Capitalism has resulted in accumulating wealth in the hands of a few people while impoverishing the overwhelming majority of people in the world. Today 62 richest people have as much wealth as the bottom half of 3.6 billion people. This is beyond obscene.
Implicit in the Qur’anic exhortation to Muslims to help the poor and needy (2:177) is the fact that there will always be poor people in the world. Allah (swt) has created human beings with different aptitudes and talents. Some are rich, others are poor, some are strong, others are weak, and so on. This does not confer any special privileges upon those with greater wealth or power. In fact, from the Islamic point of view, this places greater responsibilities upon them. That is why Muslims are constantly reminded to give zakah and sadaqah from the wealth they have been given. Sharing and caring is the very essence of Islam.
The capitalist system works on the exact opposite proposition. Making profit is the only motive regardless of the suffering it may cause. This is precisely what has been confirmed, yet again in the latest Oxfam report released on January 18, 2017 on the eve of the World Economic Forum in Davos, Switzerland.
Titled An Economy for the 1%, the Oxfam report shows that the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, while the wealth of the richest 62 people has increased by more than half a trillion dollars ($542 billion) to $1.76 trillion according to 2015 figures. The few rich men own as much wealth as the bottom half of the world’s population of 3.6 billion people. In 2010, the wealth of 388 richest people equaled that of the bottom half.
Such obscene inequality in wealth is the direct result of unfair and often illegal practices by the rich and powerful. The American billionaire, Warren Buffet, boasts that he pays less tax than his domestic servant. Similarly, the newly elected US President Donald Trump says he is “smart” because he does not pay tax. Smartness is a euphemism for crookedness. The laws are structured in such a way as to benefit the rich. There are legal loopholes for the rich to avoid paying taxes while the poor have access to no such privileges.
There are problems at two different levels: within countries and among countries. Just as the rich exploit the poor in their own countries — there are an estimated 50 million poor in the US, which has the world’s largest Gross Domestic Product (GDP) at $17 trillion — there are also gross inequalities between countries. Again these relate to unfair trade practices.
In his forthcoming book (to be published by Penguin Books in May 2017), The Divide: A New History of Global Inequality, Jason Hickel, an anthropologist at the London School of Economics, says that in one year, “rich countries take $2 trillion more from poor countries than they return in aid and investment. The countries that brag most about their foreign aid are enabling mass theft.”
The US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics recently published some fascinating data and tallied up all of the financial resources that get transferred between rich countries and poor countries each year. They found that in 2012, the last year of recorded data, developing countries received a total of $1.3 trillion, including all aid, investment, and income from abroad. But that same year some $3.3 trillion flowed out of them. In other words, developing countries sent $2 trillion more to the rest of the world than they received. If the figures are tabulated from 1980, then net outflows from the global south add up to $16.3 trillion, almost equal to the total GDP of the US.
Thus, the narrative that the developing countries receive aid to develop their economies as a result of largesse given by Western countries is patently false. It is the other way around. There is a massive drain of resources from the developing world to countries in Europe and North America. These include payments on debt, profits from investments, and of course, pilfering of money through false invoicing. Again quoting GFI figures, Hickel writes, “…by far the biggest chunk of outflows has to do with unrecorded — and usually illicit — capital flight. GFI calculates that developing countries have lost a total of $13.4 trillion through unrecorded capital flight since 1980.”
This is done openly through the international trade system. This is how it works. Corporations — both international and local — indulge in false invoicing. This facilitates transfer of money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing.” While tax evasion is the primary motive, it is not the only one. The practice is also used to launder money or circumvent capital controls. In 2012, developing countries lost $700 billion through trade misinvoicing, an amount five times the total aid they received in that year.
The people of Pakistan are mesmerized by the details of the Panamagate trial. What this involves is the manner in which Prime Minister Nawaz Sharif’s children bought flats in prestigious Park Lane, London without having any income. The sums involved here are peanuts compared to what the two ruling families — the Sharifs and Zardaris — have pilfered out of Pakistan over the years that run into tens of billions of dollars.
Where does all this wealth end up: in the capitalist West, of course. There are more than 60 tax havens in the world, the vast majority controlled by a handful of Western countries. In Europe there are tax havens in Luxembourg, Belgium and Switzerland, while US tax havens are located in Delaware, Manhattan, and New Jersey. The biggest culprit by far is the network of tax havens centered around the City of London. It controls secrecy jurisdictions throughout the British Crown Dependencies and Overseas Territories.
Globally, it is estimated that a total of $7.6 trillion of individuals’ wealth is stashed in offshore tax havens. If tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year. As much as 30% of all African financial wealth is held offshore, again costing an estimated $14 billion in lost tax revenues every year. This is enough money to pay for healthcare for mothers and children in Africa that could save 4 million children’s lives a year, and employ enough teachers to get every African child into school.
The message from the West, however, is clear: bring your stolen wealth and we will keep it for you, no questions asked. Not surprisingly, the Arabian ruling thieves and their allies have stashed billions, indeed trillions in these tax havens. It must be nice to be rich!