Panama Papers are the tip of the iceberg
Dropped Sunday, the Panama Papers have swiftly become the ruling-class equivalent of the Sony hack: Everyone’s dirty laundry has been aired, no matter how rich or how powerful, and the consequences are already unfolding mere days later.
Tuesday, the prime minister of Iceland, Sigmundur David Gunnlaugsson, resigned after being implicated in the Mossack Fonseca scandal. The documents contained in the massive leak indicate that Gunnlaugsson and his wife had set up a company in the British Virgin Islands, arranged by the Panamanian law firm, which some called a conflict of interest. On Monday, Icelanders pelted their parliament buildings with Skyr, the national favourite yogurt brand, in protest.
Given that Icelandic Vikings helped invent parliamentary democracy and enforced its decisions by sentencing greedy or malfeasant chieftains to execution by beheading, Gunnlaugsson may have quickly decided that discretion was the better part of valour.
But Iceland is, well, just the tip of the iceberg. The size of this information dump is unprecedented. There are reportedly more than 11 million documents. The earliest document comes from 1977. At 2.6 terabytes of data, it dwarfs both the WikiLeaks files and the Snowden files, while containing data that is far more wide-ranging. The data contained reportedly has information on more than 200,000 companies controlled by Mossack Fonseca, which is only the fourth-largest firm of its kind in Panama. (One can only imagine what secrets the others have in their databanks, or what emails they’re frantically erasing at the moment. Postmedia has not seen the documents.)
Those implicated live in the United Kingdom, China, Russia, and the United Arab Emirates. Want to know how Russian tycoons avoid paying out big divorce settlements? Well, now you know.
There’s also the matter of Russian President Vladimir Putin: A $2-billion trail leads back to him through loans and holdings among his close friends and family. Not to be outdone, the London real estate market is fuelled by this swift undercurrent of hidden money. Secret stores of cash held by Mossack Fonseca (and other such firms) have flooded the market by purchasing investment properties, making it unaffordable for everyday Londoners, and forcing honest, taxpaying people out of the city. Owners implicated in the scandal include the prime minister of Pakistan, the former finance minister of Iraq and major donors to the Tory party.
But what does all this mean? It means that the austerity measures proposed in Britain and elsewhere are complete nonsense. If the people “hiding their piggy banks” in the islands would simply pay their fair share, their countries could afford better health care, infrastructure and education for everyone. This, in turn, would create stronger workers and better economies. The cutbacks to the National Health Service and other services are the direct consequences of this greed, and similar cuts are happening all over the world. Meanwhile, the wealth gap is killing innovation.
Worse yet, there were warning signs of problems years ago. United States presidential candidate Bernie Sanders warned about Panama’s tax-evasion economy in 2011, during the signing of a freetrade agreement between the two countries.
This isn’t to say that owning property or making investments through offshore companies is illegal. As many journalists have noted, the practice is entirely legal. But the infrastructure it provides is vulnerable to criminal usage — the same techniques used by some for estate planning or wealth management are also available to drug cartels and human traffickers. Without oversight, the system is easy to take advantage of.
It’s time for the countries implicated to write the legislation that would make this oversight happen.