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Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System Hardcover – August 5, 2005
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"...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
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, Bakerthe internationally respected authority on money laundering, corruption, and development issuestakes 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 fundsthrough transfer pricing, false documentation, fake corporations, tax havens, secrecy jurisdictions, and other tricks of the tradeand 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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Top Customer Reviews
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.Read more ›
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.Read more ›
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?Read more ›
Most Recent Customer Reviews
I was in favor of capitalism in the past but starting seeing the ugly side of it for the last about 10-15 years. Read morePublished on January 28, 2014 by Tareen
Thought this might be good for a certain number of points, but was so dry that I just have not gotten through it. But perhaps one day I will be able to.Published on May 15, 2013 by TravelMan
Free flow of capital is going to, by definition, be amoral. Some capital will flow to orphanages, some to drug dealers. Read morePublished on September 10, 2010 by C. BURNS
I greatly enjoyed this piece!
First, to address some of the book's lower reviews, I think if you are looking at this piece from the lens of someone interested in the... Read more
Working in the financial sector in emerging markets, this was a fascinating shot across the bows. It should be required reading for anyone potentially involved in the effects of... Read morePublished on January 12, 2007 by M. Chambers
Baker shows us how "maximizing profit" is a failed philosophy. Only by including Justice in our dealings with one another can we expect to create a decent, life-giving society. Read morePublished on March 2, 2006 by Boxcar
This is a fascinating and deeply researched book by a businessman with experience across the world. Baker sums up, "Dirty money causes disaster for millions and deprivation for... Read morePublished on March 1, 2006 by William Podmore