The International League of Dark Money

Donald Trump and Vladimir Putin are bent on destroying the peaceful international order that the United States built after World War II. They're hostile to the World Trade Organization, NATO, you name it. But Trump is not the only complicit American here. Because Trump and Putin are champions are a very different, more lawless international order, which many wealthy Americans participate in and derive benefit from: the international league of dark money.

Whatever else does or doesn't bind Trump and Putin, they're united by their dependence upon international money laundering, which moves large amounts of cash across borders in disguised transactions. Putin's oligarchs routinely move their dirty money into the West through shady means, and Trump's real estate business has become heavily dependent on Russian customers whose money should not be examined too closely. The Trump Organization may not actually launder money, but they accept a lot of well-fluffed money straight out of the laundry room. Both Trump and Putin have strong vested interests in keeping the dark money flowing and keeping it out of sight.

They're not alone. There is a robust international infrastructure of shell companies, off-shore banks, and shady middlemen devoted to moving money around while disguising where it comes from. This is especially convenient for people who can't admit where how they got that money or even that they have it. Money laundering allows corrupt government officials in Russia or Nigeria to spend their graft in the West. It allows organized criminals to spend their profits from drugs, gun-running, and human trafficking. And it allows international terrorists to fund operations overseas. So there are strong reasons for the world community, working through the post-WWII international order, to close the flow of laundered money down.

Without access to money laundering, big-time criminals would not be able to use most of their ill-gotten money, because to spend it they would need to explain where they got it. Without access to money laundering, money stolen by corrupt officials could only be spent in the same country those officials help to impoverish. Without money laundering, terrorists could not support sleeper cells in foreign countries or fly volunteers to battle areas. A world where every bank transaction was transparent and on the level would be a better and safer place.

But the money-laundering infrastructure also enables tax evasion. (I mean, no one launders money so they can pay taxes on it.) And many wealthy and prominent people in America and the rest of the developed West use their legal resources to evade taxes. They use shelters and shell companies and foundations to avoid paying their full share of the tax burden, to pass on multi-million-dollar inheritances tax free, and to disguise some of the ways they spend their money. Take a look at the Panama Papers some time, which opens to a window on a single law firm's efforts to get around tax laws for its clients. You see both Russian oligarchs and Western celebrities and politicians, including a former British Prime Minister, in those pages. Lots of nominally law-abiding people rely on offshore accounts and tax havens and largely fictitious legal entities to keep from paying taxes like the rest of us. Closing down the money-laundering system on criminals and terrorists would also close down the tax-evasion system on otherwise legitimate rich people. After all, they're the same system.

Trump and Putin want a world where legal and financial accountability stops at every border, where moving money overseas moves it out of the authorities' sight forever. The existing maze of international loopholes, which already allows tens of billions of secret dollars to flow through anonymous bank accounts, is still too transparent for them. So they want to destroy any lawful international agencies which might have the tools to close down the dark money. They want a world without effective international institutions, because only international institutions can effectively fight money laundering.

But you will find plenty of well-placed Americans and Europeans who don't want international financial controls, either. They want their shell companies and make-believe charitable foundations and secret accounts in the Caymans. They might not care much for Putin. They might detest the jihadists or the Mafia or the Crips. But they won't support the steps necessary to close down Putin or the Crips, because that would mean closing down other businesses that they actually own. It is just one of the many ways that elements of our ruling class are complicit in Russia's attacks on this country.

cross-posted from Dagblog; please comment there, not here

On the

Brexit vs Breakfast: Food and Free Trade

The United Kingdom officially triggered Article 50 today, meaning the two-year march to Brexit has begun. The UK is leaving the European Union, and leaving without any concessions, any deals, any accommodations. It's the "hard Brexit." There are many reasons this is a bad idea, but let's keep it simple: the United Kingdom cannot feed itself.

