Kleptocracy, hypocrisy, yet democracy

Not again. Corruption, corruption, corruption. Doesn't he have any other topic? It is just a cover-up for incompetence. The economy will never grow if people are afraid of being caught. These are some sample comments made by pundits on the Prime Minister Imran Khan's insistence on accountability. People have actually placed bets. Accountability was what brought Pakistan Tehreek-e-Insaf (PTI) to power in 2018.

Accountability is what is going to make them lose it in 2023. And to make matters more "ridiculous" for the skeptics, the PM actually started making global appeals to stop money being stolen from poor countries and stowed in the rich countries. "As if the rich will listen," laughed off the usual cynics. Lo and behold, just as they have been proven wrong in corona management, and in economic management, they are in for another surprise. "When leaders steal from their nations' citizens or oligarchs flout the rule of law, economic growth slows, inequality widens, and trust in government plummets." Imran khan yet again? No. These words were stated by Joe Biden, the President of the US.

President Joe Biden, recently signed a memorandum on establishing the 'Fight Against Corruption', with the purpose of "countering corruption as a core United States national security interest." Yes, corruption is a national security issue. The interesting part is that for the first time President Biden talks of corruption both at home and abroad. The memorandum also proposes that all stolen assets should be recovered and corrupt people who hide behind the loopholes of a porous international financial system need to be punished. Here comes the test. In Pakistan National Accountability Bureau (NAB) is investigating an undeclared property of ex-President Asif Ali Zardari in Belaire, Manhattan, New York. Pakistan People's Party (PPP) calls it nonsense and applies for a pre-arrest bail. It will be interesting to see if US after the new definition of stolen assets cooperates with Pakistan. The UK has been a haven for laundered money and absconded leaders. More than half of the Sharif family is living a life of "looted" leisure in the UK and the other half are desperately trying to abscond and join their leader in the vacation at Avenfield House.

Kleptocracy has ruled Pakistan for long. Kleptocracy means a country is ruled by thieves who bleed state coiffeurs and stash them in foreign countries. Kleptocracy and corruption for a long period of time were an internal geo-economic, socio cultural issue. The Covid-19 pandemic has changed perspectives. Kleptocracy, like corona, is a global, borderless issue which if treated in isolation will always find a safe haven offshore. The world was globalized on paper a quarter of century ago but in practice it is still narrow tunneled with vision limitations. Reasons are mainly twofold:

1. Kleptocracy for a zero sum game- Forever, the philosophy of "if we have to win, somebody has to lose" existed. The empire building trend of the world powers continues. The philosophy is "If we have to develop then somebody has to be underdeveloped". From cheap labour to cheap raw materials the story of exploitation of the weaker countries continues. More recently the game has shifted to cheap, easy, money stolen from poor countries and stashed in rich tax havens. In many of the G7 elite countries, criminals are welcome, crime is not. Money laundering is banned, but money is not. Transparency is a principle, but hideouts are not. As of 2018, the G7 represents 58% of the global net wealth ($317 trillion), more than 46% of the (GDP) based on nominal values, and more than 32% of the global GDP based on purchasing power parity. Every year $1 trillion in bribes is paid and another $2.6 trillion is lost to other forms of corruption. This black money along with their owners are given asylum in these countries.

2. Loopholes are blackholes- Lethal pandemics include "Covid-19 and Corrupt-21" in the world. Unlike Covid-19 that has a vaccine, corruption has just become endemic. The less developed countries treat it as an SOP of getting things done. The more developed world treats it as "look the other way" as long as its money in their economy. This has created a flow of dirty money from the LDCs to the richer countries where black money havens exist to shield them from prosecution. The rich countries have become a recycling dump for all the dirt, filth and litter of illicit finance. The philosophy was to keep their own house tidy. Let looters throw their ill-gotten wealth in their economy. Let us let the world launder it by selling assets in return. But as proven in the Panama and Paradise Leaks, havens have leakages and dirty money is infectious. It permeates the system, stains the operation and creates black holes. Through these holes not just kleptocrats but the developed country launderers like Russians, Americans and Europeans themselves become partner to the crime. Pakistan was put on the FATF grey list in 2012 and 2018 as it did not tighten its money laundering laws which helped terror financing. The reason was that since leaders were sending their "ill-gotten" money abroad they did not want to plug these legal holes. With the result that terrorists used it to their advantage. Similarly, the American government is now trying to impose universal tax on multinationals who have enjoyed the very tax havens they had made to stow dirty money from corrupt leaders.

Pakistan needs to leverage President Biden's memorandum to fight against corruption. PM Imran Khan has been appealing to the rich countries for creating global mechanisms against dirty money. To capitalize on this common purpose a three-pronged approach is needed:

1. The rich-poor partnership- The only way kleptocracy can be stopped is by having laws that are made not just in exclusive 'G7 clubs' but with the input of the G77 too. Kleptocrats strengthen when local and global institutions weaken. Kleptocrats use the ambiguity of the international laws to escape to countries that allow for "rich investors" fleeing their own countries. This requires a complete over haul of the 'superpower vs powerless' world view. The laws of fighting corruption have to be based on mutual legal, ethical, moral not just assistance but binding and prosecution.

2. Aid tied to corruption prevalence- Normally developed countries' aid is tied to economic or social conditionalities. Aid money is the real bonanza for kleptocrats. Imagine how one necklace donated by President Erdogan's wife for flood victims ended up in the house of a prime minister in the past. Imagine how billions of aid money must have been transferred through illegal channels to illicit havens. Thus aid money should be tied to corruption control too. Pakistan should make a detailed proposal on it that the PM should raise it on all relevant international forums.

3. Naming and shaming kleptocrats- The most effective way is to name and shame the kleptocrats and cronies internationally. There should be global civil society activism against them. Just like the black lists in politics, there should be social boycott of such people. Their names should be entered in the hall of shame and strict condemnation should make it difficult for governments to give them and their dirty money refuge.

Democracy is all about the rule of law. When you bend laws for criminals, whether local or foreign, you are undermining democracy. With kleptocrats being given refuge democracy is just political hypocrisy. If there is one principle, that, if broken, will eventually break you is that laws cannot be used selectively. That is when a society becomes unfair and unjust. William Scott Downey, for example, had famously said: "Law without justice is a wound without cure."

(The writer can be reached at [email protected])

Copyright Business Recorder, 2021