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Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System Hardcover – August 5, 2005

4.1 out of 5 stars 16 customer reviews

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Editorial Reviews


"...Challenging the view that financial scandal and tax dodging are isolated cases in an otherwise robust system, Capitalism's Achilles Heel shows how these 'negative externalities', as economists call them, have generated a spirit of lawlessness that threatens the integrity of the market system and the finance industry as a whole..." (The London Review of Books, 6th October 2005)

"...Baker is an ethical capitalist - at least - more so than most - his concern is the incredible rapacity and corruption of modern capitalism - a must-read for those on the left...." (The Morning Star, 28th September 2005)

“…excellent book…well-researched…” (Financial Times, 10th August 2005)

From the Inside Flap

Throughout his career, Raymond Baker—a tough-as-nails businessman turned scholar —has been thoroughly committed to capitalism. He has seen it all, and now he offers careful analysis and gripping examples that illustrate the serious problems besetting the global free-market system. With this book, Baker provides a fascinating insider's look at the way criminals, terrorists, and businesspeople move dirty money around the world, impoverishing billions and corrupting capitalism's ideals of fair play. In this highly readable account, he links banking, commerce, law, economics, and philosophy with passionate advocacy of steps that must be taken to renew capitalism's mandate for the spread of global prosperity.

For over forty years in more than sixty countries, Baker has witnessed the free-market system operating illicitly and corruptly, with devastating consequences for scores of fragile nations. Now, in Capitalism's Achilles Heel, Baker—the internationally respected authority on money laundering, corruption, and development issues—takes you on a fascinating journey that winds its way across the global free-market system and reveals how dirty money, poverty, and inequality are inextricably intertwined.

You'll discover how small illicit transactions lead to massive illegalities used by drug kingpins, racketeers, terrorist masterminds, and multinational corporations. You'll learn how staggering global income disparities are worsened by the illegalities that have come to permeate international capitalism. And, you'll see how distorted philosophical underpinnings appear to justify flaws in the practice of capitalism.

Drawing on his experiences throughout Africa, Asia, Latin America, and Europe, Baker shows how Western banks and businesses use secret transactions and ignore laws while handling some $1 trillion in illicit proceeds each year. He also illustrates how businesspeople, criminals, and kleptocrats perfect the same techniques to shift funds—through transfer pricing, false documentation, fake corporations, tax havens, secrecy jurisdictions, and other tricks of the trade—and how these tactics negatively affect individuals, institutions, and countries.

Can anything be done? For capitalism to succeed on a global scale, we must fight rampant lawlessness, reduce inequality, and recast the free market's supporting structures around principles of global justice. Capitalism's Achilles Heel provides a place for us to start.


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Product Details

  • Hardcover: 438 pages
  • Publisher: Wiley; 1 edition (August 5, 2005)
  • Language: English
  • ISBN-10: 0471644889
  • ISBN-13: 978-0471644880
  • Product Dimensions: 6.3 x 1.4 x 9.5 inches
  • Shipping Weight: 1.5 pounds (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (16 customer reviews)
  • Amazon Best Sellers Rank: #356,816 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By J. Cohen on August 27, 2005
Format: Hardcover
Terrorism, drug and human trafficking, environmental degredation, income inequality, poverty, political repression...no matter what your angle or area of concern in international affairs, there is money behind every challenge facing civilization. Dictators need resources to pay off their political power bases pases and support their lavish lifestyles; terrorists need resources to acquire weapons and stealthily transfer wealth to aid allies across borders; criminals, such as poachers, drug smugglers and human traffickers need some way to stash their ill-gotten proceeds; wealthy corporations and individuals have to hide their money somewhere to avoid paying taxes and skewing the economic system further in their favor. No matter what problem you're looking at, money needs to go in, and money needs to come out, and somebody has to hide it.

Raymond Baker is under no illusions. He's no pie-in-the-sky socialist still refusing to accept that capitalism has enriched and people everywhere it has been introduced. At the same time, he's not slavishly devoted to the ideology that says open markets are the cure for all ills, that the best the solution for every problem is simply to let the market "do its thing." He recognizes that the key to having a safe, fair and free capitalist system is to re-establish fair play and the rule of law necessary to maintain a truly free market.

