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SAPs – Season Two: Why Kenyans Fear Another IMF Loan

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The Jubilee government would have us believe that the country is economically healthy but the reality is that the IMF has come in precisely because Kenya is in a financial crisis.

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SAPs – Season Two: Why Kenyans Fear Another IMF Loan
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Never did I imagine that opposing an International Monetary Fund (IMF) loan to Kenya would be viewed by the Kenyan authorities as a criminal act. But that is exactly what transpired last week when activist Mutemi Kiama was arrested and charged with “abuse of digital gadgets”, “hurting the presidency”, “creating public disorder” and other vaguely-worded offences. Mutemi’s arrest was prompted by his Twitter post of an image of President Uhuru Kenyatta with the following caption: “This is to notify the world . . . that the person whose photograph and names appear above is not authorised to act or transact on behalf of the citizens of the Republic of Kenya and that the nation and future generations shall not be held liable for any penalties of bad loans negotiated and/or borrowed by him.” He was released on a cash bail of KSh.500,000 with an order prohibiting him from using his social media accounts or speaking about COVID-19-related loans.

Mutemi is one among more than 200,000 Kenyans who have signed a petition to the IMF to halt a KSh257 billion (US$2.3 billion) loan to Kenya, which was ostensibly obtained to cushion the country against the negative economic impact of COVID-19.  Kenya is not the only country whose citizens have opposed an IMF loan. Protests against IMF loans have been taking place in many countries, including Argentina, where people took to the streets in 2018 when the country took a US$50 billion loan from the IMF. In 2016, Eqyptian authorities were forced to lower fuel prices following demonstrations against an IMF-backed decision to eliminate fuel subsidies. Similar protests have also taken place in Jordan, Lebanon and Ecuador in recent years.

Why would a country’s citizens be against a loan given by an international financial institution such as the IMF? Well, for those Kenyans who survived (or barely survived) the IMF-World Bank Structural Adjustment Programmes (SAPs) of the 1980s and 90s, the answer is obvious. SAPs came with stringent conditions attached, which led to many layoffs in the civil service and removal of subsidies for essential services, such as health and education, which led to increasing levels of hardship and precarity, especially among middle- and low-income groups. African countries undergoing SAPs experienced what is often referred to as “a lost development decade” as belt-tightening measures stalled development programmes and stunted economic opportunities.

In addition, borrowing African countries lost their independence in matters related to economic policy. Since lenders, such as the World Bank and the IMF, decide national economic policy – for instance, by determining things like budget management, exchange rates and public sector involvement in the economy – they became the de facto policy and decision-making authorities in the countries that took their loans. This is why, in much of the 1980s and 1990s, the arrival of a World Bank or IMF delegation to Nairobi often got Kenyans very worried.

In those days (in the aftermath of a hike in oil prices in 1979 that saw most African countries experience a rise in import bills and a decline in export earnings), leaders of these international financial institutions were feared as much as the authoritarian Kenyan president, Daniel arap Moi, because with the stroke of a pen they could devalue the Kenyan currency overnight and get large chunks of the civil service fired. As Kenyan economist David Ndii pointed out recently at a press conference organised by the Linda Katiba campaign, when the IMF comes knocking, it essentially means the country is “under receivership”. It can no longer claim to determine its own economic policies. Countries essentially lose their sovereignty, a fact that seems to have eluded the technocrats who rushed to get this particular loan.

When he took office in 2002, President Mwai Kibaki kept the World Bank and the IMF at arm’s length, preferring to take no-strings-attached infrastructure loans from China. Kibaki’s “Look East” economic policy alarmed the Bretton Woods institutions and Western donors who had until then had a huge say in the country’s development trajectory, but it instilled a sense of pride and autonomy in Kenyans, which sadly, has been eroded by Uhuru and his inept cronies who have gone on loan fishing expeditions, including massive Eurobonds worth Sh692 billion (nearly $7 billion), which means that every Kenyan today has a debt of Sh137,000, more than three times what it was eight years ago when the Jubilee government came to power. By the end of last year, Kenya’s debt stood at nearly 70 per cent of GDP, up from 50 per cent at the end of 2015. This high level of debt can prove deadly for a country like Kenya that borrows in foreign currencies.

