WWhen there is a leak of documents from remote islands and obscure jurisdictions where the wealthy hide their money, like this week’s publication of the Pandora Newspapers, we wonder how such things could have happened. How did we come to a global system that transfers great wealth abroad, untaxed and hidden from public view? Politicians condemn it as “the unacceptable face of capitalism”. But it’s not. It is the face of capitalism.
Capitalism was undoubtedly born on a remote island. A few decades after the Portuguese colonized Madeira in 1420, they developed a system that differed in some ways from anything that had existed before. By cutting down the forests after which they named the island (Madeira is Portuguese for wood), they created, in this uninhabited sphere, a blank slate – a terra nullius – in which a new economy could be built. Funded by bankers in Genoa and Flanders, they transported slaves from Africa to plant and process sugar. They developed an economy in which land, labor, and money lost their previous social significance and became tradable commodities.
As geographer Jason Moore points out in Review, a small amount of capital could be used, under these circumstances, to grab a large amount of natural wealth. On the rich soil of Madeira, using the abundant wood for fuel, slave labor reached a productivity previously unimaginable. In the 1470s, this small island became the world’s largest producer of sugar.
The economy of Madeira also had another characteristic that set it apart from what had come before it: the astonishing speed with which it operated through the natural riches of the island. Sugar production peaked in 1506. By 1525 it had fallen by almost 80%. The main reason, according to Moore, was the depletion of accessible wood supplies: Madeira was running out of Madeira.
It took 60 kg of wood to refine 1 kg of sugar. As wood had to be cut in increasingly steeper and remote parts of the island, it took more slave labor to produce the same amount of sugar. In other words, labor productivity has collapsed, roughly quadrupling in 20 years. At around the same time, forest clearing led to several endemic species.
In what would become the classic boom-bust cycle of capitalism, the Portuguese moved their capital to new frontiers, establishing sugar cane plantations first in São Tomé, then in Brazil, then in the Caribbean, in each case depleting resources before moving on. . As Moore says, the seizure, exhaustion, and partial abandonment of new geographic boundaries are at the heart of the model of accumulation that we call capitalism. Ecological and productivity crises like the one in Madeira are not perverse consequences of the system. They are the system.
Madeira quickly turned to other products, mainly wine. It should come as no surprise that the island is now accused of operating as a tax haven, and was mentioned in this week’s Pandora newspaper report. What else to do for an ecologically depleted island, whose economy depended on plunder?
In Jane Eyre, published in 1847, Charlotte Brontë attempts to decontaminate Jane’s unexpected fortune. She inherited money from her uncle, “Mr. Eyre of Madeira”; but, St John Rivers informs him, it is now invested in “English funds”. It also has the effect of moving its capital away from that of Edward Rochester, marred by its association with another impoverished sugar island, Jamaica.
But what were and what are the English funds? England in 1847 was at the center of an empire whose capitalist efforts had long eclipsed those of the Portuguese. For three centuries he had systematically plundered other nations: seizing Africans and forcing them to work in the Caribbean and North America, draining astonishing wealth from India and extracting the materials they needed to fuel. its industrial revolution thanks to a system of indentured labor often barely distinguishable from outright slavery. When Jane Eyre was published, Britain had recently concluded its first opium war against China.
Funding for this global theft system required new banking networks. These laid the foundation for the offshore financial system, the gruesome realities of which were exposed again this week. The “English funds” were simply a destination for the money earned by the colonial world economy called capitalism.
In Jane’s money transfer we see the gulf between the reality of the system and the way it looks. Almost from the start of capitalism, attempts were made to disinfect it. The first settlers of Madeira created an origin myth, which claimed that the island was consumed by a wild fire, lasting seven years, which cleared much of the forest. But there was no such natural disaster. The fires were started by people. The fire front that we call capitalism burned in Madeira before the sparks erupted and lit other parts of the world.
The false history of capitalism was formalized in 1689 by John Locke, in his Second Treatise of Government. “At first, everyone was America,” he tells us, a blank slate minus the people whose wealth was just sitting there ready to be taken. But unlike Madeira, America was inhabited and the natives had to be killed or enslaved to create its terra nullius. The right to the world, he said, was established by hard work: when a man has “mixed his labor” with natural resources, he “makes it his own.” But those who claimed large amounts of natural wealth did not involve their own labor, but that of their slaves. Justificatory fairy tale capitalism tells for itself – you get rich through hard work and enterprise, adding value to natural wealth – is the greatest propaganda stunt in human history .
As Laleh Khalili explains in the London Review of Books, the extractive colonial economy never ended. It continues through commodity traders working with kleptocrats and oligarchs, grabbing the resources of poor nations without payment using smart instruments such as “transfer pricing.” It persists through the use of offshore tax havens and secrecy regimes by corrupt elites, who drain their nation’s wealth and then funnel it into “English funds”, the true ownership of which is hidden by shell companies.
The fire front still rages across the world, burning through people and ecologies. Although the money that ignites it is hidden, we see it incinerate all the territories that still have untapped natural resources: the Amazon, West Africa, West Papua. While capital has no more planes to burn, it turns its attention to the deep ocean floors and begins to speculate on movement in space.
The local ecological disasters that started in Madeira are merging into a global disaster. We are recruited both as consumers and consumed, burning our survival systems in the name of oligarchs who keep their money and their morals abroad.
When we see the same things happening in places thousands of miles apart, we should stop treating them as isolated phenomena and recognize the pattern. All talk about “tamed” capitalism and “reformer” capitalism is based on a mistaken idea of what it is. Capitalism is what we see in the Pandora newspapers.
Join the Guardian’s head of investigations, Paul Lewis and guests to this special event broadcast live on Pandora Newspaper Revelations on Monday, October 18 at 8 p.m. BST | 9 p.m. CEST | 00:00 PDT | 3 p.m. EDT. Book your tickets here