These sees Bloomberg Business Week with Carol Masser and Tim Stanovic on Bloomberg Radio. Our next guest has a dire warning. He writes that we are at a quote inflection point. The two basic components of the democratic capitalist system are at risk of splitting apart. This poses an existential threat to human progress in the century, paralleling the importance of climate change. This is how this new book that is
out begins. The book Invisible Trillions, How financial secrecy is imperiling capitalism and democracy and the way to renew our broken system. The author, Raymond Baker, is founder and president of a Global Financial Integrity. It's a think tank based in Washington, d C. That focuses on illicit financial flows, corruption, illicit trade, and money laundering. Good to have you with us this after congratulations on the book, Raymond, I want
to start with the title. The subtitle here financial secrecy. How do you define financial secrecy? It is It's a It's a series of of mechanisms that work together to allow capitalism to operate in secrecy. UM tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, um falsified trade trade that is conducted where um invoice values and revalues
do not match UM. And then there are all sorts of money laundering techniques that are used to handle particular kinds of transactions. And then to be honest in another part of the system is holds that governments leave in the laws of their countries that facilitate the movement of money through this financial secrecy system and ultimately into their own economies. The US is the recipient of more illicit money,
more dirty money than any other country. So raven one thing, you know, is it the case of as long as there's money and there are some people who have more money than others, that this is just going to be a problem. This is just the way capitalism works. Interesting question, Um, this is not the way that capitalism worked at the
turn of the century. I'm sorry, at mid century, at the mid uh twentieth century, there was a fifteen year period in there between the end of World War two and nineteen sixty when capitalism operated at a very high level of responsibility. UM. In fact, at that time, the ratio of of income for the executive class and the workers class, the ratio at that time, let's take nine was only one. Today that ratio is more than three
to one. And the reason it has exploded is because we have set up so many mechanisms that enable money to move in in hidden ways, in disguise ways. Uh and it it therefore inevitably moves to the top. So who's responsible for creating a system? We are a lot of people. What do you mean by we? Though? I mean, is it we in the wealthier Western countries. A lot of people think that this is something that has been done to us by drug dealers and traffickers and counterfeiters
and terrorismanen seers and so forth. That's just not correct. We in the richer Western countries have created every single technique, every single of the financial secrecy system that is today used to move trillions and trillions of dollars around the world. So, you know, it's interesting. I feel like you can see
the white board in the cycle, right. You know, individuals, companies make money and they ultimately then have the power to support political candidates and initiatives that lead to whether it's tax breaks or policies that benefit them. And you know, politicians listen because that gets them elected, that gives them money to run campaigns. That are expensive, and so the cycle continues. Is that the basic cycle that's the problem, or is it something more or different. You hit it right,
You've hit it right. You've hit the nail right on the head. That's exactly what happens. The wealthy are able to buy the kinds of laws that perpetuate the financial secrecy system. Just to give you wanting sample, I mentioned tax havens. There isn't a single tax haven that figured out themselves. I'm talking about the Cayman Islands and Guernsey and Jersey and uh um um other tax havens. They're in a single one of them that figured out what
how to be a tax haven. No, uh, we from the richer western countries came to them and said, please adopt these kinds of laws and then we will shift a lot of business uh through the tax havens. I repeat what I said. Every single element of the financial secrecy system has been created by us. Not a single piece of it was created by others. So does that mean we can fix it? Exactly? Since we, uh, we created this, we can de create it. And I think that's what has to be done um in the capitalist
system going forward. We have to de create this financial secrecy system that is driving crime and corruption and kleptocracy and even terrorist financing and authoritarianism, and worst of all, Raymond, I have to jump in because we're running out of time, just got about thirty forty seconds. How do we do it? Because this is not a new issue. We've talked about it a lot here at Bloomberg, and I think it's great that you are, you know, drawing more attention to it.
But it's not a new necessarily idea. We kind of understand it. So what what one step could we take that would change it dramatically and just quick The broad the broad answer is increased transparency and accountability. Let me just give you one example of that. There are millions of disguised corporations around the world. Get rid of disguised corporations, get rid of shell corporations. And that can be done with a simple law that says it's illegal for banks
to receive money uh from shell companies. Um, we did exactly that with shell old banks. There used to be one of the elements of the financial secrecy system was shell banks. We took shell banks off the table, just like that. We do the same thing Michelle. Companies if we choose to not. It all makes I think a lot of people are probably listening saying, yep, I get it,
it makes sense. Raymond Baker, thank you, Founder President of Global Financial Integrity, his new book, Invisible Trillions have Financial Secrecies and parallel in capitalism and democracy and the way to renew our broken system. Joining us there from d C.