CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Spreading Prosperity 351
goods and services and for interest, principal, and dividends from local subsidiaries
and affiliates. No sympathy is due a government or its central bank
that imposes unnecessary hassles on cross-border transactions. The answer is
to insist on responsible corporate operations, including the pricing declaration,
and then trust the system. By far the greater number of multinationals
will not ask their people to violate a signed statement, and with two signatures
much of false pricing can be eliminated.
One final point on pricing. Every developing and transitional state
should have a law that bars foreigners from offering or providing illegal
flight capital or tax-evasion schemes to local residents. The possibility of arrest
and time in a foreign jail will stop many promoters of such mechanisms
from plying their trade.
CAPITALISM’S CONTRIBUTION TO SLASHING INEQUALITY
I said in Chapter 4 that dirty money is the biggest loophole in the freemarket
system and in Chapter 5 that it is also the most damaging economic
condition hurting the poor. Therefore the best thing that can be done to lift
people out of poverty and cut inequality is to clean up the global financial
system. Capitalism can make the greatest contribution to global prosperity,
provided we run it right and trust the system.
Free trade is widely touted as the panacea for poor countries. I’m all for
free trade. Provided it’s legal. Provided it’s trade and not surreptitious movement
of capital out of poorer countries into richer countries by means of
trade. Yes to free trade, provided we rein in the mispricing and exaggerated
transfer pricing and kickbacks into western accounts that currently drain
hundreds of billions of dollars a year out of poorer countries, relocated permanently
into richer countries. To make free trade work far better in promoting
growth and reducing poverty and inequality, clean up the global
financial system.
As a part of free trade, stimulating exports out of developing and transitional
economies is touted as their path to wealth. Just look at growth in
China. On the other hand, just look at stagnation in Africa. I’m all for export
promotion out of poorer countries and removal of tariff barriers and
agricultural subsidies in richer countries. Provided the export revenues get