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Of tax havens and elitist arrogance

by Hans Dembowski
A beggar's hand in Senegal

A beggar's hand in Senegal

In Germany, the names Liechtenstein and Zumwinkel have become symbols of mounting cohesion problems. Klaus Zumwinkel was presented with charges of tax evasion and therefore resigned in February as chief executive of Deutsche Post. He is accused of having illegally stashed away a million euros in a Liechtenstein bank.

In strict legal terms, it is irritating that Germany’s secret service bought digitised data from a disloyal bank employee in a foreign country, thus enabling German authorities to secure evidence against a top executive and other wealthy suspects. This bizarre episode proves that Liechtenstein’s idea of strict confidentiality in banking is not compatible with Germany’s understanding of tax justice. The respective legal norms simply do not match.

Equally important, the Zumwinkel affair shows that social cohesion should not be taken for granted even in Germany. In the past, the Federal Republic was proud of its welfare state. Today, however, the system is under pressure and no longer performing well. Not enough money has been invested in schools. Public education therefore, far from creating equal opportunity, is perpetuating social differences. An increasing number of people are no longer covered by the state-run health, pensions and unemployment insurances that were first created in the late 19th century. The incomes of ordinary wage- and salary-earners have stagnated for years, whereas top executives’ pay and returns on investment have soared.

If all this were merely a domestic issue, it would be relatively easy to tackle with social policy. But we are dealing with a global phenomenon: all over the world, rich and poor are drifting apart. The nation state that used to bind all citizens with a measure of solidarity long ago became too cramped a space for the truly prosperous. Investors and managers think in global terms now – and if they sense an opportunity, they feel it would be plain stupid not to take advantage of it.

None of this implies that globalisation is bad in itself. Division of labour certainly makes sense. It is a good thing that emerging economies have made headway in the fight against hunger and disease. No economy can achieve that without access to the world market. But even for economically advancing societies, social inclusion remains a pressing issue. After all, the rich tend to get even richer a great deal faster than the poor get a little less poor.

We live in an era in which formal rules and informal conventions for humanity’s global society are still being forged. The problems are felt in every country. What is at stake is not only money, but participation in social life in general. Relevant issues also include education, communication, housing, health care and social networking. There is scope for corrective state action at all levels; governments must act.

In Germany, there is a now-proverbial tendency to „lament in cosy circumstances“. We tend to forget that weak social cohesion is even more troublesome elsewhere – in countries, where incomes are lower (for both average and the lowest earners), where welfare-state institutions are weaker, and where society tends to be culturally less homogeneous.

The Zumwinkel case is outrageous. Nonetheless, it is negligible compared with the implications of tax evasion, tax havens and elitist arrogance for deeply divided developing and emerging nations.