When the IMF comes knocking, it essentially means the country is “under receivership”.

The Jubilee government would have us believe that the fact that the IMF agreed to this loan is a sign that the country is economically healthy, but as Ndii noted, quite often the opposite is true: the IMF comes in precisely because a country is in a financial crisis. In Kenya’s case, this crisis has been precipitated by reckless borrowing by the Jubilee administration that has seen Kenya’s debt rise from KSh630 billion (about $6 billion at today’s exchange rate) when Kibaki took office in 2002, to a staggering KSh7.2 trillion (about US$70 billion) today, with not much to show for it, except a standard gauge railway (SGR) funded by Chinese loans that appears unable to pay for itself. As an article in a local daily pointed out, this is enough money to build 17 SGRs from Mombasa to Nairobi or 154 superhighways like the one from Nairobi to Thika. The tragedy is that many of these loans are unaccounted for; in fact, many Kenyans believe they are taken to line individual pockets. Uhuru Kenyatta has himself admitted that Kenya loses KSh2 billion a day to corruption in government. Some of these lost billions could actually be loans.

IMF loans with stringent conditions attached have often been presented as being the solution to a country’s economic woes – a belt-tightening measure that will instil fiscal discipline in a country’s economy by increasing revenue and decreasing expenditure. However, the real purpose of these loans, some argue, is to bring about major and fundamental policy changes at the national level – changes that reflect the neoliberal ethos of our time, complete with privatisation, free markets and deregulation.

The first ominous sign that the Kenyan government was about to embark on a perilous economic path was when the head of the IMF, Christine Lagarde, made an official visit to Kenya shortly after President Uhuru was elected in 2013. At that time, I remember tweeting that this was not a good omen; it indicated that the IMF was preparing to bring Kenya back into the IMF fold.

Naomi Klein’s book, The Shock Doctrine, shows how what she calls “disaster capitalism” has allowed the IMF, in particular, to administer “shock therapy” on nations reeling from natural or man-made disasters or high levels of external debt. This has led to unnecessary privatisation of state assets, government deregulation, massive layoffs of civil servants and reduction or elimination of subsidies, all of which can and do lead to increasing poverty and inequality. Klein is particularly critical of what is known as the Chicago School of Economics that she claims justifies greed, corruption, theft of public resources and personal enrichment as long as they advance the cause of free markets and neoliberalism. She shows how in nearly every country where the IMF “medicine” has been administered, inequality levels have escalated and poverty has become systemic.

Sometimes the IMF will create a pseudo-crisis in a country to force it to obtain an IMF bailout loan. Or, through carefully manipulated data, it will make the country look economically healthy so that it feels secure about applying for more loans. When that country can’t pay back the loans, which often happens, the IMF inflicts even more austerity measures (also known as “conditionalities”) on it, which lead to even more poverty and inequality.

IMF and World Bank loans for infrastructure projects also benefit Western corporations. Private companies hire experts to ensure that these companies secure government contracts for big infrastructure projects funded by these international financial institutions. Companies in rich countries like the United States often hire people who will do the bidding on their behalf. In his international “word-of-mouth bestseller”, Confessions of an Economic Hit Man, John Perkins explains how in the 1970s when he worked for an international consulting firm, he was told that his job was to “funnel money from the World Bank, the US Agency for International Development and other foreign aid organisations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s resources”.

Sometimes the IMF will create a pseudo-crisis in a country to force it to obtain an IMF bailout loan.

The tools to carry out this goal, his employer admitted unashamedly, could include “fraudulent financial reports, rigged elections, payoffs, extortion, sex and murder”. Perkins showed how in the 1970s, he became instrumental in brokering deals with countries ranging from Panama to Saudi Arabia where he convinced leaders to accept projects that were detrimental to their own people but which enormously benefitted US corporate interests.