Britain does manage to grow somewhere between 50 and 60 percent of the food it eats. The last numbers I saw were 54 or 55 percent. So better than half, but not nearly self-sufficient. And Britain does export some food and drink (read: beer), exporting things that its farmland and climate are good for and importing other things that it can't grow, or can't grow well. (If there are any British grapes, there should not be.) But the UK imports more than twice as much food as it exports. Britain depends on imported food from its neighbors, and has throughout its modern history.

Why is this? Because Britain's population is too large for Britain's own farmland too feed. Too many people on too small an area, with a good chunk of that area unfarmable. (Britain has plenty of lovely mountains.) They couldn't feed themselves if they tried. In fact, they have been trying, very very hard, and they can't.

This is not a question of farming more land: just about all the arable land is being farmed already. England has no field untilled, no stone unturned. And it is not a question of efficiency, because British farmers are already incredibly efficient, already wringing the absolute maximum yield from each acre. That they can feed more than half their massive population from that amount of land is actually pretty impressive. They cannot do better than they are already doing. In fact, they're getting close to some ugly short-term/long-term tradeoffs, where they could increase this year's harvest by a few percent at the cost of making the land less productive later. That is not a way out of their problem.

Now, the British are obsessed with British farmers. UK supermarkets slather their products with labels for British beef, British cream, British etc. etc. But that obsession just masks the basic problem that Britain doesn't produce enough beef, butter, and so on. The imperative to buy and cook home-grown products functions to distract the public from the larger problem that there's not enough home-grown food.

Likewise, British farmers are heavily subsidized by the EU, and this deal -- or rather, complete lack of deal -- kills those subsidies, which may or not be replaced. So this may hurt British farmers, too. But that complicated and murky policy question is much less important than the far simpler problem of not being able to feed your own population without buying food from other countries.

Where does most of that imported food come from? All over the world, but about half of the gap is made up by European Union farmers. Remember, England's traditional breadbasket is Ireland. It's been dependent upon Irish farming throughout its modern history. (Yes, even during the Potato Famine; Ireland exported food to England during the Potato Famine, and met its quotas, while the Irish themselves starved.) And of course, England's other nearest neighbor, France, is an agricultural powerhouse, blessed with acre after acre of prime farmland. So the EU produces more than a quarter of the food the British eat.

Now, I'm no economist. But it strikes me that if your country is dependent upon imported food, you never, ever want to leave a free-trade agreement. Tariffs on agricultural goods can only drive up the price of food for your people. God forbid you ever get into an actual trade war with the people who sell your citizens at least five meals a week.

Throwing up trade barriers on food makes that food more expensive, obviously. And, free markets being what they are, making one quarter of the country's food more expensive makes all food prices rise. If Irish beef is more expensive because of taxes, then people can charge more for British beef too, and will.

This makes daily living more expensive for everybody, but it hits poorer people much harder, because more of their income is taken up on basic necessities. Rich people spend a much smaller percentage of their income on food; even if they buy more expensive groceries, or go to fancy restaurants, it's a much smaller part of their monthly budget. (Having excess money for things beyond basic needs is what being rich is.) But if, say, one-third of your monthly income goes to the groceries, a spike in grocery prices can be truly painful.

The "elites" that Brexiteers love to jeer at are not going to be hurt by this; they will still have their French wines and their long lovely dinner parties. They will just pay a small surtax on those pleasures. It's the poor and hard-working Little Englanders, the people who voted for Brexit to stick it to the London elites, who will get it stuck to them at the supermarket checkout. They are the people who are going to be bringing home less bacon, and paying more for what they bring.

If this all seems like a stupid and self-destructive idea, well, Britain has never been Europe's farming superpower. But in the EU it's become the banking superpower, making enormous money as the financial capital of Europe because the whole bloc could locate its premier financial services in one city without worrying about financial borders. And now that those borders are returning ... oh, wait. What was the plan here again?

cross-posted from, and all comments welcome at, Dagblog