The shadow economy is not just ‘poor’ people. It’s potentially anybody who hasn’t internalised the correct state-corporate narrative of normality, and anyone seeking a lifestyle outside of the mainstream. The future presented by self-styled innovation gurus has no scope for flexible, unpredictable or invisible people. They represent analogue backwardness. The future is a world of endless consumer choice built upon an inescapable digital uniformity of automated rules, a matrix outside which you can neither exist nor think. Back in Amsterdam I hang out with Ancilla van de Leest of the Netherlands Pirate Party. She only visits establishments that accept cash, true to her political belief in individual privacy from prying eyes. It would be wrong to assume, however, that Ancilla’s primary concern involves surveillance by a Big Brother-style bogeyman. It’s true that your spending patterns reveal much about how you actually live, and the privacy implications of having these recorded in searchable database format are only starting to be uncovered. We know that targeted individual surveillance of payments occurs by the likes of the FBI and NSA, but routinised mass surveillance could become a norm. Imagine automatic flagging systems triggered by anyone engaging in a combination of transactions deemed subversive. Tax authorities are bound to be building systems to flag discrepancies between your spending patterns and your declared profits. It’s also true that at London fintech gatherings the excited visions of cashless society now occasionally come with a disclaimer that we should think about the power granted to those who control the system. Not only can payments intermediaries see every time you buy access to a porn site, but they have the ability to censor your transactions, like Visa, PayPal and MasterCard attempting to choke WikiLeaks by refusing to process people’s donations. We could imagine some harsh sci-fi scenario in which a theocratic regime issues decrees to payments processors to block anyone buying books deemed sexually deviant. Such decrees could be automatically enforced via code, with subroutines remotely triggering smart locks to place the offending miscreant under house arrest while automatically deducting a fine from their account.
According to the World Bank, corruption in the form of bribery and theft by government officials, the main target of the UN Convention, costs developing countries between $20bn and $40bn each year. That’s a lot of money. But it’s an extremely small proportion - only about 3 percent - of the total illicit flows that leak out of public coffers. Tax avoidance, on the other hand, accounts for more than $900bn each year, money that multinational corporations steal from developing countries through practices such as trade mispricing. This enormous outflow of wealth is facilitated by a shadowy financial system that includes tax havens, paper companies, anonymous accounts, and fake foundations, with the City of London at the very heart of it. Over 30 percent of global foreign direct investment is booked through tax havens, which now collectively hide one-sixth of the world’s total private wealth. This is a massive - indeed, fundamental - cause of poverty in the developing world, yet it does not register in the mainstream definition of corruption, absent from the UN Convention, and rarely, if ever, appears on the agenda of international development organisations.
What may still seem to many to be a parochial affair involving Barclays, a 300-year-old British bank, rigging an obscure number, is beginning to assume global significance. The number that the traders were toying with determines the prices that people and corporations around the world pay for loans or receive for their savings. It is used as a benchmark to set payments on about $800 trillion-worth of financial instruments, ranging from complex interest-rate derivatives to simple mortgages. The number determines the global flow of billions of dollars each year. Yet it turns out to have been flawed.