Overcoming the Shadow Economy
- Table of Contents
• There is a growing global consensus that the secrecy-havens—jurisdictions which undermine global standards for corporate and financial transparency—pose a global problem: they facilitate both money laundering and tax avoidance and evasion, contributing to crime and unacceptably high levels of global wealth inequality.
• As economic leaders, the United States and Europe have an obligation to force financial centers to comply with global transparency standards. That they have the instruments to do so has been forcefully shown in the fight against terrorism. That they do not do so in the fight against corruption and tax avoidance and evasion is testimony to the power of the interests of those who benefit from secrecy.
• In a globalized world, if there is any pocket of secrecy, funds will flow through that pocket. That is why the system of transparency has to be global. The US and EU are key in tipping the balance toward transparency, but this will only be the starting point: each country must play its role as a global citizen in order to shut down the shadow economy—and it is especially important that there emerge from the current secrecy havens some leaders to demonstrate that there are alternative models for growth and development.
• Countries should position themselves proactively—not just complying with current minimal standards, but placing their economic development model at the cutting edge of the evolution of those standards. Each country must seriously consider whether it wants to be engaged in a never-ending struggle to catch up to the evolving international standards, or serve as a model, setting standards that others will eventually be forced to emulate.
About the Authors
Initiative for Policy Dialogue (IPD)
Joseph E. Stiglitz is co-President of the Initiative for Policy Dialogue, and Chairman of the Committee on Global Thought at Columbia University. He is University Professor at Columbia, teaching in its Economics Department, its Business School, and its School of International and Public Affairs. He chaired the UN Commission of Experts on Reforms of the International Monetary and Financial System, created in the aftermath of the financial crisis by the President of the General Assembly. He is former Chief Economist and Senior Vice-President of the World Bank and Chairman of President Clinton’s Council of Economic Advisors. He was awarded the Nobel Memorial Prize in Economics in 2001.
Professor of Criminal Law and Criminology
University of Basel
Mark Pieth is a Professor of Criminal Law at Basel University, former Chairman of the OECD Working Group on Bribery in International Business Transactions, and Member of Swiss Federal Gaming Commission, Chairman of the Board of the Basel Institute on Governance. Formerly Member of the Independent Inquiry Committee into the Iraq Oil-for-Food Programme, the Financial Action Task Force on Money Laundering (FATF) and Head of Section of Economic and Organised Crime at Swiss Ministry of Justice & Police, member of Chemical Action Task Force on Precursor Chemicals, Chairman, UN Intergovernmental Expert Group Commission to determine the extent of illicit trafficking in drugs. Mark Pieth has published extensively in the fields of economic and organised crime, money laundering, corruption, sentencing and criminal procedure.