This ground-breaking foray into capitalism's dark underbelly is grounded in Baker's rich use of economics, philosophy, practicality, personal experience and careful research.
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Format: Hardcover
Raymond W. Baker has written a provocative and thoroughly readable book on one of the darker, less-examined, sides of globalization's financial and commerical dimensions. The author brings formidable intellectual assets to this undertaking. A well travelled and savvy international businessman, Baker demonstrates an enviable grasp of business and, more technically, accounting principles, and how they are frequently corrupted for short term financial gain. Indeed, with the obvious exception of George Soros, today's dominant writers on globalization are almost uniformly drawn from the academic and journalistic worlds. Nothing wrong with that, to be sure. But as Baker's pain stakingly researched case studies of financial and business criminality illustrate, direct, hands on expertise in this realm cannot help but make a stronger case for combatting those practices. The other compelling virtue of "Capitalism's Achilles Heel," in my view, derives from the sweep of the authors key indictment of the present international legal regime: the weakness, if not conscious laxity, of industrial country effort in combatting these practices. This book is not a comfortable read. For those who are tired of the current lamentable state of affairs, it is an absolutely necessary one.

John Starrels
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This book distorts the corruption problem in developing countries by lumping it in with tax evasion. Little is said about government officials helping themselves to the public treasury in Asia, Africa, Latin America, the Middle East and Eastern Europe. The book only touches that issue to blame Western banks for accepting their deposits. Yet U.S. banks are subject to harsh penalties for accepting ill-gotten funds. Criminal as well as civil penalties are imposed on bankers who don't get the point, which means imprisonment and/or fines from personal assets. I hoped this book would propose practical solutions for improving this enforcement. Instead, it effuses on fear and greed, pointing the finger only where the market for anti-capitalism literature can bear. (I have no affiliation with banks, just grasping for solutions.)

For example, the author equates transfer pricing with tax evasion. Since every product is made in more than one country these days, there is always room for discussion about where income was earned and thus where income tax is owed. Developing countries often have tax rates in excess of 70%. Their officials frequently do not expect these rates to be paid-they use them to extort bribes with impunity. In countries where prices are negotiable, people are not shocked when government fees and regulations are negotiable. While this impoverishes the public treasury, local managers adapt (albeit stifled). U.S. managers cannot play this game because they are scrutinized under the Foreign Corrupt Practices Act. They cannot circumvent 70% tax rates by paying bribes, so they use transfer pricing to create some sort of system integrity in an environment of overwhelming litigation risk.
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Format: Hardcover
After graduating from Harvard's Business School in the 60s, Raymond Baker spent some time in Africa, and is clearly unhappy with the continent's progress, or perhaps more accurately, lack of progress since then.

If you would believe Baker, the reason for much of this poverty is the corruption and shadow economy that plague much of Africa and South America, and he does indeed describe some of the manifestations of this plague, such as the Abachas. All the same, I was disappointed by this book, because I feel that it only superficially addresses these problems. South Korea was once a rather backward country with a rather opaque business world, and yet it has made leaps and strides towards becoming an industrialized country, while other countries in the same position went backwards. Ireland went from being a badly backward country most known for its exports of emigrants to a booming country whose economy was growing at 6% per annum without organizing UN conferences on tax evasion, as Baker thinks Africa ought do. Update: when the Irish government corruptly bailed out domestic and foreign banks who had made very lucrative but risky and foolish loans under pressure from foreign governments this was not in Ireland's interests. Old habits die hard. Unfortunately, Baker doesn't touch on possible explanations for the fact that some countries were able to overcome their "Achilles Heel" while others stagnated.

Similarly, he insists that the rampant tax avoidance and tendency to stash money overseas and the like cause the corruption in Africa; could it not be that the corruption, arbitrary taxation and confiscation of goods account for the habits of avoiding exorbitant taxes and keeping one's savings overseas?
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