“In the end, those leaders become ensnared in a web of debt that ensures their loyalty. We can draw on them whenever we desire – to satisfy our political, economic or military needs. In turn, they bolster their political positions by bringing industrial parks, power plants, and airports to their people. The owners of US engineering/construction companies become fabulously wealthy,” a colleague told him when he asked why his job was so important.

Kenyans, who are already suffering financially due to the COVID-19 pandemic which saw nearly 2 million jobs in the formal sector disappear last year, will now be confronted with austerity measures at precisely the time when they need government subsidies and social safety nets. Season Two of SAPs is likely to make life for Kenyans even more miserable in the short and medium term.

We will have to wait and see whether overall dissatisfaction with the government will influence the outcome of the 2022 elections. However, whoever wins that election will still have to contend with rising debt and unsustainable repayments that have become President Uhuru Kenyatta’s most enduring legacy.

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Rasna Warah is a Kenyan writer and journalist. In a previous incarnation, she was an editor at the United Nations Human Settlements Programme (UN-Habitat). She has published two books on Somalia – War Crimes (2014) and Mogadishu Then and Now (2012) – and is the author UNsilenced (2016), and Triple Heritage (1998).

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Unlike the Rest of the UN, Is WHO (Finally) Taking Sexual Abuse Seriously?

A disturbing report on the sexual exploitation and abuse of women and children in the DRC has laid bare the failure of UN agencies to protect vulnerable populations.

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Unlike the Rest of the UN, Is WHO (Finally) Taking Sexual Abuse Seriously?
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It is extremely unfortunate that at a time when the World Health Organization (WHO) is spearheading a campaign to get people vaccinated against COVID-19, and pushing rich countries to donate their vaccines to low-income countries instead of hoarding them, it is confronted with revelations that suggest deep systemic failures within the global health agency that have allowed its employees to get away with sexual exploitation and abuse of vulnerable populations.

Last month, WHO released a report that confirmed that there was sexual abuse of women and children by WHO employees in the Democratic Republic of the Congo (DRC) during an outbreak of Ebola in the country’s North Kivu and Ituri provinces between 2018 and 2020. This report was the result of an independent commission’s investigations following an exclusive media report last year that found that dozens of women in the DRC had been sexually exploited by aid workers, including WHO employees.  The most disturbing revelation was that some of the perpetrators were medical doctors. Many of the abused women were offered jobs in exchange for sex; others were raped or coerced into having sex against their will. There were also stories of women being forced to have abortions after they were sexually abused. The independent commission stated that its findings showed that 21 of the 83 alleged perpetrators were WHO employees, and that “individual negligence” on the part of WHO staff may have amounted to “professional misconduct”.

This is not the first time that sexual abuse and exploitation of women and children by UN employees has been reported in the DRC. In 2004, UN Secretary-General Kofi Annan ordered an investigation into sexual abuses by UN peacekeepers in the country after it became apparent that such abuse was widespread in this mineral-rich but conflict-ridden country.  The investigation detailed various forms of abuse, including trading sex for money and food. It was in the DRC that the term “peacekeeper babies” first emerged. Women who had given birth after being raped by UN peacekeepers spoke about being abandoned by both their families and the peacekeepers who had impregnated them. However, the report had little impact on the UN’s peacekeeping mission in the DRC – none of the perpetrators were brought to book nor were the victims compensated.

Sexual abuse of vulnerable populations, especially women and children, is particularly rampant in UN peacekeeping missions.  In 2017, the Associated Press revealed in an exclusive report that at least 134 Sri Lankan UN peacekeepers had exploited nine Haitian children in a sex ring from 2004 to 2007. Many of the victims were offered food or money after they were sexually violated. (These “sex-for-food” arrangements have also been reported in other countries experiencing conflict or disaster.) Although 114 of these peacekeepers were sent home after the report came out, none of them were prosecuted or court-martialled in their countries.

One reason why UN peacekeepers evade the consequences of their actions is that under the Status of Forces Agreement negotiated between the UN and troop-producing countries, UN peacekeepers fall under the exclusive jurisdiction of the country they come from. When cases of abuse are reported, they are either ignored by the countries, or the perpetrators are sent home—no questions asked.

