Illuminating Dark Corners of the Global Economy
IMF Blog, September 3, 2019
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- Authors: Getty Images)Credit (photo: iStock by Getty Images)CorruptionIlluminating Dark Corners of the Global EconomySeptember 3
- Published: September 3, 2019
Overview
- Author: Gita Bhatt
- Publication date: September 3, 2019
- Context: Issue of Finance & Development focused on secret transactions enabling tax evasion and avoidance, money laundering, illicit financial flows, and corruption.
- Framing: Uses a Sufi parable to illustrate tendency to search where it is easiest to look and argues for shining a spotlight on hidden financial activity.
Scale of the problem (key statistics and impacts)
- Bribes: "$1.5–$2 trillion" change hands every year.
- Tax evasion: "more than $3 trillion a year" lost by governments.
- Broader losses: "countless more is lost through other illicit activities."
- Social and economic costs:
- Money lost could fund health care, education, and infrastructure for millions worldwide.
- Corruption "distorts incentives and undermines public trust in institutions."
- Corruption identified as "the root of many economic injustices young women and men also suffer every day."
Proposed responses and governance themes
- Core notion: "The best disinfectant is sunlight."
- Institutional and policy measures discussed by contributors:
- Put in place accountable institutions.
- Improve government budget transparency.
- Exchange financial information across borders.
- Resolve the tension between the need for transparency and the right to privacy.
- Curb evasion by low-tax rate locations, noting they "have a stake in curbing evasion."
- Promote closer cooperation among law enforcement, financial institutions, and regulators.
Cross-border collaboration and collective action
- Problem characterization: Hidden transactions are "not one nation’s problem nor within one nation’s power to resolve."
- Recommended approach: Combine strong domestic policies with cross-border collaboration.
- Expected payoff: "Myriad other political, economic, and social benefits, not least reducing inequality."
Concluding message
- Rationale: Shedding light on secret financial activity can reduce corruption, recover resources for public services, and strengthen public trust.
- Editorial note: Message signed "Editor-In-Chief, Finance & Development."
- Call to action: Emphasizes the need to "shed light on the dark corners of the world economy."
Source: IMFBlog post "Illuminating Dark Corners of the Global Economy" by Gita Bhatt, September 3, 2019.