Restoring capitalism after the age of the oligarchs

Earlier this month, the UK’s par­lia­ment backed a change to leg­is­la­tion that would force the gov­ern­ment to push off­shore tax havens to boost trans­paren­cy in an effort to tack­le cor­rup­tion and mon­ey laun­der­ing. Without much enthu­si­asm, the gov­ern­ment has announced not to oppose a cross-par­ty amend­ment, writes Bill Wirtz.

In their strug­gle to respond to the attempt­ed assas­si­na­tion of Sergei Skripal, Theresa May and Boris Johnson seem reluc­tant in stop­ping the dirty mon­ey that flows into the UK on a dai­ly basis. Johnson, field­ing ques­tions from MPs last month, encap­su­lat­ed the British government’s sen­ti­ment of pow­er­less­ness last month by insist­ing “this is not a coun­try where we in the gov­ern­ment can say ‘Oi! We think this so-and-so deserves to have his or her col­lar felt.’ This is not how it works.”

But Johnson’s protes­ta­tions seem to ignore Whitehall’s many ways to “feel up col­lars” and keep the pro­ceeds of crime and cor­rup­tion out of the coun­try. Nor is this the state’s respon­si­bil­i­ty alone. Private busi­ness­es and indi­vid­u­als in the UK bear need to help address the prob­lem. Adam Smith’s vision of cap­i­tal­ism requires, in the words of Raymond Baker and Jennifer Nordin, “lead­ers of integri­ty, pru­dence, mod­esty and grace.” Instead, a “vast cot­tage indus­try of lawyers, bankers, and accoun­tants” make their liv­ing ser­vic­ing the tens of bil­lions of ill-got­ten pounds flow­ing into Britain.

This is a dan­ger­ous road for a mar­ket to go down. It also has real ram­i­fi­ca­tions for aver­age peo­ple in the UK. While a decades-long hous­ing bub­ble has pushed the  mid­dle class out of cen­tral London, Bloomberg reports £729 mil­lion worth of sus­pi­cious prop­er­ty pur­chas­es made by Russians alone from 2008 to 2015.

But Russian oli­garchs are only the tip of the iceberg.

In fact, many British elites, pol­i­cy­mak­ers and par­lia­men­tar­i­ans are will­ing to befriend wealthy out­siders whose income is ques­tion­able, to say the least. They thrust them­selves into cas­es like the soon to be extra­dit­ed Romanian tycoon Alexander Adamescu, only to have peo­ple left with more ques­tions about

Adamescu is the tar­get of a European Arrest Warrant (EAW) and is want­ed in his native Romania to face cor­rup­tion and bribery charges. Sir John Scarlett, for­mer­ly head of MI6, signed up to work as a pri­vate con­sul­tant on his behalf. A num­ber of media out­lets have defend­ed him as a busi­ness­man being per­se­cut­ed by a cor­rupt European gov­ern­ment. Multiple MPsprotested his treat­ment. Some Adamescu defend­ers held up the EAW itself as a tawdry mat­ter of polit­i­cal score-set­tling back in Romania. Now there are cer­tain­ly crit­i­cism towards the EAW that pro­fes­sion­als of legal sys­tems will demon­strate to be legit­i­mate, but using the exam­ple of a Romanian busi­ness­man who made his wealth in the ear­ly 1990s cer­tain­ly doesn’t make for a good case.

Adamescu will in fact be extra­dit­ed for rea­sons entire­ly in his own hands. Two years and much spilled ink lat­er, the Romanian was caught out using a forged doc­u­ment last month to con­vince British judges not to send him home to stand trial.

Adamescu may rep­re­sent one of the establishment’s most recent embar­rass­ments, but he is hard­ly the most spec­tac­u­lar. That hon­our may go to Prince Andrew’s rela­tion­ships with indi­vid­u­als such as the Kazahk oli­garch Timur Kulibayev, who bought the Duke of York’s Sunninghill Park estate in 2007 for £3 mil­lion above the ask­ing price.

There is also the Azeri pres­i­dent Ilham Alijev, who the Duke has met on numer­ous occa­sions. Aliyev has just been elect­ed to his fourth term as pres­i­dent of Azerbaijan with 86% of the vote. Just a few days lat­er, his chil­dren were revealed as the secret ben­e­fi­cia­ries of anony­mous com­pa­nies using Malta as a base to invest in the UK and oth­er European countries.

The Duke’s con­tro­ver­sial rela­tion­ships in coun­tries like Kazakhstan and Azerbaijan cost him his posi­tion as trade envoy in 2011. They also hap­pen to over­lap quite neat­ly with the con­sult­ing career of Tony Blair.

Of course, being wealthy and buy­ing prop­er­ty or liv­ing an extrav­a­gant lifestyle isn’t prob­lem­at­ic in and of itself. The demo­niza­tion of legit­i­mate busi­ness­men who suc­ceed in their endeav­ours is a major prob­lem in many European coun­tries. However, he cor­rupt struc­tures that the UK has per­mit­ted, and is now grap­pling with, have lit­tle to do with inno­va­tors who pro­vide valu­able goods and ser­vices to con­sent­ing customers.

Instead, they serve oli­garchs who see Britain as a place to store sus­pi­cious­ly large amounts of mon­ey whose ori­gins can­not be account­ed for. The allure of that mon­ey has enrap­tured for­mer prime min­is­ters, mem­bers of the Royal Family, and thou­sands of oth­ers in the City of London.

It has also changed the face of London. Many of the City’s most promi­nent address­es now belong to indi­vid­u­als such as Ukrainian bil­lion­aire Gennadiy Bogolyubov, who bought One Trafalgar Square oppo­site Nelson’s Column for £173m in 2010. Through off­shore firms, he has also pur­chased a man­sion in Eaton Place and a lux­u­ry house in Belgrave Mews for a total of £20 million.

Bogolyubov made his wealth in the 1990s through his co-own­er­ship of Ukraine’s Privatbank. Two decades lat­er, his for­mer bank and Ukranian anti­cor­rup­tion offi­cials are try­ing to recoup £1.8 bil­lion lost to “dis­hon­est trans­ac­tions” by Bogolyubov and co-own­er Ihor Kolomoisky. Thus far, they have suc­ceed­ed in hav­ing British courts freeze the pairs’ assets.

Breaking this nox­ious spell does not mean resort­ing to mas­sive­ly intru­sive gov­ern­ment con­trol, espe­cial­ly since exe­cut­ing unex­pect­ed wealth orders (UWO) remains a dif­fi­cult task. It does, how­ev­er, require con­sis­tent­ly apply­ing laws on the books. It also requires busi­ness­es embrac­ing the notion of a con­scious cap­i­tal­ism. The lawyers, con­sul­tants and bankers of the City should be expect­ed to cre­ate a more trust­ing and inno­v­a­tive envi­ron­ment by act­ing with a sense of moral and eth­i­cal responsibility.

The influx of dirty mon­ey into the British Isles may be lucra­tive, but it is ulti­mate­ly anath­e­ma to any com­pre­hen­si­ble free mar­ket approach. The unhealthy crony­ism that has pro­duced one set of rules for the com­mon man, and anoth­er for those with pow­er­ful friends and well-con­nect­ed con­sul­tants, makes it easy to under­stand why Britain’s cur­rent sys­tems of mon­ey, pow­er and pol­i­tics are so despised.

Bill Wirtz is a polit­i­cal com­men­ta­tor and a pol­i­cy ana­lyst for the Consumer Choice Centre.

By Guest con­trib­u­tor

Restoring cap­i­tal­ism after the age of the oligarchs

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