Unfortunately, civilian UN staff who commit crimes such as rape also evade any legal action because the UN accords the UN and its employees immunity from prosecution. This immunity can only be waived by the UN Secretary-General, but the Secretary-General hardly ever waives this immunity even when there is overwhelming evidence against a UN staff member. This means that cases brought against UN employees cannot be tried in national courts, nor can the perpetrators be detained or arrested by national law enforcement agencies.  

At a press conference held last month, WHO’s director-general, Tedros Adhanom Ghebreyesus, apologised to the victims of the abuse in the DRC at the hands of WHO employees and promised to take action to prevent such abuse from happening again. “I am sorry for what was done to you,” he said. “What happened to you should not happen to anyone.”

The head of WHO has also promised to review the organisation’s emergency response measures and internal structures and to discipline those staff members who fail to report cases of sexual exploitation and abuse. WHO member states have also called for an “immediate, thorough and detailed assessment of what went wrong”.

I have no doubt that Mr Ghebreyesus is serious about fixing a problem that has plagued the UN for decades. In fact, his response to the sexual abuse allegations is much more honest and sincere than the responses of other heads of UN agencies whose employees have been accused of allowing sexual exploitation and abuse to occur under their watch. One, he established an independent commission to look into the sexual abuse allegations, which rarely happens. (Most UN agencies either ignore the allegations or order an internal investigation, which invariably determines that the allegations “could not be substantiated”.) Two, he has publicly committed to undertake wholesale reforms in WHO’s structures and culture that allow sexual exploitation and abuse of vulnerable populations to go undetected, unreported and unpunished. Three, he has agreed to the independent commission’s recommendation that an independent monitoring group be set up within two months to ensure that the commission’s recommendations are enforced.

“What happened to you should not happen to anyone.”

Most UN agencies would not welcome such intense scrutiny of their operations by independent bodies, so WHO’s efforts in this regard are laudable.  WHO’s actions could also be attributed to the fact that, unlike other UN agencies that report to the General Assembly, WHO reports to the World Health Assembly that comprises delegates that have technical competence in health matters and represent their governments’ ministries of health. Because it is a specialised UN agency not governed by the General Assembly, WHO can establish its own rules without deferring to the General Assembly. In this sense, WHO enjoys relative autonomy from the UN system’s gargantuan and highly opaque bureaucracy.

Cover-ups and impunity 

WHO’s response is a far cry from the normal tendency of UN bosses to cover up cases of sexual abuse and exploitation taking place under the UN’s watch.  In 2014, for instance, when a senior UN official reported to the French government that French peacekeepers operating in the Central African Republic were sexually abusing boys as young as eight years old, his bosses at the Office of the UN High Commissioner for Human Rights (OHCHR) responded by asking him to resign. When he refused to do so, they suspended him for “unauthorized disclosure of confidential information”, and, in a typical case of “shooting the messenger”, they directed their internal investigations towards him rather than towards the peacekeepers who had allegedly abused the children. This case, which received wide media coverage, did not lead to significant changes in how the UN handles sexual abuse cases. On the contrary, Anders Kompass, the UN official who reported the abuse, was retaliated against, and eventually left the organisation in frustration.

Cases of UN employees sexually abusing or harassing their colleagues are also brushed under the carpet. In 2018, for example, when an Indian women’s rights activist accused the United Nations Population Fund (UNFPA)’s India representative of sexual harassment, the UN agency said that its preliminary investigations showed that her allegations could not be substantiated. The Code Blue Campaign, which tracks instances of sexual harassment and exploitation by UN employees, dismissed the findings of the investigation, calling them a “cover-up.” (Soon after the activist made her allegation, UNFPA evacuated the accused from India, which further muddied her case.)

This is not an isolated case. In 2004, when a staff member at the UN’s refugee agency accused the head of the organisation of sexual harassment, the UN Secretary-General, Kofi Annan, dismissed her claims. Recently, a woman working at UNAIDS lost her job soon after she filed a complaint of sexual harassment against UNAIDS’ deputy executive director. This was after Michel Sidibé, the then head of UNAIDS, told a staff meeting that people who complain about how the agency was handling sexual harassment “don’t have ethics.”

