Cross-border, state-directed kleptocracy – 21st century authoritarianism



Lebanon-based businessmen who lost enterprises through dealings with members of Saudi Arabia’s royal family and others in the kingdom are closely watching a the anti-corruption campaign led by the powerful crown prince targeting officials, princes and tycoons in the oil-rich kingdom, hoping it will help them win back what they lost over the year, AP reports:

The campaign, which Crown Prince Mohammed bin Salman says is aimed at cracking down on corruption in the kingdom, has been met with skepticism by many. With dozens of powerful princes, business leaders and government officials in custody, the move has provoked speculation the crackdown is more about consolidating power than curbing corruption.

But the conventional understanding that corruption is a national, bordered phenomenon best assessed and countered on a state-by-state badly flawed and complacent, say analysts Alex Cooley and Jason Sharman. The real fight is against cross-border flows of tainted money and Western financial centers, which launder corrupt money and help people spend it, they write for the Washington Post:

Instead of drawing a dichotomy between corrupt and clean countries, we should look at the role of transnational networks, which create a symbiotic relationship between the source countries of grand corruption and the destination host or haven countries that receive the loot. Kleptocracy is not just an initial act of theft, but also the subsequent ability of these corrupt leaders to legally reside in other countries where their wealth and property will be protected, and where they can enjoy their mansions and conspicuous consumption in cities such as London, Paris, New York and Geneva.

Credit: ICIJ

It is precisely because the contents of the Paradise Papers largely pertain to officially legal activity that their implications are so grim, says the American Interest’s Sean Keeley writes.

“Not only does the current legal framework empower wealthy Western tax dodgers, it also enables foreign kleptocrats to plunder state coffers and launder their proceeds in the West, compromising our own moral authority while emboldening autocratic adversaries who are quick to cry hypocrisy,” he adds, citing a number of valuable sources:

  • Back in 2006, Jennifer M. Nordin and Raymond W. Baker sounded the alarm in “Toolbox: Dirty Money,” explaining how Western legal structures facilitate the spread of ill-gotten gains.
  • In “Big Bills” from 2014, James S. Henry takes a look at the hard currency of kleptocrats and tax evaders the world over: namely, the high-denomination banknotes needlessly issued by Western central banks.
  • Neil Barnett explains how dirty foreign money poses an “existential threat to democracy” by giving kleptocratic states leverage to subvert open societies.

21st century authoritarianism cannot be dissociated from kleptocracy. They have tied the knot, and this elegant couple, in its interactions with the free world, defines the geopolitical configuration of our times, says Charles Davidson, the executive director of the Kleptocracy Initiative at the Hudson Institute. 

State-directed kleptocracy is this century’s brand of authoritarianism, but it is critical to understand that kleptocracy and authoritarianism are mutually supportive and reinforcing activities designed to achieve total control, says Heather A. Conley, director of the Europe Program at the Center for Strategic and International Studies (CSIS) and the author of The Kremlin Playbook: Understanding Russian Influence in Central and Eastern Europe.

An authoritarian leader and his or her inner circle can secure state-owned and private assets through kleptocratic means, and kleptocratic means can secure control over key government and democratic institutions, she writes for the National Endowment for Democracy’s International Forum for Democratic Studies.

Kleptocrat” (above) a new free game available in the Apple App Store, operates on the premise that the player is a bad guy trying to launder ill-gotten riches while evading the investigator, writes Henry J. Schumacher. He cites the Integrity Initiative as an example of the multi-stakeholder approach required to enhance transparency and accountability.

Kleptocrats, like Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them, analyst David Klion writes for the New York Times. It is imperative “to block Russia’s kleptocratic elite from safeguarding its assets in the United States, to clean up the influence of foreign lobbying on Washington and to shut down tax havens for billionaires,” he contends.

One of the best ways to fight kleptocracy is to institutionalize a genuine democracy in which the people can throw rotten rulers out of office and the judicial system can act independently to go after public officials who have erased the line between public interest and private greed, argues Larry Diamond, a senior fellow at the Hoover Institution and at the Freeman Spogli Institute for International Studies, where he also directs the Center for Democracy, Development, and the Rule of Law.

A ‘subtler kind’ of kleptocracy

It is a mistake that kleptocracy is nearly always associated with repressive states and that, I believe, is a mistake, according to George Mason University’s Janine R. Wedel, the author of Shadow Elite: How the World’s New Power Brokers Undermine Democracy, Government, and the Free Market. She has observed a subtler kind of kleptocratic behavior take hold in Western democratic states,” she writes for the NED forum on the relationship between kleptocracy and authoritarianism:

I argue that among the most potent assets a leader has is the power embodied in the office, especially in democracies, and that that power endures after the leadership role ends.  It is urgent to look at kleptocracy this way: That something smells at the top has not been lost on ordinary people in Western democracies, who have seen elite fortunes roaring along as theirs stagnated and whose faith in public institutions has plummeted. 

In Central Asia and parts of Eurasia, the relationship between authoritarianism, globalization, and kleptocracy changes depending upon whether elites are looking inward into their own polities, or outward into the international community, argues Alexander Cooley, the author of Dictators without Borders: Power and Money in Central Asia.

“On the one hand, these authoritarians continue to protect their control over state-related resources, industries, and financial flows that provide the material basis for their personal enrichment,” he writes for the NED forum. “They actively conceal their familial looting of the state through the use of secret shell companies and restrict the activities of foreign-funded media or civil society that might expose these activities and otherwise hold them accountable.”

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