Despite the tepid media reaction, the Panama Papers seem to have generated some fear amongst the capitalist class.
On 3 April, newspapers around the world published their first reports based on their investigation of the Panama Papers, an enormous leak of 11.5 million documents. The leak details the workings of Mossack Fonseca, a Panamanian law firm that specialises in helping the wealthy of the world create shell companies in order to disguise their ownership of assets and avoid paying taxes. The documents, totalling 2600 GB of data, had been leaked in batches, starting in early 2015, at first only to the German newspaper Süddeutsche Zeitung. Eventually, 107 media organisations contributed to the project of combing through the massive trove of data, analysing patterns and identifying key players.
The initial revelations of the Panama Papers in early April made a big splash worldwide. A flood of articles revealed that many major political and business figures—from Iceland’s Prime Minister to Vladamir Putin’s close associates—were enmeshed in a shadowy web of lawyers, financiers and middlemen whose main goal was to make the rich richer through deliberately secretive means. In India, news reports largely focused on the high-profile Indians who had ties to Mossack Fonseca. The most discussed were Amitabh Bachchan, who appeared as the director of various shipping companies in the Caribbean, and DLF’s KP Singh, who—along with several family members—owns firms in the British Virgin Islands, a notorious tax haven.
Both Bachchan and Singh denied they had done anything illegal, and the news reports on the Panama Papers soon slowed from a flood to a trickle. Though they had a major impact in some parts of the world (most dramatically, Iceland’s PM resigned), in many places they were met with little more than a disillusioned shrug. Of course, the rich are cheating on their taxes, seemed to be the collective response. What else is new? It’s possible that renewed attention will be brought to the Panama Papers when a full list of implicated companies is released in May, but for now the issue seems to have died down, at least in India.
Though they had a major impact in some parts of the world (most dramatically, Iceland’s PM resigned), in many places they were met with little more than a disillusioned shrug. Of course, the rich are cheating on their taxes, seemed to be the collective response. What else is new?
But that doesn’t mean that business people and government leaders aren’t worried about the implications of the leak. In India, the central government has promised (as it does so often) to crack down on tax evaders and black money holders. But the most interesting response came from the Governor of the Reserve Bank of India, Raghuram Rajan, who issued a series of statements regarding the Panama Papers. Rajan is often projected as the calm, rational face of Indian capitalism, a globally respected figure who stands above the parochialism and drama of Indian politics. His worries about the Panama Papers, then, are indicative of international concerns about the leak’s fallout.
The RBI’s first interventions in the Panama Papers debate were meant to minimise their importance. The bank’s Deputy Governor warned that people should not “jump to conclusions” when it came to those Indians named in the papers. Rajan also pushed this line, emphasising that not all offshore accounts are necessary “illegitimate,” and that further investigation was needed to see if any wrongdoing had occurred. Through these statements, Rajan seemed to be conflating legitimacy with legality; as long as those with offshore accounts had followed all the rules and regulations, we should not pass judgement.
But the very next day, Rajan took a different tack, suggesting that the leak was indeed troubling and that legitimacy might not be confined just to a narrow legality. While attending a symposium of the Confederation of Indian Industry in Singapore, Rajan emphasised that the leaks were “dangerous” because they reinforced a tendency to question the legitimacy of wealth. With this speech, Rajan was focusing not so much on whether the wealth was strictly legal, but whether people saw it as legitimate that the rich were able to amass such huge amounts of wealth while millions were living in dire poverty.
Rajan seems quite troubled by this trend of questioning wealth. He sees the problem as escalating in recent years, as people have gone from questioning certain forms of wealth to questioning the amassing of wealth in general. In Rajan’s mind, this has been a three-step process: first, in the wake of the 2008 financial crisis, people started to question the legitimacy of the banking system, and the crony capitalism that went along with this.
It “makes sense” that people raised such queries, says Rajan, but questions have a way of leading to more questions. People then started questioning the legitimacy of inherited wealth. According to Rajan, people began to ask whether that inherited wealth should be redistributed. (To Rajan, of course, the answer is a resounded “no”—he seems horrified that people could even contemplate such a thing.) In this context, it’s interesting to note that the institution of the family has been central to people named in the Panama Papers leak; to take just one example, KP Singh spread the ownership of his offshore firms among nine family members.
In the final step of the process, says Rajan, people are questioning “the entrepreneurial wealth” of “self-made people.” To Rajan, this is mortifying: people are questioning the very legitimacy of capitalist accumulation. But perhaps Rajan should ask himself a few questions. Is “entrepreneurial wealth” really self-made? The story of the entrepreneurs celebrated by the Indian business press, from Dhirubhai Ambani to K.P. Singh, has always been the story of collusion with government officials, dispossession of farmers and exploitation of workers. These men have succeeded because they have the backing of a vast state apparatus and because they profit from the labor of underpaid workers.
It’s interesting to note that the institution of the family has been central to people named in the Panama Papers leak; to take just one example, KP Singh spread the ownership of his offshore firms among nine family members.
For Rajan, though, entrepreneurial wealth is sacrosanct. He rues its possible delegitimisation, and recognises that this is an international phenomenon: “It is something that we have seen elements of in our own society but certainly it is full-fledged in industrial countries. It is certainly [something] we need to worry about at the global level.” Although he does not specify it, Rajan is likely referring to movements like Occupy Wall Street, and the rise of political figures like Bernie Sanders in the US and Jeremy Corbyn in the UK, who explicitly identify as socialists and question the extremely unequal distribution of wealth that centuries of capitalism has nurtured.
What Rajan fears is that the ideology of neoliberalism in general, and capitalism more broadly, is under threat. In the US and the UK, not just workers, but also the middle classes that were supposed to benefit from capitalism, are starting to turn against the system, as they increasingly see it not as an engine of opportunity, but of destruction, chaos and inequality. In India, the middle classes largely remain satisfied with the gains of capitalism, but Rajan dreads the day that the dissatisfaction spreading around the world reaches India. (Of course, it already has in many ways, but Rajan is loath to admit it.)
Firmly entrenched in the capitalist system, Rajan can only see this line of questioning as “dangerous,” something that must be placated by offering a few more opportunities here, a bit more entrepreneurship there. But the Panama Papers are just one more piece of evidence that the entire system is set up to benefit a tiny minority at the expense of the great majority. If the Panama Papers causes people to question the legitimacy of wealth, it’s not because people are misguided. It’s because the injustice and inequality of the system are becoming increasingly evident. And the sooner we realise this, the better.