Over 150 participants contributed to the three very interesting, hectic and fruitful days of the Financial secrecy-conference in Bergen, in November 2012.
Speakers' presentations and videos
Tuesday 20: Society, secrecy and the global market
Wednesday 21: Facilitating secrecy
Thursday 22: Vested interests
The Financial secrecy-conference was held at NHH Norwegian School of Economics in Bergen. PWYP Norway is proud and very grateful to have hosted the event together with NHH. We would like to direct a big "thank you" to speakers, chairs and participants for creating awareness about and interest in financial secrecy and its consequences.
Financial secrecy will be one of the most important problems to tackle for our societies in the years to come. In order to fight it, and push our leaders to make a real change, we need to do more of what this conference has done: Create public awareness about what actually goes on in in the dodgy world of finance.
The purpose of the conference was to facilitate and accelerate an international and interdisciplinary approach in order to discuss important questions such as:
- What are the negative impacts of secrecy and information asymmetry on the global economy and sustainable development?
- Why are efforts to deal with secrecy and anonymity met with resistance?
- What reforms are reasonable and achievable?
The conference was based on the understanding of the following: Global financial integration has developed much faster than the ability for nation states to comprehend and get an overview of which new implications this brings for national laws, economics, accounting ethics and society. New and complex ethical challenges have arisen that relate to information asymmetry and secrecy.
One of the most significant breakthroughs in economic theory is the discovery that asymmetric information results in serious market breakdowns. This insight, pioneered by Georg A. Akerlof, A. Michael Spence and Joseph E. Stiglitz, earned them the Nobel Prize in Economics in 2001(link is external).
Nevertheless, a great number of jurisdictions have made it their business to sell secrecy and thus create asymmetric information. The damages predicted by this economic theory have been confirmed in practice:
- Secrecy facilitates formal and less formal organizations¹ endeavours to combine legal and illegal activities.
- It has become easier for many players to avoid and evade tax commitments.
- Capital flight from developing countries has multiplied.
- Revenues from the production of non-renewable resources "disappear".
Despite the international focus on corruption, money laundering, capital flight, and criminal activities, efforts to increase transparency continue to face significant resistance. This resistance comes from politicians, official institutions, legal firms, accounting practices, and in particular, multinational extractive companies, in all regions of the world.
As part of globalization, regulatory decisions at the national level are subject to significant international influence. Although such influence may well be welfare-enhancing, it brings a risk that the broader public is not sufficiently consulted in the political processes. This is a problem if it allows international corporations, which invest heavily in efforts to influence their framework conditions, to obtain benefits at the cost of society at large. In particular, this is a concern in countries where there is already a democratic deficit.
Financial secrecy has been used to cover enormous profits from trade of non-renewable natural resources, like oil and minerals. For over 50 years, revenues from oil production have been kept hidden from the general public to the benefit of corrupt elites and the firms involved. Financial secrecy has made it difficult for ordinary citizens to know the extent to which the funds are reinvested for domestic development or exported to secrecy jurisdictions.
For resource-rich developing countries that need to mobilize capital for development, this is of dramatic importance. However, even developed countries experiencing a financial crisis, are not immune to the negative effects of financial secrecy.
These complex challenges require contributions from several angles and disciplines since none of them have what is needed to deliver sustainable solutions alone. This is important for both policymaking and academic and expert analysis. For policymaking, it is necessary to understand and document praxis in order to understand how it can be met. This praxis is a both a technical challenge, and one that spans across several traditional disciplines such as law, accounting and economics.
For academic and expert analysis, the aim for interdisciplinary value and solutions is that each discipline should contribute with its unique set of tools, terms and practical experience, and not move directly to adapt a too general policy thinking and language, but allow insight from other disciplines to inspire own thinking.
We have seen milestone achievements in transparency reform in the USA, and a similar transparency reform is currently being discussed in the EU. These reforms are only minimum standard, but despite this, they have been met with resistance, in particular from multinational oil companies and accounting companies. Still, these milestone achievements are not able to address the secrecy issues this conference addressed.
A better understanding of how to deal with financial secrecy (and the resistance to dealing with it) requires collaboration across borders and academic disciplines. The conference, Financial secrecy, society and vested interests, addressed these challenges and offered an excellent area for discussion amongst leading international experts, including academics, policy-makers and civil society representatives from both North and South.
The conference was hosted by NHH Norwegian School of Economics and Publish What You Pay Norway, and financed by Norad and the Norwegian Ministry of Foreign Affairs.