CAPITALISM'S ACHILLES HEEL Dirty Money and How to

238 CAPITALISM’S ACHILLES HEEL
majority. I estimate it at a minimum of 80 percent, or about $400 billion.
That’s the first part of the hidden proceeds accruing to the rich.
The second part is earnings on assets already taken abroad over a period
of years and unrecorded in a country’s national accounts. Earlier I estimated
this external accumulation at perhaps $5 trillion. Assuming a modest rate of
return of four percent on these assets, that’s another $200 billion earned offshore
annually and unseen locally. The sum of the two is an estimated $600
billion annually received by the richest in the poorest countries, lodged far
away, out of sight of GDP in the home countries. Taking conservatively estimated
hidden income into account, the global GDP accruing to the top
quintile, illustrated in Figure 5.2 at 67.6 percent and 87.5 percent depending
on the measurement, grows to rounded figures of 70 to 90 percent.
The comparison of the illegal money of the poor countries’ rich to the
total money of the poor is staggering. The bottom quintile of the world has
total earnings at exchange rates of about $230 billion per year. (Exchange
rates are the preferable base of comparison in this instance.) Thus, the rich
people in poor countries receive out of their countries nearly three times the
total money that the poor receive inside their countries. Think of that! The illegal
money alone that flows annually out of poorer countries is a multiple of
the total money available to the world’s bottom fifth. And it doesn’t really
matter if better calculations in the future put rich people’s dirty money taken
abroad at only double the money available to the bottom fifth, or even
merely equal to the money available to the bottom fifth. A capitalist system
with as much or more dirty money moving offshore illegally to the rich as the
total amount of money available domestically to the poor is in deep trouble.
The rich in developing and transitional economies are far richer than
they appear to be from available data. They are concealing wealth from their
own countries’ national accounts by illicitly transferring major portions into
tax havens, secrecy jurisdictions, and western deposits. Researchers who assert
that inequality is declining because the poor are prospering have missed
what’s happening at the other end of the scale. Starting in the 1960s and accelerating
in the 1970s, 1980s and 1990s, the rich have steadily taken advantage
of the package of mechanisms available for shielding wealth and
hiding income. What seems in some studies to be declining inequality may
simply be poor accounting. The gap appears to be narrowing because, in
part, the full income of the rich is understated. Until estimates of the unrecorded
income of the rich are included in inequality studies, the notion