Tuesday, 19 November 2013

Debunking the myths around Swiss bank secrecy

It is widely thought that Swiss bank secrecy was established in the 1930s, in order to enable Jews and other victims of the Nazis to hide their money from the regime. In his fascinating 2011 book Treasure Islands, Nicholas Shaxson exposes this hypothesis as a myth, and gives an insight into the vast offshore empire used by companies and the super-rich to hide their money from the taxman.

Swiss bank secrecy is far more than 80 years old - it dates back centuries. In the 18th century, the Catholic monarchy of France borrowed money from Swiss banks - secrecy was crucial, as it would have been a scandal if it had been revealed that the monarchy was taking money from Protestant moneylenders. Bank secrecy and neutrality were the two crucial elements to Switzerland's international policy for centuries.

Whenever dirty money is traced to Switzerland and they comes under fire, Swiss banks always roll out the same World War Two story: if it had not been for Swiss bank secrecy, the Jews would have had nowhere to hide their money from the Nazis. In reality, it took decades after WWII for Swiss banks to release assets held by the victims.

The first investigation after WWII conducted by the Swiss Bankers' Association identified a miserly 482 000 francs held by victims of the Nazi regime. Thousands of relatives of account holders were turned away by Swiss banks demanding to see death certificates, something which concentration camps obviously didn't provide.

Further assets were released by Swiss banks in dribs and drabs, but it took until 1998 for a full pay out of $1.25 billion. So much for Swiss banks being the noble assistants of the victims of the Holocaust.

But beyond this, justifying secrecy jurisdictions on the basis that they enable people to hide their hard earned money from tyrannical regimes is absurd. As Shaxson points out, "Who uses secrecy jurisdictions to protect their money and bolster their positions? The human rights activist screaming in the torturers' dungeon? The brave investigative journalist?...Or the brutal kleptocratic tyrant oppressing them all? We all know the answer."

In 2007, Swiss banks held $3.1 trillion in offshore assets. But this is only a fraction of the money kept and transferred through offshore havens. Bank secrecy and tax havens have enabled dictators such Mubarak, Mobutu and Abacha to siphon billions of dollars from the coffers of their own treasuries. While organisations such as Transparency International condemn governments in developing countries for their corruption, it is partly the banking laws and secrecy in countries such as Switzerland which facilitate it.

An in-depth discussion of the arguments against tax havens can be found here. One of Shaxson's key points is that while people generally think of Switzerland and Caribbean islands such as the Caymans when they hear "tax haven", many offshore havens are in fact under American or British jurisdiction.

We can only speculate at how much money is hidden in tax havens - in 2012 a study arrived at an estimate of $21 trillion and $32 trillion. While it is depressing that such a vast web of international tax evasion and corruption exists, the still small but increasing interest, awareness and media attention given to this issue is encouraging.

Finally, the obscene amount of wealth hidden offshore makes a mockery of the argument for austerity. It shows that cuts in public services and living standards for the majority are not inevitable. Just think how much progress could be made in improving school and hospital facilities, reviving the economy and combating climate change if some of those trillions were taxed at a reasonable rate.

Tuesday, 12 November 2013

The most under-reported country in the world?

In March this year, a military coup took place in the Central African Republic which plunged the country into chaos. A group of rebels calling themselves the Seleka ousted former president Francois Bozize. Since then it is estimated that 1.5 million people have been displaced, and there have been reports of massacres of civilians, the burning of villages and widespread rape. While shedding some light on the situation in the CAR, the minimal news coverage there has been shows just how pitifully little we know.

As its unimaginative name suggests, the CAR lies in the middle of the African continent, bordering Chad and Sudan to the north, South Sudan to the East, the Democratic Republic of Congo (DRC) and the Republic of Congo to the south, and Cameroon to the west. The CAR was
colonised by the French, and prior to this the region had been ravaged by the Arab slave trade. Since independence in 1960, the CAR has suffered from bad governance, instability and chronic poverty, and it remains one of the ten poorest countries in the world to this day. Three times the size of the UK but with only 4.6 million inhabitants, the CAR is a vast territory about which we know next to nothing. Even before the outbreak of violence last year, neither the IMF nor the World Bank had any staff on the ground, and few NGOs are active in the CAR despite the desperate need.

While it is difficult and dangerous to get information out of a war-zone such as Syria, amazingly, there are still scheduled flights, and as a high interest story, there are channels for the media to get into the country. In stark contrast, the CAR is less extensively mapped today than Britain in the year 1800. While tarmac roads connect the capital city, Bangui, with some of the other principle towns, dirt tracks are the norm, and these can become impassable after the rains. According to the Wikipedia page, there are "over 1800 motor vehicles on the road." Before last year's coup, there was one flight from Paris to Bangui per week.

The main route to the outside world should be the Oubangui river, which connects to the Congo and the Atlantic Ocean. But continued conflict in the DRC has made this route impassable. Sudan and South Sudan have recently been at war, and the Chad is politically unstable. As a result, CAR's main route to the outside world is through Cameroon, and this road is in very poor condition due to the damage caused by heavily laden trucks.

Deposed President Bozize himself came to power through a military coup in 2003, after a five year period in which there had been numerous attempts by different military groups to seize the capital. The only means of social mobility in the country is the army, and except for Bozize's predecessor Patasse, all of the country's leaders since 1960 have been military men. While political commentators are now discussing whether the CAR is in danger of becoming a failed state, no government has ever been able to control the whole country.

