Speaker 1: These sees Bloomberg Business Week with Carol Masser and Tim
Speaker 1: Stanovic on Bloomberg Radio. Our next guest has a dire warning.
Speaker 1: He writes that we are at a quote inflection point.
Speaker 1: The two basic components of the democratic capitalist system are
Speaker 1: at risk of splitting apart. This poses an existential threat
Speaker 1: to human progress in the century, paralleling the importance of
Speaker 1: climate change. This is how this new book that is
Speaker 1: out begins. The book Invisible Trillions, How financial secrecy is
Speaker 1: imperiling capitalism and democracy and the way to renew our
Speaker 1: broken system. The author, Raymond Baker, is founder and president
Speaker 1: of a Global Financial Integrity. It's a think tank based
Speaker 1: in Washington, d C. That focuses on illicit financial flows, corruption,
Speaker 1: illicit trade, and money laundering. Good to have you with
Speaker 1: us this after congratulations on the book, Raymond, I want
Speaker 1: to start with the title. The subtitle here financial secrecy.
Speaker 1: How do you define financial secrecy? It is It's a
Speaker 1: It's a series of of mechanisms that work together to
Speaker 1: allow capitalism to operate in secrecy. UM tax havens, secrecy jurisdictions,
Speaker 1: disguised corporations, anonymous trust accounts, fake foundations, um falsified trade
Speaker 1: trade that is conducted where um invoice values and revalues
Speaker 1: do not match UM. And then there are all sorts
Speaker 1: of money laundering techniques that are used to handle particular
Speaker 1: kinds of transactions. And then to be honest in another
Speaker 1: part of the system is holds that governments leave in
Speaker 1: the laws of their countries that facilitate the movement of
Speaker 1: money through this financial secrecy system and ultimately into their
Speaker 1: own economies. The US is the recipient of more illicit money,
Speaker 1: more dirty money than any other country. So raven one thing,
Speaker 1: you know, is it the case of as long as
Speaker 1: there's money and there are some people who have more
Speaker 1: money than others, that this is just going to be
Speaker 1: a problem. This is just the way capitalism works. Interesting question, Um,
Speaker 1: this is not the way that capitalism worked at the
Speaker 1: turn of the century. I'm sorry, at mid century, at
Speaker 1: the mid uh twentieth century, there was a fifteen year
Speaker 1: period in there between the end of World War two
Speaker 1: and nineteen sixty when capitalism operated at a very high
Speaker 1: level of responsibility. UM. In fact, at that time, the
Speaker 1: ratio of of income for the executive class and the
Speaker 1: workers class, the ratio at that time, let's take nine
Speaker 1: was only one. Today that ratio is more than three
Speaker 1: to one. And the reason it has exploded is because
Speaker 1: we have set up so many mechanisms that enable money
Speaker 1: to move in in hidden ways, in disguise ways. Uh
Speaker 1: and it it therefore inevitably moves to the top. So
Speaker 1: who's responsible for creating a system? We are a lot
Speaker 1: of people. What do you mean by we? Though? I mean,
Speaker 1: is it we in the wealthier Western countries. A lot
Speaker 1: of people think that this is something that has been
Speaker 1: done to us by drug dealers and traffickers and counterfeiters
Speaker 1: and terrorismanen seers and so forth. That's just not correct.
Speaker 1: We in the richer Western countries have created every single technique,
Speaker 1: every single of the financial secrecy system that is today
Speaker 1: used to move trillions and trillions of dollars around the world. So,
Speaker 1: you know, it's interesting. I feel like you can see
Speaker 1: the white board in the cycle, right. You know, individuals,
Speaker 1: companies make money and they ultimately then have the power
Speaker 1: to support political candidates and initiatives that lead to whether
Speaker 1: it's tax breaks or policies that benefit them. And you know,
Speaker 1: politicians listen because that gets them elected, that gives them
Speaker 1: money to run campaigns. That are expensive, and so the
Speaker 1: cycle continues. Is that the basic cycle that's the problem,
Speaker 1: or is it something more or different. You hit it right,
Speaker 1: You've hit it right. You've hit the nail right on
Speaker 1: the head. That's exactly what happens. The wealthy are able
Speaker 1: to buy the kinds of laws that perpetuate the financial
Speaker 1: secrecy system. Just to give you wanting sample, I mentioned
Speaker 1: tax havens. There isn't a single tax haven that figured
Speaker 1: out themselves. I'm talking about the Cayman Islands and Guernsey
Speaker 1: and Jersey and uh um um other tax havens. They're
Speaker 1: in a single one of them that figured out what
Speaker 1: how to be a tax haven. No, uh, we from
Speaker 1: the richer western countries came to them and said, please
Speaker 1: adopt these kinds of laws and then we will shift
Speaker 1: a lot of business uh through the tax havens. I
Speaker 1: repeat what I said. Every single element of the financial
Speaker 1: secrecy system has been created by us. Not a single
Speaker 1: piece of it was created by others. So does that
Speaker 1: mean we can fix it? Exactly? Since we, uh, we
Speaker 1: created this, we can de create it. And I think
Speaker 1: that's what has to be done um in the capitalist
Speaker 1: system going forward. We have to de create this financial
Speaker 1: secrecy system that is driving crime and corruption and kleptocracy
Speaker 1: and even terrorist financing and authoritarianism, and worst of all, Raymond,
Speaker 1: I have to jump in because we're running out of time,
Speaker 1: just got about thirty forty seconds. How do we do it?
Speaker 1: Because this is not a new issue. We've talked about
Speaker 1: it a lot here at Bloomberg, and I think it's
Speaker 1: great that you are, you know, drawing more attention to it.
Speaker 1: But it's not a new necessarily idea. We kind of
Speaker 1: understand it. So what what one step could we take
Speaker 1: that would change it dramatically and just quick The broad
Speaker 1: the broad answer is increased transparency and accountability. Let me
Speaker 1: just give you one example of that. There are millions
Speaker 1: of disguised corporations around the world. Get rid of disguised corporations,
Speaker 1: get rid of shell corporations. And that can be done
Speaker 1: with a simple law that says it's illegal for banks
Speaker 1: to receive money uh from shell companies. Um, we did
Speaker 1: exactly that with shell old banks. There used to be
Speaker 1: one of the elements of the financial secrecy system was
Speaker 1: shell banks. We took shell banks off the table, just
Speaker 1: like that. We do the same thing Michelle. Companies if
Speaker 1: we choose to not. It all makes I think a
Speaker 1: lot of people are probably listening saying, yep, I get it,
Speaker 1: it makes sense. Raymond Baker, thank you, Founder President of
Speaker 1: Global Financial Integrity, his new book, Invisible Trillions have Financial
Speaker 1: Secrecies and parallel in capitalism and democracy and the way
Speaker 1: to renew our broken system. Joining us there from d C.