9. To cancel debt, cancel BlackRock and tax havens first

Canceling debt is a prerequisite to any attempt to limit fossil fuel extraction and make a transition to a sustainable economy in the Global South.

I view debt cancellation as a mean to achieve the goals of ending the subjugation of Global South economies to Global North financiers and facilitating the stewardship of natural resources by indigenous communities. These goals are incompatible with the existence of hegemonic private financial agents such as BlackRock, and with the profusion of tax havens, which are in essence states captive to the private financial sector.

Making recommendations is a perilous job. I write here from my own narrow perspective, as an activist from a core economy of the Global North. In the context of debt cancellation campaigns, I have often heard researchers from the Global North addressing their final arguments to politicians of the Global South, enjoining them to take a given strategy and scolding them for not doing enough. Instead of reproducing this problematic post-colonial attitude, I would rather address my recommendations to activists located in the Global North. 

Firstly, BlackRock and its fellow asset managers belong to the Global North financial system. While debt cancellation activists of the South aim their demands at the International Monetary Fund, which supervises negotiations with creditors, it would make sense for activists of the North to target the singular actor who’s both the first creditor of developing economies and the first investor in fossil fuels. There is some indication that BlackRock is sensitive to campaigns that question its policy on climate change if we look at the opinions emitted by its CEO Larry Fink, but only a strong regulation of the financial sector would actually reduce the damage caused by the appetite of investors for short-term profit. 

This is why BlackRock invests millions in political lobbying, they know how much they can lose when civil society is able to organise and spread its message effectively. So this would be my recommendation: to continue to inform the public on the existence and systemic effect of monopolistic powers like BlackRock, and push for the regulation of the financial sector as a whole. To turn fiduciary duty into a duty to nature and the populations that depend on it. 

Secondly, the problem of tax havens seems to be deeply rooted in the post-colonial trade empires that Europe and the United States imposed on the rest of the planet during the 20th century. One recommendation would be to continue to uncover the role of tax havens in the subjugation of former colonies to investors and creditors in the Global North. Another one would be to pursue the investigation of the barely explored effect of tax havens on climate change, in particular through the financing of the extraction of natural resources. 

Tax havens have been under fire for accentuating inequalities and helping the wealthiest individuals avoid paying taxes, but their ecological and societal impact should also be considered. Not only is it a necessary step to operate a transition to a greener, more sustainable global economy, but doing so could also create a new intersection between strands of activism that are often separated: climate change and social change. Tax havens are the result of the capture of legislative power by private interests in complacent jurisdictions. They intensify income inequality and erase the liability of powerful people to be held accountable for the economic activity they control. 

Many suggestions have been made to reform the global financial framework to tackle the extent and growth of tax havens. Some of the most convincing propositions in my eyes come from the Panel on Financial Accountability, Transparency and Integrity (FACTI). This United Nations project came to existence because representatives of countries in the Global South and the Global North came to realize that fair and sustainable development was impossible without a radical overhaul of financial institutions. In a nutshell, the FACTI panel proposes to create a new institution under the umbrella of the UN that would supervise financial transparency. This new institution would have legal capacity to enforce transparency on fiscal optimization and ecological damage of investments. Such an institution would be a transformative step because it would give the United Nations the legal capacity it never truly had. Most of the real power has been in the hands of the International Monetary Fund and the World Bank since the end of World War II, with other institutions steered by wealthy countries, like the Organisation for Economic Co-operation and Development (OECD). While it is reasonable to be skeptical of the will of the wealthiest countries to give up some of their authority in favor of a democratic assembly of nations, grassroots movements might appreciate the perspective of an international instance where new ideas are able to flourish and dialogue.      

Besides the difficult problem of the legal tax rate, the secret surrounding the identity of investors and executives of vulture funds is what allows these private actors to leverage moral hazard and make huge profits by relying on governments eventually paying their creditors, because countries need access to financial markets to complete their public budget. Similarly, financial secrecy in tax havens is what drives capital flight fueled by extractivism and external debt, because the absence of accountability creates the opportunity of self-interested rent-seeking. 

From the angle of extractivism, a main driver of tax haven financing is the reduced liability for human rights violation and environmental crime. Drastic measures of financial transparency are required in order to stop the current state of lawlessness. These measures should be imposed on tax havens by the former colonial powers that hold them under protectorate, but they can only be truly implemented if the global financial system is transformed to account for climate change and fiscal justice. Chiefly, asset managers like BlackRock, with their unique central position, present both challenge and opportunity for a thorough update of the world’s financial machinery.  

This article is the ninth in a series: Sink logic: how BlackRock and tax havens worsen the climate and debt crisis