Politicians must come clean to gain trust

Those who are entrusted with power by the people, please, show us your money. Otherwise, we can’t believe in you anymore.

The European aristocracy in the 1800s would have been deeply disturbed by the American and French revolutions. But it was Napoleon Bonaparte who sent the wake-up call that the aristocracy’s days were numbered.

The Vienna Convention that marked the beginning of post-Napoleonic Europe not only declared Switzerland a neutral territory but also started an industry we know today as offshore banking.

Napoleon Bonaparte sent the wake-up call to the old-world aristocracy’s their days were numbered.

The old-world aristocracy stashed their money in the offshore havens for fear that some day their nations would either be defeated by ambitious nationalist dictators, or become a republic like America, where everyone was proclaimed to be equal.

The aristocracy was both right and wrong. The old order was displaced by newer forms of government. But across the Atlantic Ocean, industrialists in the new world emerged as the aristocrats of capitalism with more wealth and power than any of the monarchs of continental Europe.

By the late 19th century, Delaware in the United States entered the scene to become the new world’s destination for setting up offshore companies. Delaware is still considered one of the corporate havens in North America. Others include Nevada, Wyoming and Puerto Rico.

However, beginning in the 1980s, a change in US federal tax laws made them less attractive.

The 1 percent who make most of their fortunes through financial speculation then started to move their wealth to places such as Bermuda, the British Virgin Islands or the Cayman Islands where capital gains and transactions are not taxed at all. The Panama Papers reveal what many suspected for years the rich and powerful hide their wealth and save on taxes.

However, I think we should distinguish between the political aristocrats, who make use of their political powers for private benefit, from capitalists and entrepreneurs, who bear the risk themselves and contribute value to consumers.

There is always a moral case for capitalists and entrepreneurs to protect their financial privacy, hence their private property rights. However, for those who are entrusted with power by the people, please, show us your money. Otherwise, we can’t believe in you anymore.

(Originally published on the Hong Kong Standard,8 April, 2016)

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