The UN’s highly patriarchal and misogynistic culture allows such abuse to continue unabated. In 2018, the UN conducted an internal survey that found that one-third of the UN employees surveyed had experienced sexual harassment. It revealed that the most vulnerable targets were women and transgender personnel aged between 25 and 44. Two out of three harassers were male and only one out of every three employees who were harassed took any action against the perpetrator. About one in ten women reported being touched inappropriately; a similar number said they had witnessed crude sexual gestures.

Another survey by the UN Staff Union found that sexual harassment was one among many abuses of authority that take place at the UN. Results of the survey showed that sexual harassment made up about 16 per cent of all forms of harassment. Forty-four per cent said that they had experienced abuse of authority; of these, 87 per cent said that the person who had abused his or her authority was a supervisor. Twenty per cent felt that they had experienced retaliation after reporting the misconduct.

The UN’s highly patriarchal and misogynistic culture allows such abuse to continue unabated.

Since then, the UN has established a new sexual harassment policy and a hot line for victims of sexual harassment. However, remedial actions spelled out in the policy appear to be mediation or counselling exercises rather than disciplinary ones. The emphasis is on psychosocial support and counselling (for the victims, of course) and “facilitated discussions” between the “offender” and the “affected individual”. Disciplinary measures include physical separation of the offender from the victim, reassignment, and temporary changes in reporting lines. Official internal investigations are permitted, but as I have tried to illustrate, most internal UN investigations into cases of sexual harassment and other kinds of wrongdoing inevitably conclude that the sexual harassment or wrongdoing “could not be substantiated.” This leaves victims vulnerable to retaliation.

Perhaps WHO can lead the way in showing the rest of the UN system how to tackle sexual exploitation, abuse and harassment by UN employees. WHO has already terminated the contracts of four of its employees who were accused of sexually exploiting women in the DRC. However, a true test of WHO and the UN’s commitment to end such abuses would be if they reinstated all those who were fired for reporting such cases. I for one am eagerly awaiting the independent monitoring group’s findings on whether or not WHO has taken tangible and impactful measures to protect people from being sexually abused and exploited by its employees and to safeguard the jobs of those who report such abuses.

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The Retrospective Application of Constitutional Statutes: Notes From the High Court of Kenya

Katiba Institute adds to the growing comparative discussion around constitutional statutes and therefore ought to be keenly studied by students of comparative constitutional law.

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Previously, I have discussed the concept of constitutional statutes. Recall that a constitutional statute is a law that is “enacted in pursuance of the State’s positive obligation to fulfil a constitutional right.” While certain constitutional rights are self-enforcing (such as, for example, the right to free speech ipso facto prohibits the State from engaging in arbitrary censorship), others – by their very nature – require a statutory framework to be made effective. For example, the right to vote cannot be made effective without an infrastructure in place to conduct free and fair elections, including the existence of an independent, non-partisan Election Commission. Insofar as such a legislative framework is not in existence, the state is arguably in breach of its positive obligations to fulfil the right in question. Thus, to refine the definition further, a constitutional statute is a statute that “provides a statutory framework towards implementing a fundamental right, thereby fulfilling the state’s positive obligation to do so.”

What follows from the finding that a particular law is a constitutional statute? On this blog, we have discussed constitutional statutes in the context of amendments to the Right to Information Act, which have sought to undermine the independence of the Information Commissioners. We have argued that, insofar as constitutional statutes stand between the individual and the State, mediating the effective enforcement of rights, legislative amendments that prevent them from fulfilling this function, are thereby unconstitutional. Furthermore, once a constitutional statute has been enacted, the principle of non-retrogression applies – that is, the legislature cannot simply repeal the law and go back to a position where the right in question was unprotected. Another example discussed on this blog is the recent judgment of the Kenyan Court of Appeal in David Ndii, where it was held that the implementation of the Popular Initiative to amend the Kenyan Constitution required a legislative scheme, as also its discussion of the previous judgment in Katiba Institute, where an attempt to reduce the quorum for resolutions of the Independent Electoral and Boundaries Commission was held to be unconstitutional.

