Explaining the Panama Papers, or, Why Does a Dog Lick Himself?

People demonstrate against Iceland's Prime Minister Sigmundur Gunnlaugsson in Reykjavik, Iceland on April 4, 2016 after a leak of documents by so-called Panama Papers stoked anger over his wife owning a tax haven-based company with large claims on the country's collapsed banks. Reuters

The only truly surprising thing about the Panama Papers leak is that there is no surprise in them: Didn't we learn exactly what we expected to learn from them? Yet, it's one thing to know about offshore bank accounts in general, and another to see concrete proof. It's like knowing that one's partner is fooling around on you—one can accept the abstract knowledge of it, but pain arises when one learns the steamy details. And when one gets pictures of what they were doing.… So now, with the Panama Papers, we are saddled with some of the dirty pictures of financial pornography of the world's rich, and we can no longer pretend that we don't know.

Back in 1843, the young Karl Marx claimed that the German ancien regime "only imagines that it believes in itself and demands that the world should imagine the same thing." In such a situation, to put shame on those in power becomes a weapon itself. Or, as Marx goes on, "the actual pressure must be made more pressing by adding to it consciousness of pressure, the shame must be made more shameful by publicizing it."

This is our situation today: We are facing the shameless cynicism of the existing global order, whose agents only imagine that they believe in their ideas of democracy, human rights, etc., and through moves like WikiLeaks and the Panama Papers disclosures, the shame—our shame for tolerating such power over us—is made more shameful by publicizing it.

A quick look at the Panama Papers reveals a standout positive feature and a standout negative feature. The positive one is the all-embracing solidarity of the participants: In the shadowy world of global capital, we are all brothers. The Western developed world is there, including the uncorrupted Scandinavians, and they shake hands with Vladimir Putin. And Chinese President Xi, Iran and North Korea are also there. Muslims and Jews exchange friendly winks—it is a true kingdom of multiculturalism where all are equal and all different. The negative feature: the hard-hitting absence of the United States, which lends some credence to the Russian and Chinese claim that particular political interests were involved in the inquiry.

So what are we to do with all these data? The first (and predominant) reaction is the explosion of moralistic rage, of course. But what we should do is change the topic immediately, from morality to our economic system: politicians, bankers and managers were always greedy, so what is it in our legal and economic system that enabled them to realize their greed in such a big way?

From the 2008 financial meltdown onward, public figures from the pope downward bombard us with injunctions to fight the culture of excessive greed and consummation. As one of the theologians close to the pope put it: "The present crisis is not a crisis of capitalism, but the crisis of morality." Even parts of the left follow this path. There is no lack of anti-capitalism today: Occupy protests exploded a couple of years ago, and we are even witnessing an overload of the critique of the horrors of capitalism: books, newspaper in-depth-investigations and TV reports abound on companies ruthlessly polluting our environment, on corrupted bankers who continue to get fat bonuses while their banks have to be saved by public money, of sweat shops where child work overtime.

There is, however, a catch to all this overflow of critique: what is as a rule not questioned is the democratic-liberal frame of fighting against these excesses. The explicit or implied goal is to democratize capitalism, to extend the democratic control onto the economy, through the pressure of the public media, government inquiries, harsher laws, and honest police investigations. But the system as such is not questioned, and its democratic institutional frame of the state of law remains the sacred cow even the most radical forms of this "ethical anti-capitalism" like the Occupy movement do not touch.

The mistake to be avoided here is best exemplified by the story—apocryphal, maybe—about the Left-Keynesian economist John Galbraith: before a trip to USSR in the late 1950s, he wrote to his anti-Communist friend Sidney Hook: "Don't worry, I will not be seduced by the Soviets and return home claiming they have Socialism!" Hook answered him promptly: "But that's what worries me—that you will return claiming the USSR is NOT socialist!" What worried Hook was the naïve defense of the purity of the concept: if things go wrong with building a Socialist society, this does not invalidate the idea itself, it just means we didn't implement it properly. Do we not detect the same naivety in today's market fundamentalists?

When, during a TV debate in France a couple of years ago, the French intellectual Guy Sorman claimed that democracy and capitalism necessarily go together, I couldn't resist asking him the obvious question: "But what about China today?" Sorman snapped back: "In China there is no capitalism!" For the fanatically pro-capitalist Sorman, if a country is non-democratic, it simply means it is not truly capitalist, but practices its disfigured version, in exactly the same way that for a democratic Communist Stalinism was simply not an authentic form of Communism.

The underlying mistake is not difficult to identify—it is the same as in the well-known joke: "My fiancée is never late for an appointment, because the moment she is late she is no longer my fiancée!" This is how today's apologist of market, in an unheard-of ideological kidnapping, explain the crisis of 2008: It was not the failure of the free market that caused it, but the excessive state regulation, i.e., the fact that our market economy was not a true one, that it was still in the clutches of the Welfare State. The lesson of the Panama Papers is that, precisely, this is not the case: Corruption is not a contingent deviation of the global capitalist system, it is part of its basic functioning.

The reality that emerges from the Panama Papers leak is of class division, and it's as simple as that. The papers demonstrate how wealthy people live in a separate world in which different rules apply, in which legal system and police authority are heavily twisted and not only protect the rich, but are even ready to systematically bend the rule of law to accommodate them.

There are already many Rightist liberal reactions to the Panama Papers putting the blame onto the excesses of our Welfare State, or whatever remains of it. Since wealth is so heavily taxed, no wonder owners try to move it to places with lower taxes, which is ultimately nothing illegal. Ridiculous as this excuse is, this argument has a kernel of truth, and it makes two points worth noting. First, the line that separates legal from illegal transactions is getting increasingly blurred, and is often reduced to a matter of interpretation. Second, owners of the wealth who moved it to offshore accounts and tax havens are not greedy monsters, but individuals who simply act like rational subjects trying to safeguard their wealth. In capitalism, you cannot throw out the dirty water of financial speculation and keep the healthy baby of real economy. The dirty water effectively is the bloodline of the healthy baby.

One should be not afraid to go to the end here. The global capitalist legal system itself is, in its most fundamental dimension, corruption legalized. The question of where crime begins (which financial dealings are illegal) is not a legal question but an eminently political question, one of power struggle.

So why did thousands of businessman and politicians do what is documented in the Panama Papers? The answer is the same as that of the old vulgar riddle-joke: Why do dogs lick themselves? Because they can.