From betrayal to compassion: Balkan challenge, U.S. opportunity

ZAGREB, Croatia, and WASHINGTON—If the problems of Balkan unemployment and poverty weren’t so serious, it would be easy to dwell on circus aspects like these:

The first three articles in WORLD’s series (Oct. 18, Nov. 1, Nov. 29) detailed the history of Western powers betraying Balkan countries, and then reported on a global movement toward financial transparency that could return billions of dollars to countries in the Balkans and other poor regions. This last article looks at who’s getting in the way of that movement and how the United States disappoints Balkans residents who see it as different from the European powers. It concludes with the hope that liberal and conservative lawmakers, along with liberal and conservative evangelicals, will work together for foreign policy alternatives that take into account the needs of the region over momentary U.S. interests.

IT’S A LONG WAY from expensive Washington real estate to the shells of buildings in Bosnia and Serbia that have stood as unrepaired sentinels since the wars of the 1990s. The Adriatic Institute, a Balkans reform organization, sees laws to increase financial transparency as crucial to that region’s progress—but two D.C. denizens, Richard Rahn and Dan Mitchell, are leading opponents of such laws.

Rahn, the eyepatch-wearing, 72-year-old chairman of the Institute for Global Economic Development (IGED), told WORLD all money laundering laws should be abolished. He says America’s founding fathers would find “abhorrent” the idea of financial transparency, and Rahn labels as “global liberty haters” those seeking to close out the secret bank accounts in which oligarchs and criminals stash their money.

Mitchell, co-founder of the Center for Freedom and Prosperity (CFP), is Rahn’s partner in proclaiming that view. Mitchell, claiming it’s a “human right” to have a secret bank account, promotes “The Moral Case for Tax Havens.” He says small countries that solicit secret bank accounts “should be applauded, not persecuted” because their existence pressures governments to reduce taxes.

Critics of Rahn and Mitchell, both of whom are also Cato Institute senior fellows, wonder about their motives. Mitchell did not respond to numerous interview requests, and Brian Garst, CFP’s director of governmental affairs, said the organization does not disclose its donors. Garst would neither confirm nor deny a 2013 Washington Post report that CFP sends funding pleas directly to offshore entities that benefit from its stateside advocacy. Garst told WORLD his organization solicits both domestic and foreign donors: “Anyone that wants to join us is welcome to.”

WORLD met this summer with 30 Balkan residents from seven countries and many walks of life. This fall we interviewed IGED and CFP leaders along with other Washington hands. Whether or not money is buying advocacy, it’s clear that both IGED and CFP operate high up the ladder of abstraction as they try to make the debate one of macroeconomic principles. The street-level view in the Balkans differs from Washington suite-level rhetoric.

For example, listen to 28-year-old Luka Arvaj, who nervously started smoking a year ago and was puffing up a cloud as he told WORLD about corrupt practices. He still venerates America and says, “The United States has a lot of potential to bring external pressure, carrots and sticks … but the only importance to the United States is to have Croatian compliance on some part of their external politics. The U.S. doesn’t care about the lower levels.”

Specifically, Croatia and several other Balkan countries have sent small numbers of soldiers to Iraq or Afghanistan. That allowed U.S. officials to say they had backing from a broad international coalition—and in return for that, the United States has supported Balkan regimes.

Arvaj has little influence in Croatia. Banker Goran Gazvoda, 65, had a lot—but he has now gone from sleek business suits to workout clothes. He sees “corruption everywhere” and tells of how it takes two years to put up a windmill, four years to get permits to use fertilizers, six years to get permits for a hotel. Entrepreneurs resort to bribery, with the bribes going into secret accounts, and the unemployed stay unemployed.

Long-time Balkan pastors like Zlatko Musija and Miroslav Didara spoke of discouragement and pessimism in the face of corruption. They encourage congregants not to give up—but it’s hard to remain hopeful when the United States, still seen as different from German or British exploiters, goes easy on the money laundering and illicit finance that remove billions each year from Balkan economies.

This is not only a Balkans problem. A Pew survey last month showed three out of four residents of 34 poor nations saying corruption is “a very big problem” in their countries. European and U.S. leaders contribute to it: Liberian Foreign Minister Kpehe Ngafuan told Reuters, “If there were no facilitators on their side, the miscreants on our side would not have succor.” Illicit financial flows take hundreds of billions of dollars each year from poor countries, and from efforts to alleviate malnutrition, fight malaria, and boost early education.

Evangelical groups call for more American aid to Africa. That could be helpful if thoughtfully done church-to-church rather than government-to-government—but not if African “miscreants” find more “facilitators.” Liberal and conservative evangelicals who have fought each other in many areas should unite to help mend rather than end FATCA, the Foreign Account Tax Compliance Act discussed in part three of this series.

The Republican National Committee this year passed a resolution advocating FATCA repeal. Republicans rightly say the law relies on a dragnet approach that demands extensive paperwork from innocent middle-income Americans abroad. But FATCA could be amended to focus on big bucks criminals, and safeguards could be added so the assets of foreign conscientious objectors will not be revealed to authoritarian governments.

The success of FATCA, with all its downsides, has come in pushing other countries to fight corruption. In the United States, FATCA could become part of a larger discussion of tax reform and government spending, with thoughtful lawmakers distinguishing between banking privacy and banking secrecy, aided by anonymous companies. If an anonymous U.S. shell company funds the next terrorist attack on Americans, claims that secret bank accounts are a human right will be hard to live down.

Better enforcement of current laws could also help. The 1970 Bank Secrecy Act requires U.S. banks to inform the federal government of suspected money laundering activity, but the U.S. has never prosecuted a big bank for violating that statute. Department of Justice (DOJ) prosecutors have instead habitually settled investigations with slap-on-the-hand fines and bank pledges not to do it again. That hasn’t worked. Despite billions in fines, taking massive amounts of shady money is still a good business decision when it only means giving up at most a small percentage of one year’s profits.

The battle against corruption could even bring together Sen. Richard Shelby, R-Ala., likely to be the next chairman of the Senate Banking Committee, and Sen. Elizabeth Warren, D-Mass., one of the most liberal senators. At a September hearing Shelby said the Department of Justice “seems bent on money rather than justice” as it allows well-connected bankers to “buy their way out of culpability.” Warren argued, “If you steal $100 on Main Street, you’re probably going to jail. If you steal a billion bucks on Wall Street, you darn well better go to jail, too.”

Politicians from both parties have the chance to develop and communicate a more realistic assessment of corrupt governments throughout the world. Corruption does not always signal system failure: In many countries it represents success for a system whose goal is to allow rulers to put public funds into private wallets. Sometimes they do that by funding overpriced public works projects worked on by oligarchs’ friends and family. Sometimes they steal foreign assistance by creating GONGOs, government-operated nongovernmental organizations.

Leaders of the G20, the world’s largest economies, met in Brisbane last month and vowed to attack financial secrecy. Statements from the World Evangelical Alliance last month also highlighted the problems of money laundering, bribery, and cheating. Liberal evangelicals have long called for more foreign aid and debt forgiveness, and conservative evangelicals have emphasized the need for worldview change—but both sides could work together to fight corruption.

The faith in America that many in the Balkans maintain is touching. American Christians have the opportunity to love our neighbors and not add our names to the long list of Balkan betrayers.

Along with already-discussed measures, here are seven ways to avoid again betraying the Balkans (and parts of Africa, Asia, and South America):