Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and a regular contributor to PostEverything.
The Panama Papers consist of 11.5 million documents from Panama-based law firm Mossack Fonseca. The papers apparently implicate a number of high-profile global figures in potentially illegal financial activities. (Deirdra O'Regan/The Washington Post)

It’s still early in 2016 and already it’s been a banner year for stories about worldwide corruption (see: FIFA. Also see: Brazil). But these stories seem pretty piddling compared to what the International Consortium of Investigative Journalists (ICIJ) just published:

From the Guardian:

The hidden wealth of some of the world’s most prominent leaders, politicians and celebrities has been revealed by an unprecedented leak of millions of documents that show the myriad ways in which the rich can exploit secretive offshore tax regimes.

The Guardian, working with global partners, will set out details from the first tranche of what are being called “the Panama Papers”. Journalists from more than 80 countries have been reviewing 11.5m files leaked from the database of Mossack Fonseca, the world’s fourth biggest offshore law firm.

The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists with the Guardian and the BBC

It’s been known for some time that Mossack Fonseca played a key role in setting up shell corporations to permit high net-worth individuals to park their assets offshore (see this Ken Silverstein story in Vice from 16 months ago). Now, however, the ICIJ has gotten its hands on an awful lot of the paper trail connecting this bank with myriad government officials across the globe, including 12 current or former heads of state. The Panama Papers implicate close allies of Russian President Vladimir Putin, as well as much of China’s political leadership.

The extent of the paper trail makes the WikiLeaks release of diplomatic cables look puny by comparison:

To say it will be interesting to see the global fallout from this scandal would be a massive understatement. Already the Icelandic prime minister is facing a vote of no confidence.

This has all the makings of a “drip, drip, drip” kind of story that won’t be going away anytime soon. So as it plays out, here are the three questions running through my head:

1) Will any American politicians or hoteliers be implicated? What’s striking so far about the Panama Papers is that no U.S. politicians or prominent figures have been named yet. That is causing a kind of reverse-WikiLeaks effect on social media, in which it’s assumed that because there are no American names, the whole thing must be a CIA plot or something.

There are some rational explanations for why no U.S. figures are implicated, and it’s entirely likely that the other shoe will drop very soon. And I, for one, am very curious about whether a recent hotelier-turned-presidential candidate might appear in those papers.

Ironically, if Donald Trump does appear in these papers I strongly suspect that there would be nothing untoward about his actual activities. Trump is enough of a celebrity to justify a legitimate use of shell corporations: namely, to engage in, say, real estate purchases without affecting the market price. This serves as an important reminder: There are a few legitimate reasons why someone sets up an offshore shell corporation.

2) Will this lead to deeper reforms of the global tax system? While there are a few legitimate reasons to use offshore companies, the primary purpose is tax avoidance if not outright tax evasion.

Over at Vox, Matthew Yglesias provides a solid explainer of what’s going on. This in particular stood out:

Tax avoidance is an inevitable feature of any tax system, but the reason this particular form of avoidance grows and grows without bounds is that powerful politicians in powerful countries have chosen to let it happen. As the global economy has become more and more deeply integrated, powerful countries have created economic “rules of the road” that foreign countries and multinational corporations must follow in order to gain lucrative market access.

Establishing some kind of minimum global standard of taxation of corporate and investment income hasn’t been done because it hasn’t been a political priority. In the United States, in particular, the Republican Party fights quite hard for the view that high levels of taxation on rich people and investment income are economically ruinous so there isn’t the kind of institutional mobilization that exists around drug trafficking or possible terrorism financing.

Indeed, one of the paradoxical effects of the Panama Papers could be to force a further squeeze on known offshore financial centers. The chief beneficiary of such a move? The biggest tax haven in the world, which happens to be — wait for it — the United States.

3) Will the Panama Papers play out the same way as Cablegate? The WikiLeaks dump of diplomatic cables proved to be mildly embarrassing to the United States and deeply problematic for many authoritarian countries. That’s largely because the cables revealed candid diplomatic assessments of corruption and perfidy in the rest of the world. Five years ago, many of those authoritarian regimes proved less resilient to this kind of transparency than Western democracies.

Will that same dynamic hold true in 2016? I’m honestly not so sure. A few months ago in Foreign Policy Christian Caryl suggested that this year was going to be an interesting stress test for political regimes of all stripes.

I would argue, indeed, that both democracies and authoritarian regimes alike are entering a new age of disillusionment, a period when citizens in all political systems feel increasingly let down and left behind. The general dissatisfaction focuses above all on how well governments are holding up their end of the social contract. Expect to hear lots of anguished discussions in 2016 about the divide between what we expect governments to do for us and what they actually end up delivering — the so-called “governance gap.” (And pay particular attention to countries that have long relied on high oil prices to keep the favors flowing. The fundamental incompetence of those in charge will suddenly be on vivid display.)

The Panama Papers will be an interesting natural experiment. Publics in many of the advanced industrialized democracies are primed to be angry at their political leaders. But they’re primed to be angry in Russia, China, and the authoritarian regimes of the Middle East as well.

Buckle up.