Heads are beginning to roll thanks to the Panama Papers. Unlike previous scandals, however, the Panama scandal potentially has serious political implications on a world scale. From Iceland to Peru, and from China to Britain: political leaders and the ruling class everywhere are now under serious threat.
Heads are beginning to roll thanks to the Panama Papers. The Icelandic Prime Minister has been the first casualty as a result of the leaked data from the Panamanian law firm Mossack Fonseca, which specialises in offshore tax avoidance.
For the last seven years, one scandal after another seems to have rocked the establishment in various countries. From child abuse in the Church to bribery at Fifa, and from politicians’ expenses in Britain to Petrobras money laundering in Brazil. In that sense, the information contained in the Panama Papers comes as no great surprise to anyone – we all more or less assumed that the global 1% are dodging taxes and cheating the rest of us; these latest revelations are just the final proof.
Unlike previous scandals, however, the Panama scandal potentially has serious political implications on a world scale. From Iceland to Peru, and from China to Britain: political leaders and the ruling class everywhere are now under serious threat.
The most high profile case so far is that of the Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson, who was revealed to have owned a shell company, Wintris Inc. with his wife since 2007 on the tax haven of the British Virgin Islands, where he invested millions of dollars to avoid paying taxes. The company held bonds worth millions of dollars in Iceland’s three biggest banks during the crisis of 2008. Gunnlaugsson refused initially to comment on the information and walked out of the interview with SVT when they asked him about his connection to the shell company. Later he claimed that he had done nothing wrong because it was his wife, and not him, who owned the company.
He later told Reuters Television:
“Certainly I will not [resign], because what we’ve seen is the fact that, well, my wife has always paid her taxes.
“We’ve seen that she has avoided any conflict of interest by investing in Icelandic companies at the same time that I’m in politics.
“And finally, we’ve seen that I’ve been willing to put the interests of the people of Iceland first, even when it’s at a disadvantage to my own family.”
All this is of course a lie. What particularly infuriated the Icelanders is that this is the same Prime Minister who came to power in 2013 promising to fight corruption and tax evasion. His own party, the Progressive Party, got a boost in the election after the discrediting of both the Independence Party and the Social Democrats.
The previous IP-PP coalition was toppled in a mass movement in 2009 after the banking crisis. The Social Democrats were voted into power with the Left-Greens in the hope that they would end austerity. Instead, they did just the opposite, like many other left-wing governments in Europe since. The Social Democrat-led government was punished in the elections of 2013 and fell from 29.8 percent to 12.9 percent and the Greens fell from 22 percent to 11.
The Icelandic working class has been suffering under harsh austerity ever since the financial collapse of 2008. A falling currency and declining living standards, plus high inflation and accelerating mortgage repayment increases, is a recipe for building up resentment against the government.
Iceland is often cited by both Right and Left as an example of how the crisis of capitalism can be solved through reforms. Conservatives emphasise the cuts, whilst the Left stresses the nationalisation of the banks. But what Iceland in fact shows is that this crisis can not be solved within the framework of capitalism, neither through partial nationalisation nor reforms. Cuts, austerity, tax evasion and corruption will continue as long as capitalism exists. And with the world economy now facing a new and serious slump, Iceland will surely once again be hit by a downturn in the economy, with greater attacks and further cuts.
The people are tired of a government that only favours the rich, the banks and big business, and the Progress Party’s populist talk of harsh measures against the banks meant that some were hoping for a change. But now it is clear that this government only serves their own interests and the rich, while ordinary Icelanders are stuck with the burden of a worsening standard of living after the cuts.
In little more than 24 hours, 29,000 had signed a petition demanding the Prime Minister’s resignation. On April 4, thousands gathered outside the Althingi, the Icelandic Parliament, and on 5 April more than ten thousand demonstrated. In a country with only 330,000 inhabitants, these are huge demonstrations. The Icelanders have time and time again shown their tenacity in toppling governments and the ruling class quickly saw that the game was up. Undoubtedly, the Prime Minister was told to go.
But this solves nothing from the point of view of the ruling class. Gunlaugsson’s first move was to try to dissolve Parliament and call new elections. But the President refused to accede to this request, presumably because he thought that under the pressure of a general election campaign the governing coalition – from which not only Gunlaugsson but also the leader of the junior coalition partner, the Independence Party, are named in the Panama Papers – would collapse in the polls under the weight of the scandal.
At the last general election in 2013 more than a quarter of those who voted did not vote for one of the four traditional parties, in an election in which turnout was the lowest since independence. Now, even before the latest scandal, almost 50% declared their intention to vote for other parties. If the elections were held under these conditions, likely the Pirate Party would be propelled into power, with 40-50% of the vote.
Under these circumstances the Icelandic ruling class is concerned about a snap election handing even more power to anti-establishment parties. They will be treading carefully, especially now that the masses are confident, after toppling yet another Prime Minister.
