Follow the money – closely

Many people mentally divide the world into Western countries and developing countries, even though the world diversified long ago. For instance, the BRICS countries – Brazil, Russia, India, China and South Africa have risen to became such major economic actors that they pose a challenge to the old economic order. In addition, Indonesia, Turkey, Nigeria, Argentina, and Malaysia are substantial economies.

Various developing countries and ways of measuring development

The World Bank classifies countries into four categories using Gross National Income (GNI) per capita as the criteria: low-income, lower middle-income, upper middle-income and high-income countries. In addition, Least Developed Countries (LDCs), largely overlapping with low-income countries, are generally recognised but, in addition to income, the LDC classification also takes into account education and healthcare indicators.

GNI is a widely used buy highly simplistic way of measuring countries’ development. It sidelines access to health care, education, level of education, and other indicators of human welfare – other than money. National income does not explain how wealth is distributed inside states. Inequality is a major trend of our time, as wealth has accumulated in the hands of the few, as well as within and between them states.

Unlimited capital, messy taxes

Money moves slickly, legally by circumventing laws. Journalists have shed light on tax havens and tax avoidance. For instance, the Panama Papers and the LuxLeaks are revelations of recent years that many are familiar with.

When you write about tax issues, it is important to be precise about the terms. Tax evasion is illegal: it is where money is hidden away (often abroad) without paying the relevant taxes. Tax planning on the other hand is legal. For instance, companies can deduct production costs from taxable profits. It becomes aggressive tax planning when the game gets dirty, such as with transfer pricing to shift money within a concern from developing countries to tax havens. This is also called tax avoidance.

According to the book Treasure Islands by the investigator Nicholas Shaxon, about half of all world trade is conducted through tax havens.