The judgment of the High Court of Kenya of 14 October 2021 – also titled Katiba Institute – provides an additional, fascinating implication that flows from the finding that a law is a constitutional statute. Katiba Institute arose out of the efforts of the Government of Kenya to implement a national biometric identification system called NIIMS, and the judgment of the High Court with respect to a challenge to the constitutionality of NIIMS (Nubian Rights Forum), which we discussed on this blog back in 2019. Recall that in Nubian Rights Forum, after a detailed analysis, the High Court struck down a part of NIIMS, and allowed the government to go ahead with the rest of the programme subject to the implementation of an effective data protection law. Therefore, as I had noted in that post:

The High Court’s decision – at least in part – is a conditional one, where the (legal) future of the NIIMS is expressly made dependant on what action the government will take. Thus, there remain a significant number of issues that remain open for (inevitable) litigation, even after the High Court’s judgment.

Notably, Kenya had enacted a data protection law in between the hearings and the judgment, but the High Court – in its verdict – was insistent that until the point of effective implementation, the continued rollout of NIIMS could not go on. And this was at the heart of the challenge in Katiba Institute: the applicant argued that NIIMS had been rolled out, in particular, without complying with Section 31 of the Kenyan Data Protection Act, which required a Data Impact Assessment as a pre-requisite to any data collection enterprise. In response, the state argued that the data collection in question had already been completed before the passage of the Data Protection Act, and that therefore – in accordance with the general principle that statutes are not meant to apply retrospectively – Section 31 was inapplicable to this case.

Engaging in impeccable constitutional statute analysis, Justice Jairus Ngaah noted that the Data Protection Act was “enacted against the backdrop of Article 31 of the Constitution.” Article 31 of the Constitution of Kenya 2010 guarantees the right to privacy. As the learned Justice noted, in its very preamble, the DPA stated that its purpose was to “give effect to Articles 31(c) and (d) of the Constitution.” Justice Ngaah then rightly observed, “The need to protect the constitutional right to privacy did not arise with the enactment of the Data Protection Act; the right accrued from the moment the Constitution was promulgated.”

The judgment of the High Court of Kenya provides an additional, fascinating implication that flows from the finding that a law is a constitutional statute.

It therefore followed that, on the balance, an interpretation that gave the DPA retrospective effect was to be preferred over one that did not. A contrary interpretation would mean that the state was entitled to collect data and infringe the right to privacy even in the absence of a legislative scheme. Or, in other words, having failed to implement its positive obligation to enact a constitutional statute to give effect to the right to privacy, the state could then take advantage of its own failure by nonetheless engaging in data collection enterprises anyway. This, naturally, could not be countenanced. And in any event, given that Article 31 had always existed, it followed that:

. . . there was always the duty on the part of the State to ensure that the Bill of Rights . . . is respected and protected. Section 31 of the Act does not impose any more obligation or duty on the state than that which the state, or the respondents . . . have hitherto had to bear.

On this basis, Justice Ngaah therefore held that NIIMS had been rolled out in breach of Section 31, and therefore, first, quashed the rollout itself, and secondly, issued a mandamus restraining the State from rolling it out again without first complying with Section 31.*

The judgment in Katiba Institute does not, of course, answer the number of questions that still remained to be resolved after the Nubian Rights Forum judgment, including some problematic aspects of the DPA itself. Those questions were not, however, before the court in this instance; on the other hand, the court’s finding that constitutional statutes apply retrospectively – and the reasons for that finding – make it a landmark judgment. Katiba Institute adds to the growing comparative discussion around constitutional statutes, Fourth Branch bodies, and “Guarantor Institutions”, and therefore ought to be keenly studied by students of comparative constitutional law.

* One cannot, of course, help comparing this with the judgment of the Indian Supreme Court in the Aadhaar case, where despite the fact that Aadhaar data was collected for more than five years without any law whatsoever, it was retrospectively validated by the Supreme Court.

