Cross-posted from ineteconomics.org
The Panama Papers are not simply a story of public corruption as depicted in news outlets like the Wall Street Journal, says former financial regulator William K. Black. They’re a reminder that such corruption destroys the possibility for honest businesses to succeed.
“Markets become completely perverse when cheaters prosper,” explains Black, a leading expert on corruption and finance and frequent speaker at Institute events. When cheating brings a competitive advantage, the victims are not only middle class taxpayers who have to shoulder a heavier burden, and the wider public that suffers from schools not being built and roads not being repaired. A less obvious victim is the honest business person.
“Those who want to do business honestly simply can’t compete against people who don’t pay taxes,” says Black. A company may start out with strong values and principles, but if all of its competitors are cheating, that business will either just fail, or else will “grit their teeth and go for it.” Thus, still more cheaters, and fewer straight shooters.
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