The damage of reporting on the Paradise Papers investigations

News reports about the Paradise Papers investigations can be found everywhere, on the web and in more traditional news outlets. The importance of those revelations cannot be understated, as they expose widespread tax avoidance and wealth concealment on behalf of some of the wealthiest members of our societies, corporate as well as natural persons. Most of these activities are not strictly illegal, true. That something is not strictly illegal, however, does not make it necessarily acceptable in the eyes of most people.

There’s good news: The leaks’ resonance in the media forced the political debate both among politicians and the general public to address and question the widespread adoption of such practices (as well as their morality). From this perspective, the news clamour offers the momentum necessary to initiate a process of rethinking and reshaping the system currently in place. If not missed, this opportunity might ultimately allow the public sphere to recover billions that are currently lost in avoided taxes.

There’s bad news too, though. The leaks and the ensuing news reporting are shining a bright and broad beacon on behaviours that most common people would find unfair. While true that such practices should be exposed if we hope such unfairness to ever be redressed, their exposure might initiate a negative spiral leading to further spreading of behaviours of the same type.

Researchers have shown people to have a strong tendency to decline their socially oriented actions according to their belief (or knowledge) about whether others in society will engage in socially oriented actions in turn. People will cooperate and contribute to the common good, insofar and inasmuch as others are willing to cooperate and contribute in turn.

Think about a group of people voluntarily working on a common project. No law forces any of the participants to contribute their own effort. Still, shirking on one’s own contribution is arguably a deplorable act, and repeated free-riding on behalf of some group members might end up causing the group to stop cooperating altogether. One might argue that groups usually adopt formal and informal devices aimed at stifling selfishness and at promoting cooperation. While such devices work in principle, they do so under fairly specific conditions: small group size, measurable and visible contributions, enforceable and meaningful punishment. True, laws exist in our social systems to prevent tax evasion and avoidance, and enforcement can be expected to work in most cases. As the Paradise Papers themselves teach us, however, there are myriads of perfectly legal loopholes and sideways allowing one to minimize one’s contribution to the common good, not necessarily available to the ultra-wealthy only.

Some of my recent research confirms the findings I mentioned above, and additionally suggests the presence of an asymmetry in how much individuals expect those with greater or lower resources to contribute to public welfare: Greater resources generate greater expectations. It doesn’t matter whether you have little or a lot, you’ll still expect wealthier others to make the greatest contributions to the common good. Reporting on the Paradise Papers leaks is shining a bright light on selfish behaviours adopted by those segments of our societies my research suggests are the ones greatest cooperation is expected from- an expectation versus reality mismatch that might have dire consequences on the broad social base’s willingness to take their part in the collective effort. If people see others adopting practices to conceal their millions from the eye of the treasury, the first questions asked will be: if they can why can’t I? Why shouldn’t I find a way to conceal my (presumably smaller) wealth?

That’s not all for the bad news, though. My research also suggests the presence of an asymmetry in how people respond to expected behaviours of more or less wealthy others: Expected un-cooperativeness on behalf of the wealthier is more harmful than analogous expected un-cooperativeness on behalf of the less wealthy. In other words, people will react more negatively, by withdrawing their cooperation more, to expected un-cooperative behaviour on behalf of wealthier individuals, than to the same expectation of the less wealthy. The old adagio “noblesse oblige”, is not something the wealthy only might believe in. Rather, the less (least) wealthy believe in it too, and will react accordingly.

I’m not suggesting that reporting about the investigations and disclosure of their findings should be avoided. To the contrary, I am convinced that reporting and dissemination are crucial to create awareness and political momentum for change. However, the consequences of them not being accompanied by a clear signal that wealth concealment and tax avoidance will be addressed by regulators in the interest of the most should be kept well in mind. A failure to do so, might push more of the wealthier as well as less wealthy people to try avoiding their contributions being free rode upon by others, by searching for ways to hide what is their own.