But it is not only in Iceland that politicians are having trouble dealing with the fallout from the Panama Papers revelations. Peru will be holding the first round of its presidential elections on Sunday 10 April in which the leading candidate, Keiko Fujimori, has been implicated by the Papers. One of her main financial backers, Jorge Yoshiyama Sasaki, is linked to an offshore company in the British Virgin Islands. Between Sasaki and his uncle, a former minister under Alberto Fujimori (Keiko’s father, the dictatorial President of Peru from 1990-2000, who is currently serving 25 years in prison for corruption and human rights abuses), they have given 120,000 USD to Keiko Fujimori’s campaign. In other words, it looks like the front runner’s campaign has been funded by offshore money.
Meanwhile the second-favourite in the Presidential race is Pedro Pablo Kuczynski, a former minister under Alejandro Toledo. During his time time as a minister, in 2006, Kuczynski wrote a letter of recommendation for a friend so as to use the weight of his office to help set up an offshore account through Mossack Fonseca.
All of this will fuel what is already a turbulent presidential election in Peru, in which 30,000 people protested in Lima alone (as well as many smaller protests outside the capital) against Fujimori and her campaign on Tuesday 5 April. Meanwhile Veronika Mendoza, a left-wing, anti-establishment candidate who has promised to wrest power away from the country’s business and political elite, is likely to benefit from this situation. She said in a TV debate on Sunday 3 April (the day the Panama Papers story was made public) that “the first thing [we will do] is to end corruption”. This is a message that is becoming more relevant by the hour in Peru just days before the first round of voting.
Elsewhere in Latin America the Panama Papers have covered the Brazilian establishment in yet another layer of scandal. The state-run oil company Petrobras has already been the source of bribery and money laundering allegations; the arrest of the former President Luiz Inacio Lula da Silva; and an impeachment bid against the current President Dilma Rousseff. Now 57 politicians and businesses who are already under investigation for bribery and money-laundering have also been named in the Panama Papers as having opened 107 offshore companies between them, thus deepening the web of scandal engulfing Brazil’s political class.
As if that wasn’t enough, the dozens of politicians named in the leak come from seven different parties. Indicating that this is a problem that reaches into every corner of the Brazilian political system – although it should be noted that no current politicians from Dilma Rousseff’s PT are included on the list.
The Brazilian revelations show up a spectacular example of the hypocrisy which is the lifeblood of bourgeois politicians. The PMDB, Brazil’s largest party, which split away from Dilma’s coalition just last week, had a number of its politicians outed as tax cheats. This includes Eduardo Cunha, the speaker of the lower house of Brazil’s legislature and the man who is leading the campaign to see Dilma impeached. He is alleged to have taken bribes linked to offshore companies named in the Panama Papers that are under scrutiny as part of the Petrobras investigation. In other words, the man who is most vocal about needing to hold the President to account for corrupt behaviour is himself embedded in the world of tax avoidance and shady deals.
This nauseating hypocrisy can only discredit the ruling class in the eyes of the masses even further. It has the potential to turn the anti-corruption campaign on its head, making the right-wing and the bourgeois the target of the anger of the masses, rather than the PT.
In France, Marine Le Pen, of the far-right Front National, has derived a certain popularity from her manufactured and false anti-establishment image. Now this falsehood has been exposed by the activities of two of her closest allies: the businessman Frédéric Chatillon and the accountant Nicolas Crochet, both of whom have been named in the Panama Papers as being at the centre of a complex web of offshore companies stretching from Hong Kong to the British Virgin Islands to Singapore.
These allegations come on top of an investigation faced by both of these men into suspected illegal financing of Front National campaigns.
On top of that, Jean-Marie Le Pen, Marie’s father and founder of the Front National, appears to have stashed 2.2 million euros in cash, property and gold in the British Virgin Islands using a shell company in the name of his butler, Gerald Gerin.
Clearly the leaders of this so-called “anti-establishment” party are not so different from the rest of the corrupt, bourgeois politicians after all.
The Panama Papers revelations have been suppressed as much as possible within China itself, presumably because a number of top Chinese officials have direct or indirect links with Mossack Fonseca, including the former Prime Minister of China, Li Peng, whose daughter has wealth stashed offshore.
These are embarrassing leaks for officials belonging to a so-called “Communist” Party, and dangerous at a time when the mood amongst the working class in China is growing increasingly militant, with strike action doubling year-on-year for the last few years.
But these revelations are also a particular problem for President Xi Jinping who has been leading a massive “anti-corruption” drive, during which he has purged many members of the Chinese government and ruling class from their positions in the bureaucracy and/or in industry. It is therefore a blow to Xi that not only has his brother-in-law been implicated by the Papers, but also a whole series of other Politburo members.
This comes at the worst possible time for the Chinese regime, as it struggles to cope with the slowdown in the economy. It adds fuel to an already inflamed situation, with scandals, strikes and protests, the latest of which has brought the government into conflict with the state-controlled media. The regime is entering into deep crisis and it is only a matter of time before mass movements explode across China.
Despite the fact that, somewhat suspiciously, no US capitalists or politicians have been linked to Mossack Fonseca, the leak could have a big impact in the USA, particularly in the race for the Democratic nomination.
