrorism: Pan Am 103 and 9 / 11
On December 21, 1988, Pan Am flight 103 exploded over Lockerbie, Scotland. 270 lives, mostly young, were lost in the attack perpetrated by the Libyan secret services. It was also the beginning of the end for an airline of global importance and history, Pan American, and the end of air travel as we knew it: flying without fear of sabotage. Since then, the whole world has to go through the hassle and the intrusion of the security checks before boarding a flight and has also to carry the cost of those.
The main conspirator, Abdel Basset Ali Mohamed al-Megrahi, an agent of the Libyan secret service was actively protected by the Libyan Government from prosecution until 2001, when after long negotiations, he was sentenced to 27 years of imprisonment. That’s one year per ten victims, or 1.2 months for each murder. As everyone knows, he just was released for "health reasons" and after serving 8 years of his sentence, that is to say 10 days per murder, he returned to Libya. He only has three months to live, said his physicians, Drs Brown and Muammar.
The Libyan Government has dispatched a special plane to repatriate a great criminal whom it has consistently supported all over the years. The murderer of 270 people received a hero's welcome in Tripoli that state reason has tried to mitigate. If according to polls 95% of the American public condemn this release, probably 95% of the Libyan public support it. That is the reality of the deterioration of morality in international relations, governments and peoples alike.
The same dissonance occurred during the attacks of September 11, 2001 in New York and Washington: unlike the revulsion of the Western world, the Arab world danced in the street.
So here we have two examples of international crimes of unequaled bestiality, but the criminals were protected by their publics, have benefited from the sympathy of their governments or even, they have carried out their orders. The net result is not only military retaliation in Afghanistan and Iraq, but a cycle of threats, violence and terrorist nuclear escalation, that poison international relations and affect our everyday lives.
Globalization and the trivialization of white-collar crimes: UBS and Madoff
There are other international crimes, facilitated by globalization, which also tend to be more easily forgiven or minimized: these are the "white collar" crimes. Without finding any equivalency with the two murderous crimes listed above, these crimes are even so detrimental to good international relations and good international developments.
Consider the misfortunes that the Swiss bank UBS and the Swiss Confederation have with the United States. UBS, a leading global bank, has gotten out of its way to commit crimes in the United States by helping U.S. clients with all its know-how to evade US taxes. Tax evasion and complicity in tax evasion are crimes in the United States. Caught with their hands in the bag, the bank got the Swiss government to come to the rescue. They both deployed efforts and creativity worthy of a Swiss watchmaker, to protect the bank, its employees and the weapon of the crime, which is the Swiss bank secret.
Contemplated in terms of the Swiss national interest, the billions of dollars deposited in Switzerland have generated tens of millions of dollars in budget revenues in Switzerland, salaries for professionals, Swiss bankers, lawyers and auditors. Exact numbers are difficult to get to, as you would expect from a bank secrecy jurisdiction. One thing is certain, however: in each wage paid by the Swiss Government, whether the compensation of the President of the Confederation or the janitor at the Police Commissioner’s office in Pratteln, you’ll find small amounts of criminal money. It comes through the federal budget, which levied the tax, among others from the money of this crime, which of course, it will be said, wasn’t a crime in Switzerland. Except for the United States, where severe penalties and convictions were issued, no penalty has been handed out in Switzerland, to my knowledge, against the bank or its officers, on the contrary!
Now, it is not the purpose to specifically vilify Switzerland. It is only an example that is immediately available, because it currently makes the headlines. Similar situations exist elsewhere, which is precisely the issue here: the gradual trivialization of international crime and the negative consequences for international order.
Consider the Madoff case, where $ 65 billion were lost. Madoff claimed to generate revenues of around 15% annually, that is to say, about $ 10 billion. The nearly $ 3 billion invested in Luxembourg would therefore produce a profit of about $ 400 million annually and therefore income taxes by the tens of millions of dollars, of which about ten to twenty million would have gone to Luxembourg tax each year? Again it is difficult to know exact numbers, bank secrecy obliges. But what a strange feeling it is to know that in the salary of Prime Minister Juncker as well as in my pension or the police officer’s salary in Troisvierges and the customs agent’s salary in Frisange, there is dirty money coming from Madoff, through the good offices of the Luxembourg tax authorities, or maybe dirty money from fraudsters and other criminals who are also hiding around in the country! Again, except for the United States, there has been no conviction or punishment in Luxembourg, neither against the banks who were playing "feeders" to Madoff such as UBS (see, they're back) or HSBC, nor against other “net winners”. Yet the red flags alerting to fraud should have been noticed by some participants, as the ropes that Madoff pulled were so visible.
