The Panama Papers highlight, with painstaking clarity, that austerity is not a shared sacrifice.
It remains to be seen whether the scale of the revelations, whose full scope is only slowly starting to emerge, will be a catalyst for positive change or just more fodder for curmudgeonly conspiracy theorists. But one thing is clear: The debate over global economic policy is going to be deeply affected for a while to come.
The epic document dump, which includes 11.5 million files from the Panamanian law firm Mossack Fonseca, implicates a string of world leaders, their families, and close associates in an intricate web of shell companies constructed for the sole purpose of hiding money from tax authorities.
Following the Great Recession and world financial meltdown, policymakers have fallen broadly into two camps: those who see a significant role for official intervention through fiscal and monetary stimulus policies, and those who see government as the problem and push for structural changes to push it out of the way.
Both Europe and the United States imposed considerable austerity on government finances despite prevailing modern economic thinking suggesting governments should spend more, not less, in times of economic weakness.
This budget-cutting approach to exiting the economic crisis, predicated on the dubious notion that fiscal prudence will boost confidence and hence growth, was sold to the public as a shared sacrifice across society. But as the Panama Papers appear to show, the very wealthy play by an entirely different set of rules than the average person when it comes to paying taxes.
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