As is often the case in international affairs, Aljazeera has given the CAR much more coverage than the western media, although there have been reports on the latest conflict in the Independent and the Guardian. The Seleka rebels marched into Bangui on March 24, and their leader, Michel Djotodia, declared himself president. But while "Seleka" means "alliance", it quickly became clear that the rebels were far from united. Djotodia has even tried to disband the Seleka, amid continued fighting among the rebels. Djotodia has admitted that he can't control the rebels, stating, "it is difficult for me because I don't know who they are."

Last week Aljazeera has reported that another armed group, calling itself Anti-balika, has attacked Seleka rebels, displacing a further 200 000 civilians. Hundreds of thousands of people have been forced from their homes and are taking refuge in the forests, or gathering in make-shift refugee camps. Evidence of a massacre in which 18 people were killed has been found, but it is likely that this is only a tiny fraction of the violence unfolding in the country.

But the international response has been pathetic: Britain has pledged £5 million in aid, a laughable amount which will make barely any difference. The African Union hopes to have a force of 1100 soldiers in the country in 2014. What exactly they are expected to achieve remains unclear.

The CAR briefly made the headlines during the Kony 2012 phenomenon, and Joseph Kony was thought to be hiding in the east of the country. Commentators interviewed in an Aljazeera programme claimed that armed groups as diverse as the Ugandan Lord's Resistance Army, the Janjaweed from Sudan, and the Nigerian Boko Haram may have spilled over the borders into the CAR. But the the striking fact is that we simply don't know. Statements from the French government stressing the danger that the CAR could become a failed state and a safehaven for terrorists give the illusion of some sort of command and understanding of the situation.

In reality, to talk of the CAR's "borders" is meaningless. Most of the borders are unmarked and unprotected areas of jungle. While the CAR would make an effective hiding place for Kony, it seems unlikely that Boko Haram would want to take refuge or try to recruit here. The crisis in the CAR is the worst humanitarian disaster in the history of the country. Framing it in terms of terrorism makes little sense and only serves to disguise our ignorance of what is really going on.

Portraying the conflict in the CAR as a threat to our security may raise some foreign interest. However, the grim truth of the matter is that the vast majority of us are not affected by the events in the CAR. In a civilised world that shouldn't be a reason not to care.

Friday, 8 November 2013

75 years after Kristallnacht Germany deserves admiration for the way it has dealt with its past

75 years ago today was Kristallnacht, the terrible pogrom against the Jews in Germany which foreshadowed the Holocaust. The BBC covered of the anniversary with an article by Stephan Evans, posing the question: "how strong is anti-semitism in Germany?"

By implication, this headline suggests that anti-semitism is still a negative force to be reckoned with in Germany today. Evans acknowledges that the Holocaust is taught in schools, "but how much anti-semitism lingers despite the knowledge of what happened?" The answer to this question is said to be a "complex picture."

Evans quotes a study conducted in 2011 which apparently showed that anti-semitism was strongest in Poland and Hungary, but that also in Germany, "anti-semitism is significantly more prominent than in the other western European countries." The evidence for this is shaky at best. Nearly half of respondents in Germany agreed with the statement: "Jews try to take advantage of having been victims during the Nazi era", compared with 22% in the UK and 32% in France. With no exact figures or information regarding the phrasing of the questions, there is no proof that these responses are representative, nor that the answers themselves are anti-semitic.

But the refusal to believe that Germany has come to terms with its past is also reflected in Germany itself. Evans refers to a study carried out by the German parliament in 2012 which found that 20% of Germans hold at least "latent anti-semitism." Anetta Kahane of the Amadeu Antonio Foundation claims that "anti-semitism is acceptable again". Moreover, the AAF found that in 2011 there were 811 attacks on Jews in Germany, of which 16 were violent. On the basis that this increased to 865 in 2012 and 27 acts of violence, the AAF infers that anti-semitism is on the rise. The other 838 attacks are not defined, and there is no indication whether the 27 violent attacks were racially motivated.

These figures show that the extent of anti-semitism in Germany today is not a "complex picture" at all. To say that anti-semitism  has become "acceptable" is obscene. Even the extreme far-right neo-Nazi NPD party, while openly hostile to the Roma and Sinti, doesn't dare to even mention the Jews. Rather than ban NPD posters inciting racial hatred, the German government tolerated them, safe in the knowledge that hardly anybody would be persuaded by them. The recent elections proved them right, with the NPD failing to secure one single MP.

At an open-air karaoke event I attended in Berlin several months ago, a drunk blundered on to the stage and began telling an anti-semitic joke. A chorus of hundreds of voices from the crowd booed him off stage. While anecdotes such as these do not conclusive proof, they are indicative of attitudes in Germany today.

To claim that 27 violent attacks is evidence of mounting anti-semitism is a gross distortion of reality, and trivialises the attacks on thousands of Jews that took place on Kristallnacht. The real headline ought to have been that 75 years after that terrible night in 1938, anti-semitism in Germany is negligible. Contrary to popular belief in the UK, the Holocaust has been taught in German schools for decades. Berlin is full of memorials, museums and exhibitions about  the Holocaust and in 2011, 58 000 Germans visited Auschwitz.

Germany deserves admiration for the way in which it has come to terms with its past, something which Britain, still clinging to its "one world cup and two world wars" mantra would do well to follow.