There has been a case of “cognitive dissidence” by those involved, or was it negligence, or the result of an accidental adoption of dishonesty, or was it willful blindness? The bungling by the Luxembourg authorities over several months about responsibilities in this area speaks volumes about the malaise that we rather would like to forget. How could this happen? If our ancestors saw us live off the fruit of ill-gotten gains, those ancestors who toiled at Hadir and Arbed, in the iron ore mines or in the barren fields of the Oesling, they would certainly say, "Hutt Dir Séi nach all!? "
According to American principles for the recovery of defrauded moneys, Madoff victims will use "claw back" strategies, that is to say a recovery of funds from the scammers first, and then the accomplices, professional intermediaries such as managers, lawyers and auditors, regulators and investors who have been net winners. Should they do the same to recover the missing funds with the US, Luxembourg, French, Austrian tax agencies, all of which have levied a tax on Madoff’s fictional profits? Indeed the balance sheet total is zero!
The consequences for Luxembourg and other "small" countries
Let’s go back to the initial thesis: international crime disrupts the proper international order. This is evident regarding terrorism and the fears associated with it, such as the fear of nuclear proliferation.
It is becoming increasingly clear that other crimes, such as tax evasion, although downplayed for a long time, have a similar effect. Gone are the times, when it was good enough to recite page number 1 of the Luxembourg Catechism: "An activity that is considered a crime in a foreign country is considered a crime by the Luxembourg authorities only if a Luxembourg court confirmed that such activity is also a crime in Luxembourg." This very conveniently excludes tax evasion.
In this troubled world where “every man is for himself” seems to be re-emerging as the winning principle, the past Luxembourg (or Swiss or Antiguan etc..) opportunism riled many. In a world that puts its plans on hold, in a stagnant Europe that has some good old fashioned protectionist reflexes, and where diplomatic civility goes AWOL, the law will be the law of the largest and strongest and fittest. Switzerland, Luxembourg, Liechtenstein, Antigua, they all are small countries, aren’t they?
True defense and advocacy of the Luxembourg, Swiss and other financial centers’ interest can only be anchored on positions that are morally unassailable. Among these we don’t include tax evasion or even banking secrecy, which is in essence a selfish pretext. There are however key principles to be defended, especially by smaller nations. They are those freedoms that make the world global and their corollary, competition of any kind, including tax competition. This is where small countries have a moralistic role to play; these very same countries that yesterday were accused to be the facilitators. Under the condition that these countries are able to get rid of what caused of their negative reputations.
Very little, however, seems to be done in this direction right now. We are still in denial, or in recriminations. However, it's time for the "small" ones to display their intransigence when the benefits of globalization are being questioned. Deceiving itself with untimely priorities, Luxembourg pursues a grotesque international ambition by applying for a seat on the United Nations’ Security Council! Luxembourg’s risk is that it is going to burn its fingers by trying to save a selfish world before trying to save itself. Knowing the kabuki of the United Nations for having been there, it doesn’t seem likely that there is anything to glean for Luxembourg, especially in a world where good neighborhoods are deteriorating. We have previously experienced that disappointment, when Luxembourg took a bold step at the UN and sponsored an initiative for the prohibition of child labor. Luxembourg instantly got 3 billion enemies in the world. Since in the meantime we have enough enemies in Europe, the G20 and OECD, shouldn’t we reserve our courage and boldness for the clashes to come and that need all our attention? This is called the economy of means.
Meanwhile, all is well in the brave new world between the United States and Luxembourg, or so we are told. This is what the Kindergarten Principal seems to have told us on a beautiful morning of a beautiful Thursday in the beautiful month of July. She seemed condescending, because the student Luxembourg had done his homework on the OECD, but she seemed a little harsh at the same time. She seemed to think about the $190 billion in taxes that the Obama Administration would retrieve from around the world. Given our past experience, let us fear for that uncertain Friday which will certainly come after this fine Thursday. The world is no longer what it used to be.
Egide Thein
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