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The Pandora Papers Reveal the Dark Underbelly of the United Kingdom

Through its network of tax havens, the UK is the fulcrum of a system that benefits the rich and powerful.

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There’s the role, for instance, played by the British Virgin Islands, an overseas territory of the UK that functions as a tax haven. Czechia’s multimillionaire prime minister used the territory to hide his ownership of a chateau in France. Others, including the family of Kenyan president Uhuru Kenyatta and Vladimir Putin’s PR man, have made similar use of the islands to conceal wealth – while Tony and Cherie Blair reportedly saved £312,000 in stamp duty when they bought a London property from a company registered in the British Virgin Islands in 2017.

Then there’s London itself. The leaked documents show how the King of Jordan squirreled personal cash away in the capital’s property market, as did key allies of Imran Khan, Pakistan’s president.

More details will emerge in the coming days. But one thing is already clear. This isn’t a story about countries on the periphery of the world economy. It is a story about how the British state drives a global system in which the richest extract wealth from the rest.

British through and through

The British Virgin Islands were captured by England from the Dutch in 1672. By then, the indigenous population had already gone – either slaughtered in an unrecorded genocide or fled for fear of one. The islands have been a haven for pirates of various sorts ever since.

But this is just one part of Britain’s offshore network. There are around 18 legislatures across the globe that Westminster is ultimately responsible for. These include some of the worst offenders in the world of money laundering, tax dodging and financial secrecy. The Cayman Islands are British. So is Gibraltar. So are Anguilla and Bermuda.

These places aren’t just British in an abstract sense. Under the 2002 British Overseas Territories Act, their citizens are British citizens. They operate under the protection of the British diplomatic service. And, when need be, they can rely on Her Majesty’s Armed Forces: in the last 40 years, Britain has twice gone to war to defend Overseas Territories. Once was when Argentina tried to claim back the Falklands/Malvinas. The other time was the invasion of Iraq, when the British government claimed that Saddam Hussein’s weapons programme threatened its military bases at Akrotiri and Dhekelia on the island of Cyprus.

This complexity is no accident

In total, experts estimate, Britain and its overseas territories are responsible for facilitating around a third of the total tax dodged around the world. And that’s before we consider money stolen by corrupt rulers, or the proceeds of crime. Not to mention the way that billionaires’ hidden wealth allows them to influence our political systems in secret.

This complexity is no accident. The UK, unlike almost any other country on earth, lacks a written constitution. The rules about how the rules are made are set through ‘convention’, an endless fudge that ultimately amounts to them being made up by our rulers as they go along.

We see this most clearly in how the domestic territories of the British state are governed: Scotland, Wales, Northern Ireland, Greater London and the City of London each has its own arrangements, each absurd in its own way. Each of these messes leaves a different tangled thicket in which the crooks of the world can hide their cash.

Seen from the perspective of international capital, though, it is the Overseas Territories, as well as the Crown Dependencies of Jersey, Guernsey and Mann, which form the most significant part of this complex. They use the malleability of the British constitution to form a network of safes in which the rich can hide their cash.

A new era

Although no one knows for sure how much money is hidden in tax havens, of which the British territories make up a significant chunk, the figures involved are so vast that academics at the Transnational Institute in the Netherlands have described them as “the backbone of global capitalism”.

Seen this way, the constitutional flexibility of the British state isn’t just some post-medieval hangover. It’s a hyper-modern tool in an era of global surveillance capitalism, where the rich can flit around offshore while the rest are forever trapped by borders.

Through its empire, the British state played a key role in inventing modern capitalism. Now, the UK is helping reinvent capitalism once more, by extending the protection of a constitution designed by the powerful, for the powerful, to the billionaires, oligarchs and criminals of the world.

Adam Ramsay is openDemocracy’s main site editor. You can follow him at @adamramsay. Adam is a member of the Scottish Green Party, sits on the board of Voices for Scotland and advisory committees for the Economic Change Unit and the journal Soundings.

This article was  first published by Progressive International

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