Between 2009 and 2011, Hillary Clinton, as Secretary of State for Obama, pushed hard for a free trade deal to be signed with Panama, an effort which succeeded in 2011, despite warnings from tax experts that it could encourage tax avoidance. At the same time Bernie Sanders, Clinton’s left-wing Democratic rival, vocally opposed the deal on the grounds that it would limit the US government’s ability to stop questionable or illegal activity, such as setting up offshore corporations and bank accounts.
On top of this, Clinton is already widely regarded as the establishment candidate in this election, funding her campaign through donations from Wall St and big business. Sanders on the other hand is seen as the anti-establishment alternative, whose fundraising is primarily through small donations from millions of people.
With a rising tide of revulsion at the tax-dodging global elite, who are in bed with corrupt politicians, it is Sanders who appears to be on the right side of history. He will benefit from the Panama Papers, even if the US names are never released, because for the majority of people this has confirmed that it is not a case of just a few bad apples – the entire ruling class is rotten to the core. Clinton is seen as part of that class, while Sanders is seen by many as fighting against it.
In Britain, David Cameron has been under scrutiny as a result of the revelations that his father avoided paying tax using Mossack Fonseca for as long as 30 years. When asked to clarify the extent to which Cameron has benefitted from offshore funds, the British Prime Minister was repeatedly unable to give a clear answer.
Jeremy Corbyn, the leader of the Labour Party, has called for a full and independent investigation into the tax affairs of all those British people named in the Panama Papers, which so far has implicated six members of the House of Lords, three former Conservative MPs and dozens of donors to UK political parties. Tax avoidance is an issue that has been raised before by Corbyn and his Shadow Chancellor John McDonnell and which will undoubtedly be used by Corbyn’s Labour now to go on the offensive against the Tories.
These revelations could not have come at a worse time for Cameron, who is in the midst of a civil war within his own party over the upcoming referendum over British membership of the European Union. As a result of Tory infighting and backstabbing, Cameron’s position in the party – as well as that of his close ally, George Osborne, the Chancellor of the Exchequer – is looking increasingly precarious.
On top of this, the latest budget presented to Parliament by Cameron and Osborne unravelled within days because it provided tax breaks to the rich, whilst simultaneously cutting welfare support for the disabled – a measure that even some Tories claimed not to be able to stomach. This Tory debacle will descend into farce next month when Cameron hosts an international summit on tackling tax avoidance in London.
Corbyn is seen by many as being one of the few honest men in Parliament. In the wake of the Panama Papers revelations, such honesty amongst politicians appears to be a rare thing in the world today. He also has a consistent record on the question of tax avoidance, having called in the past for Britain to clamp down on those territories under its administrative control that operate as tax havens, such as the British Virgin Islands.
Corbyn must use this opportunity – with Cameron and co. frantically trying to put out fires all over the place – to take the fight to the Tories and explain that capitalism is corruption, putting forward a bold socialist programme of nationalisation and democratic workers’ control as the only alternative to this world of offshore accounts and shady politicians.
The system is broken!
This scandal has revealed – perhaps more than ever before in the minds of many people – the extent to which political divisions and loyalties count for nothing in the minds of the ruling class and their representatives in comparison to the importance they place in their own private wealth.
David Cameron’s father and President Assad of Syria (the man David Cameron tried unsuccessfully to bomb out of power) were united in their desire to cheat the rest of us out of as much tax money as they could. The same can be said of Putin of Russia and Poroshenko of Ukraine. The Panama Papers leak has proved that, in the final analysis, the overriding division in all of society is a class division.
These revelations also come seven years after the global economic collapse and the onset of the global age of austerity. The working class everywhere is being told that the cupboard is bare and that healthcare, education and the welfare state can no longer be funded, while workers are expected to take cuts and redundancies to help the capitalists shore up their profits. In the midst of all this, to find out that the same politicians who lecture the rest of us about “living within our means” are hypocritically hiding their own vast personal fortunes in offshore accounts understandably enrages millions of people everywhere.
The overall result of this leak then could be enormous, triggering a domino effect that will bring down a whole string of political leaders on the back of a wave of public anger against the ruling class and global elite in general. Whatever happens, the radicalisation that this has created will express itself sooner or later.
But above all, we should ask the question: how have the people named in the Panama Papers got hold of so much money in the first place – enormous piles of wealth that they go to extreme lengths to hide via a dodgy law firm in Panama.
The Panama scandal is just the tip of the iceberg when it comes to the corruption within capitalism. The capitalists are guilty of a much greater crime – that of naked exploitation and robbery of the billions of working class people around the world. Like Robin Hood in reverse, the 1% steal from the poor to pay themselves – the rich and wealthy.
It is the workers of the world who produce all the wealth in society, only for the capitalists to first appropriate this wealth for themselves, before then stashing it away in offshore companies, cutting our health and education, sacking us from our jobs, and accusing us of being too lazy to work. This is how capitalism works.
Therefore, whilst we as Marxists agree with Jeremy Corbyn in Britain and Veronika Mendoza in Peru that something has to be done about the super rich and their tax avoidance, we say that alone is not enough. The root cause of the problem is capitalism itself, the very foundations of which are built on exploitation and corruption. We have to fight against this system and the rotten ruling class who defend it.