“What is rewarded above is punished below … Profits are privatized, losses are socialized.”
~ Eduardo Galeano, Upside Down: A Primer for the Looking-Glass World (2001)
This week it was revealed that HSBC – Europe’s biggest bank – has been running a massive tax evasion scheme through its Swiss subsidiary, allowing some of its wealthiest international clients to hide over $120bn in undeclared assets in 30,000 secret bank accounts. Leading British regulators, MPs and government officials were aware of the malpractices and the names of potential tax evaders (including movie stars, drug lords and heads of state), but never pressed criminal charges.
Instead, the UK – like the rest of Europe – ushered in an age of austerity. Where the billions of the rich escaped to Switzerland and the Caymans, the benefits of the poor were cut “to balance the budget.” Last year, David Cameron pledged to slash “wasteful” government spending for another decade, citing as reason that it “comes out of the pockets of the same taxpayers whose living standards we want to see improve.” The irony of the Prime Minister speaking from a golden throne was hardly lost on anyone. Welcome to the topsy-turvy reality of austerity politics.
Of course the diligent observer will not have been very surprised by the news of HSBC’s umpteenth mega-scandal. Already back in 2012, financial journalist Matt Taibbi made it clear that the bank had been engaged in “more or less the worst behavior that any bank can possibly be guilty of.” So far, HSBC has managed to evade prosecution despite laundering billions of dollars for some of the most notorious Mexican drug cartels, cutting illegal deals with a Saudi bank linked to Al Qaeda, and systematically rigging interbank interest rates, reaping lavish profits in the infamous LIBOR scandal.
The decision of US and UK governments not to prosecute HSBC for its industrial-scale criminal behavior signals the glaringly obvious double standards at the heart of our contemporary justice systems. In the US, where more than half of the prison population is doing time for minor drug offenses, the white collar criminals who aid and abet the violent producers and traffickers of these same drugs get off with a slap on the wrist. As Taibbi puts it, “for the crimes they committed, getting away with just [a fine] – and it’s not even their money, it’s the shareholders’ money – it literally is a get out of jail free card.”
Yet it is very important not to let the criminal behavior of a singularly nefarious bank distract us from the bigger picture. HSBC is but one notoriously scandalous player in a financial field that is populated by some of the most violent criminal organizations of our times. Focusing our wrath on individual acts of misbehavior risks missing the deeper dimension to the story. While it is the illegal practices that mostly hit the headlines and cause indignation, the real theft still occurs at the margins – in the everyday transactions and ordinary financial operations at the heart of these banks’ business models.
In this sense, the greatest scandal of our times is systemic in nature and rests upon the wholesale transformation of the world economy over the past four decades. With the onset of financialization in the 1970s, the international banking system began to act like Galeano’s magnifying glass: grossly amplifying pre-existing inequalities and inverting reality in the process. In the first instance, the system sucks up billions in interest and tax money from below. Starting with the bankruptcy of New York City in 1975 and the Mexican debt crisis of 1982, austerity became the principal means to effect a historically unprecedented redistribution of resources from the bottom to the top.
At the other end, the magnifying glass created the preconditions under which the world’s wealthiest businesspeople, white-collar criminals and Third World dictators could further increase their accumulated capital – obtained through decades' worth in pillage and plunder of state resources and common property – in offshore bank accounts and foreign capital investments, where this immense stolen wealth largely escapes taxation, regulation and criminal investigation.
The financial privileges obtained through this process, referred to by David Harvey as "accumulation by dispossession", stand in direct relation to the fiscal deprivation at the bottom. Ultimately, major scandals like HSBC's Swiss tax evasion scheme are merely flash points offering us a clearer view of the hidden dynamics at work in the world economy: what is taken from one side shows up at the other. In a word, there is no such thing as austerity; there is only a highly skewed redistribution of scarce resources. In this upside-down world of financialized capitalism, money simply tends to flow upwards.
The result is a stable set of outcomes in which profits are perennially privatized and losses are systematically socialized. Those who question this state of affairs are told that “there is no alternative,” and those who actively resist – like the social movements and progressive governments in Latin America and Southern Europe – are ruthlessly punished for it. First the cops will beat ordinary citizens over the head when they protest, then investors will beat popular governments over the head when they do the same. Foreign capital is withdrawn, bond yields spike up, stock markets collapse. Where the bankers above are rewarded for criminal behavior, those who struggle for justice from below find themselves imprisoned within the narrowing perimeters of the permissible.
How, then, should we respond to the latest HSBC scandal? Certainly criminal injustice requires effective redress, and the UK and US governments should actively pursue this. But to systemic injustice there can only ever be systemic answers, and without powerful anti-systemic movements to carry demands for social justice forward, meaningful change remains unlikely. Luckily, the countries of the periphery are already making some advances, but to turn the looking glass around and put the world back on its feet will require international mobilization on a scale we have not been able to muster so far. Now more than ever we need the Occupy movement to take back to the streets.