Mossack Fonseca clients and their associates caught up in the “Panama Papers” leak face prosecution in the court of public opinion. Many most likely feel public backlash against them is both undue and unjust. After all, the money they were hiding under layers of shell corporations is theirs. From their perspective, it is no one’s business what they do with their money. For those who actually paid their taxes, they probably have the right to feel slighted by the criticism and the violation of their privacy. Public outrage over the hypocrisy and special treatment of the affluent is, however, also justifiable. In fact, it is the product of broader issues faced by rich and poor illiberal economies alike.
The “illiberal” concept, which was popularized by Fareed Zakaria, describes nations that embrace superficial democracy, yet lack true democratic institutions and a legal system that protects the civil liberties of individuals. This writer has argued “ill-democratic” better describes situations where authoritarian-minded leaders hijack democratic institutions to legitimize, solidify, and consolidate every form of power in their countries. The “illiberal” term should be reserved for situations where the unimpeded freedoms of the affluent allow them to suppress the interests of others, which is exemplified by pre-Civil Rights Movement America.
Because women and minorities did not have civil liberties in a practical sense, America was an illiberal democracy before the Civil Rights Movement resulted in laws that protected the disenfranchised from discrimination. Although “illiberal” typically describes civil liberties and the rule of Law, countries can be illiberal in economic terms as well. "Liberalization" is a term easily confounded. Depending on the context, the term "liberal" can have many meanings, even though people often restrict to their understanding to the political conservative versus liberal meaning. To say the least, this creates a lot of confusion, especially since US "Conservatives" tend to promote economic liberalization.
The US is a liberal democracy, because the US Constitution prioritizes individual rights above cultural rights and government authority while all individuals, without regard to their socioeconomic status, are supposed to have the same legal rights, i.e. civil liberties. Clashes between individual rights and cultural rights occurs when a community is forced to accept the expression of someone’s individual identity, yet that expression is prohibited by the defining characteristics of a cultural identity, which is why any democracies in the strict religious Muslim world will likely be illiberal. Although the US was founded as a liberal democracy, it has continued to liberalize, e.g. the Civil Rights Movements.
Just as discrimination based on gender, race, and ethnicity translated into a lack of civil liberties in a practical sense, an unhealthy economy, which caters to the wealthy at the expense of the majority, translates into a lack of economic freedom. Just as government interference was required to ensure all people enjoyed the same legal rights, proper government interference in the economy is required to ensure economic freedom. Economic liberalization describes decreasing government interference in the economy and the opening of an economy to foreign investments and goods, yet illiberal policies can hinder so-called free market economies by undermining the interests of the majority.
All societies eventually fail when they neglect the critical interests of significant populations and powerful individuals. The strength of democracy is its potential to provide all the Peoples of a nation representation, so the interests of the weak can be balanced with the strong. In many respects, democracy is about establishing limits. Limits on the authority of government afford individual protections from the harms of oppressive, self-serving government. Limits on individual behavior protect people from the actions of other people. By placing limits on businesses, workers, consumers, and communities are protected from business decisions that cause harm.
The limitations imposed by democratic governments help ensure all citizens enjoy the same protections. In doing so, individuals are given a large degree of freedom to act without undermining the freedoms of others. In contrast, dictatorships ensure absolute freedom for those strong enough to impose their rule; whereas, democracy harnesses the strength of the community. Where anarchy is the natural state of the human animal that provides absolute freedom to the point there is no government to protect the interests of anyone and “might-makes-right” becomes the law of the land, democracy balances the interests of citizens, so all can enjoy freedom and dictatorship cannot seize control.
With that in mind, liberal nations, such as democracies, are also commonwealth. Where the King claims ownership overall all the wealth of his kingdom in a monarchy, the People, as a collective, own the wealth of their nation in a democracy. For the capitalist, the ability to earn a higher socioeconomic standing and profit from the investment of one’s work (labor capital), innovative thinking (intellectual capital), and/or financial capital is the most efficient manner to distribute national wealth and provide for the needs of the People. In theory, individuals are able to derive greater benefits from the commonwealth when their contributions have a greater impact.
On the other hand, commonwealths are not just about earning a big piece of the pie. The right and opportunity to earn from an economy comes with the price of social responsibility. Unless people “give back” to their communities, their communities cannot derive a sustainable benefit from the economic activities of individuals. Paying taxes to support government services, which help secure and stabilize an economy, is a part of this social responsibility. Thanks to the economic liberalization of the world’s economies, however, wealthy individuals and businesses are economically incentivized to avoid social responsibility for reduced costs and additional opportunities in foreign lands.
In a world defined by immense economic disparity, great pockets of inescapable poverty, decreased opportunities for average people, and increased costs, economic liberalization is seen as a means of enriching the already rich. Not only does the use of shell corporations and safe havens to avoid paying taxes displace a greater tax burden onto individuals of lesser means, as well as smaller businesses, it demonstrates a total lack of obligation to one’s community on behalf of those who have benefited the most from the “commonwealth.” It also demonstrates the willingness of the more affluent to use their wealth to exploit undue legal privileges that help them amass even more wealth.
The over "liberalization" of international trade has undercut the ability of governments to tax, regulate, and protect their national economies, thus neutralizing the leverage governments had once extended to their Peoples. Accelerated globalization has also exposed workers to oppressive competition that undercuts their opportunities. In contrast, the wealthy are shedding their tax burdens and finding greater opportunities across the globe that allow them to avoid the downturns of local economies. A healthy economy, as a balanced part of a healthy society, depends upon the financial health of the masses. Unfortunately, the illiberalization of the world economies is undermining this need.
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