Smuggling. Labor abuses. Environmental degradation. Money hoarding. These words bring to mind images of the struggling nation. But in reality, these terms perfectly describe the situation in places outside of national borders — international space, the final bastion of lawlessness.
There is a widespread notion that globalization and the free flow of capital and goods around the globe should mean positive gains for everyone. In fact, fewer restrictions may be contributing to increased inequality and decreased well-being around the globe. Unforeseen consequences to loosening border restrictions have turned the international space into something resembling the wild west. Rather than fostering greater clarity among nations, ease of movement between borders has spawned a murky shadow world that thrives on human trafficking, polluting, illegal trawling, sickening labor conditions, smuggling and tax evasion. It is a true example of a tragedy of the commons, out of sight and unscrutinized.
International spaces offer a veil for everything our society deems unacceptable. But why should we care about international space and the consequences of the increased flow of capital around the world? All of this occurs in a no man’s land that few of us will ever actually encounter. If for purely dispassionate reasons, we should care because it hits us hard in the pocketbook. This aspect of globalization has been a growing problem for decades and has managed to remain mostly out of sight and mind. Over 10 percent of America’s largest companies store all their money in offshore havens and pay a zero percent tax rate. It is estimated that there is between $8 and $32 trillion in private global wealth that is squirreled away offshore where it hides untaxed in places spattered throughout the oceans.
Some of these money transfers are legal. American citizens are allowed to move their money overseas as long as they report their account information to the Internal Revenue Service. However, many transfers are not reported, depriving governments of billions of dollars worldwide. Shrouded in secrecy and opacity, the system offers wealth protection and beachfront destinations to the super rich while starving the rest of society. It is now rare for large corporations like Verizon Communications, News Corp and Apple Inc. not to move their money offshore, leaving the little people on land to pay taxes. This trend of offshoring not only hurts governments, it also makes it tough for small- and medium-sized companies to be competitive in the global market.
In spite of massive popular opposition to these practices, little has been done to remedy the problem. Recently, individual states have been taking measures into their own hands, implementing laws that require companies to report funds going abroad and pay taxes on a portion. Granted, this only recovers money lawfully transferred, but the gains are still substantial. The states who have taken this action expect an uptick of over $18 million in revenue this year alone. Rhode Island is not among the states that have closed these loopholes. Our state should follow suit and implement laws to stop corporations from bleeding it of its rightful tax dollars.
Beyond this, individuals suspected of abusing legal offshoring practices should be aggressively pursued by the Justice Department. Recent Senate investigations have found that the US government has failed to do just that with many Swiss bank accounts — the values of which total $12 billion. Using all manner of illicit methods, American individuals have managed to spirit their treasure across the sea to vaults that let them avoid contributing their share to their community. We must demand better from our government. This much money cannot be allowed to slip through the cracks, and the affluent cannot get away with this sort of greed.
According to James Henry, the author of a recent study on tax transparency, the increased phenomenon of offshoring has not been the result of tax hikes onshore. In fact, the offshoring industry has been exploding in a period when taxes have been cut. This means the shadow world of offshore tax havens and ungoverned international space is a symptom of increased global movement. It reflects problems that will become more dire as we become more interconnected. It will be up to our generation to confront the negative consequences of globalization — financial, humanitarian and environmental.
Global integration is a new theater for class warfare, and it is a war the ultra-rich are winning through offshoring and corruption. Because so much capital is hidden away from scrutiny, there is no way to truly say how great the wealth disparity has grown. But there is hope for civilizing the high seas and the transoceanic flow of capital. The Global Oceans Commission is currently engaging in talks with Interpol about the deployment of a global ocean police force to ensure transcontinental vessels are conforming to international laws. The Justice Department has received a proper scolding from Congress for its ineptitude in prosecuting tax evaders.
Beyond borders the wealthy and powerful drift in an anarchic paradise devoid of government and regulation, while everyone else is left derelict. Increasing regulation, along with tightening tax loopholes and pursuing criminal offshoring can help ensure that our international spaces are healthy and licit for the future. Pay attention to the ongoings in these nowhere lands. Urge your government leaders to take action against those who seek to harm our communities.
Robyn Sundlee ‘16 can be reached at robyn_sundlee@brown.edu.
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