"It is the mark of an educated mind to be able to entertain a thought without accepting it." Aristotle
Worldwide there are multitudes of so-called "non-governmental organizations” or NGOs. They are all more or less active advocates for various causes. Among them there are two main NGOs campaigning for the cleanliness of the international financial system. “Transparency International” (TI) fights against corruption in the world, while "Tax Justice Network” (TJN) watches the networks of tax evasion. Generally, it is not good to appear on their radar screens. But generally, too, when Luxembourg surfaces in publications, it is in a context with other countries, included in statistics, which drowns the fish at least a little.
The other day, however, Luxembourg had the honor of being singled out and exposed by TJN for more than a boring story of tax evasion: for a democratic deficit? (1)
Luxembourg’s NGOs commit hara-kiri, and revisit Galileo
The story goes that an association of Luxembourg NGOs (2) has made a study about corruption that would impoverish the "developing world" and come and hide the ill gotten moneys in Luxembourg. The guardians of the Luxembourg financial center were outraged by such a sacrilege (not the corruption, but the allegation that the money would end up in Luxembourg). They have neutralized the accusers with a barrage of fire, and then dragged them, already guilty as hell, to stand before the governmental bodies that grant them subsidies to operate and fulfill their missions, especially to help third world development.
These Galileans who had caused the scandal to be known, have been admonished, then threatened with losing their knapsack filled with generous Government subsidies, the well advertised money Luxembourg spends on developing countries. They beat their mea culpa, swearing they wouldn’t do it again as long as the Sun revolves around Earth. They had to discard their beautiful study, which actually now has disappeared from almost all sites on the Internet.
I encourage them to stand up, however, and insist on the validity of their study on behalf of the truth, for their right to freedom of speech and to highlight the arbitrariness to which they were subjected in a challenge to the very democratic principles. Their private donors are certainly in solidarity with them. I told them: "Don’t be afraid that this magical haversack filled with subsidies might get confiscated. Without you, Luxembourg does not have the means to execute its ambitious aid programs for which it would be world champion all categories, if there were not theseover-zealous Swedes ahead of us.” In fact, in order to maintain its position that it pursues with much ambition to be a leading donor country, it cannot do without the NGOs. Without them, the Government of Luxembourg would have to send checks directly to the potentates and other suspicious democrats in the Third World. Those exactly who for so long have managed to remain what they are: kidnappers of their own people and hijackers of whole countries which as a result continue to be developing countries, forever. No doubt many of these gentlemen (women are scarce in this business) would then take these checks and deposit them on personal accounts in Luxembourg, or Switzerland or elsewhere. Precisely what the Luxembourg and other donors want to avoid, thanks to the help and intervention of the NGOs who are dedicated, unselfish and vigilant in the field.
Bribery money in the world
As for that famous study, there is little to refute regarding principles:
1. The frustrating fact is that a few dozen countries in the developing world, despite receiving billions in aid, have never developed as expected. This is an indication that these billions were squandered in part or stolen by the political systems and cliques in power, to be stashed away in a jurisdiction that ensures confidentiality and security. Historical examples abound. Not to mention other ungenerous practices that hamper the development, such as "transfer pricing”, a tax strategy that multinationals often use to artificially minimize their tax debt in developing countries.
2. The International Monetary Fund estimates the total amount of money laundered globally at $800 - $ 2,000 billion per year. Sorry for the lack of precision. The IMF couldn’t do better. This shows how difficult it is to measure the overall impact of these hidden activities.
3. Transparency International and Kroll consider that international corruption, on contracts only, generates at least $500 billion annually, or 10% of those contracts. (3)
There would be no corruption money in Luxembourg?
Considering these facts and figures, it is statistically plausible to estimate that dirty money is spread across financial centers worldwide on a pro rata base to other deposits. Maybe a little more in those centers that never catch anyone. The bad guys are learning fast.
Here is a good question for a radio quiz: Who is the biggest money launderer on earth then? Answer, a little bit further down the lines.
The answer is simple to calculate. Ernst & Young estimates the total deposits in private banks in the world to be over $ 15.500 billion. It suffices to estimate the percentage held by institutions in Luxembourg, say 10% for ease of calculation, which is realistic, especially in adding all the other forms of deposits. There is a great risk therefore there are also 10% of worldwide bribes (or $ 50 billion) and 10% of global money laundering (or $ 80 - $ 200 billion). Sorry again for the lack of precision. I am only an individual who is making those estimates. But an individual who certainly knows that it is not impossible.
Recognizing these realities, it would seem that the only crime the Conference of NGOs committed was that it vexed the guardians of the fortress by over estimating the amount of money from corruption being parked in Luxembourg. But what about the lower estimates and also zero estimates? Sorry for the lack of precision. These are only estimates either by the NGOs or by those who believe differently.
Also, according to Ernst & Young only 2% of the dirty money worldwide would be detected and confiscated. So, we know nothing about the remaining 98% of the problem. I do not know if Luxembourg confiscates its share of 2% which would be $ 2.6 to $ 6.6 billion per year. I hope so. This would help to cover budget deficits.
For our own comfort, let’s get back to our quiz. If one considers the sums of money at various stages and layers of money laundering around the world, including a total of 98% that are never detected, the Federal Reserve of the United States is necessarily the institution that sees the most laundered money milling through it without never detecting it, given that the currency used to pay for worldwide crime is most often the U.S. dollar. That's the bonus of the day: now we feel much better and less guilty already in Luxembourg.
The consequences for Luxembourg
With such a charge against the Federal Reserve, we can leave the well-intentioned people at the NGOs alone. They are right after all about the great laundering machine: And yet it revolves!
The rebuff these NGOs were subjected to in front of the whole world to see, was certainly not a lesson in democracy. These organizations, in conscience decided to be the whistleblowers about what they witness on the ground, every day. Democracy got no help here, neither at home or with those presidents for life of any color, from A for Afghanistan to Z for Zimbabwe, who feel that their kleptocracy has been indirectly reinforced and protected by Luxembourg. Luxembourg in turn, in order to silence the troublemakers, I might say got its inspiration perhaps directly from those convincing methods of undemocratic, un-developing regimes. This is not Luxembourg.
The Luxembourg counter offensive cannot wait
In the interest of democratic principles, let’s all make a U-turn, because the NGO initiative has at least unveiled an incredible opportunity. If I understand correctly, some would say that my remarks above are filled with errors. If they are right, which is highly unlikely, it would mean that there is no corrupt money in Luxembourg. Luxembourg officials, from the financial world and from government alike have protested the NGOs' allegations. And those have publicly recognized their mistake and have retracted.
For Luxembourg, the virgin when it comes to corruption, it's time now to attack those who made our summer miserable, because of a few meager accounts from tax evaders. But now we can get back to our accusers, because they are the former colonial powers: London, Paris, Frankfurt, New York and other G20 members who maintain puppet regimes in their former colonies. And for sure, they must hide the shameful accounts of the corrupt regimes they support. It's time for Luxembourg to move heaven and earth, as the sun rotates around it, at the UN, OECD and in Brussels to fight these appalling bribery havens. Luxembourg will be the champion of democracy on Earth! What a great contrast with the tax haven that we used to be!
Egide Thein
egidethein.blogspot.com
(1) http://taxjustice.blogspot.com/2009/09/luxembourg-tax-haven-attacks-its-own.html
(2) Cooperation Circle of Development NGOs in Luxembourg asbl
(3) http://www.allbusiness.com/crime-law/crime-prevention-financial/12369951-1.html
