SBS Analysis: Panama Exposes the Fictions of Finance Teaching & Research

By Dr. Atul K. Shah, Suffolk Business School

Offshore is not just about secrecy or taxation. It is also about knowledge, truth and expertise. Accounting and Finance are massive disciplines taught in business schools all over the world, with thousands of academics conducting research, writing textbooks and teaching. Whole professions are shaped and nurtured by this knowledge base and expertise. At this time, the public may wonder where offshore fits into all this. The answer is – almost nowhere. Instead, students are taught about free and perfect markets, efficiency and competition. The truth is offshore from these theories. But lies are more profitable, supporting careers and consultancy, so why be authentic?

coins-currency-investment-insurance
‘Money is fiction – it is based on trust and confidence’

At its heart, money is a fiction – one cannot eat a dollar when one is hungry. Its value depends on public trust and confidence. Therefore, ethics and culture should be at the root of finance, not its periphery, but instead, they are now ‘offshore’. Finance has ignored this truth and built a huge pyramid of knowledge on top of it which is equally fictitious. Ask a finance expert what is the fundamental value of a share, and the answer will be – it depends. The truth is they don’t know, but would not like to admit it. Risk for experts is a calculation, not a culture or unknown and uncertain. We can show you ways to hedge it, say the experts. As to politics and power, money is totally clean – everything is open and fair in perfect markets, so there is no scope for manipulation or monopoly control. Access to finance is open to one and all – there are no barriers assuming you have a good investment or business plan. Ha Ha. After the 2008 global crash, it was the bad banks who got bailed out – how many small businesses get bailed out when they fail? Finance is deeply political, and depends on elite networks and influence. The textbooks would never admit this.

Like the 2008 global financial crash, the Panama Papers crisis presents a huge opportunity to rewrite our textbooks and theories. It gives us a chance to teach students the history of finance, the politics and speculation, the booms and crashes, so that they understand from human experience how finance has damaged the world. We can now make finance personal, by asking students to share their own experiences with the finance world, and how instead of acting in their best interest, banks and insurance companies try their best to exploit any ignorance and thrive from complexity and confusion. Ethics like trust and sharing can be discussed, to see how finance can be a win-win industry, rather than a win-lose. Cultural diversity, and different cultural perspectives on finance should be allowed to enrich the discussion. Finance texts have nothing to say about diverse cultures – just one neo-liberal free-market perspective exported to the whole world, starting from the great USA. We can teach students what the limits of money and finance are, and the places where it should not go, like offshore, and the transactions and information it must not control. We can bring back the idea of relationship finance, where trust is key to a transaction, and social capital is nurtured by communities of businesses and lenders, rather than trashed and destroyed by elites and the corrupt. Society and the environment must have a say in finance and its language and calculations, so that we are able to preserve communities and the planet for future generations. And we must teach them why taxes are important, why they need to be paid, and how tax minimisation destroys the fabric of public society. Not everything that is sold in markets is important or valuable, and public service and public goods are worthy of the highest respect.

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