“Offshore – Stealth Wealth and the New Colonialism” by Brooke Harrington, 2024
This is a book of reporting by a sociologist inspired by C.
Wright Mills who joined the world of secretive offshore finance to explore it from the inside. After being trained as a wealth manager, Harrington
played the ‘dumb’ female outsider and interviewed wealth managers, a fisherman
and a debt bounty hunter, who spilled the beans. Harrington reveals the massive and corrupt
nature of ‘offshore’ and onshore money bolt-holes. Used by billionaires, corporations and
millionaires, this archipelago of finance around the world allows them to evade
taxes, legal process and publicity, launder money and bribes, and ensure wealth
for generations to come. She notes that cash counting machines in the British Virgin
Islands broke down due to the suitcases full of banknotes they were required to
count, so that tells you something about their money-laundering abilities.
Not surprisingly, these bolt-holes also include Joe Biden’s
Delaware, Christie Noem’s South Dakota, Wyoming, Nevada and luxury real estate
across the country. The U.S. is now the
#1 haven for hidden billions on the 2022 Financial Secrecy Index, not the
Cayman Islands, the Bahamas or the British Virgin Islands. Obama rejected U.S.
involvement in the Common Reporting Standards, which would have exposed the
owners of many of these accounts. The
OECD and the EU Parliament have also failed to restrain these abuses so far.
Harrington is a pro-capitalist supporter of ‘free’ markets,
so she is incensed that the big capitalists who use offshore accounts are
getting away with financial murder. By
turns she calls this situation ‘neo-feudalism,’
‘zombie colonialism’ and old-guard ‘imperial’
behavior, believing we are generally in a ‘post-imperial’
period. As if capitalist oligarchs and their hangers-on wouldn’t use every
method for wealth preservation at their disposal! After all, the initial wealth comes from
‘on-shore’ – from capitalist exploitation, rent and attendant fraud. Off-shore
is just the tail end of the profit cycle. She quotes the Libertarian Hayek on
the need for rules, honesty, fairness and transparency under capital. So she feels this is not capitalism, this is
‘theft’ and ‘cheating.’ Then she condemns
these offshore havens for being a Libertarian billionaire’s dream. This only
confirms she’s a sociologist, not a political economist.
At any rate, let’s see what Harrington has discovered. The key element in the development of these
hiding places is British law and former colonial ‘Commonwealth’ locations and
‘free ports,’ as nearly all of the jurisdictions were originally U.K. linked. The
U.K. encouraged their involvement in banking in order to get these mostly poor locations
off the British dime. Secrecy is their
main ingredient, allowing shell companies, LLC’s, corporations and individual
trusts to hide their ownership, making it very difficult to prosecute the
account holders. The British passed the International Business Companies act,
which allowed these entities to avoid public audits or bookkeeping too. Most of them are no-tax or low tax locations
to boot, also a U.K. colonial inheritance.
The other aspect is they are based on U.K. ‘common law,’ which allows
countries to permit anything not yet forbidden.
Its other benefit is that common law allows an integration of finance
across the planet. Harrington notes that
after the Panama, Paradise and Pandora papers, which exposed hundreds of
thousands of these underground accounts, only a few people were convicted of
financial crimes. After all, what most were doing was still legal or impossible
to prosecute.
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| Drone captures British Virgin Island from above |
Harrington’s solution is to go after the ranks of wealth
managers – tax advisors, private bankers, trustees - who make it possible for
the rich to hide their money, and forbid them from working for tax havens. Their organization is called the Society of
Trust and Estate Practitioners. Exposure and shame is her second weapon. Some
jurisdictions have tried this but it hasn’t put a real crimp in the system. She
maintains that the 2008 collapse was caused by the failure of 2 hedge funds in
the Caymans, so there is also a crisis danger within hidden, unregulated investment
hordes.
In 2022 economists’ estimated that $12T in household wealth
was held in these secret accounts across the world. It is estimated that $110B is lost in taxes
per year, and another $500B taxes lost from corporations per year. (I think this is for the U.S. only.) 21% of rich U.S. citizen’s income goes
unreported. A list of the places that do
business outside the U.S. are Nevis, Cyprus, the Cook Islands, the Caymans,
Singapore, Mauritius, Hong Kong, Bermuda, Panama, Monaco, Jersey Island,
British Virgin Islands, Luxembourg, Switzerland, the Bahamas, Malta and Gibraltar. She mostly mentions right-wing billionaires
using these lock-boxes – Russian capitalists, Nigerian dictators, Robert
Mercer, Oleg Deripaska, Putin himself, Peter Thiel, Queen Elizabeth – some using
the cash to fund right-wing candidates like Trump and LePen.
Due to the lack of tax receipts in these cash-holes by the
international monied set, the consequence is that the locals pay the taxes. The
second thing that happens is that local democracy is thwarted in the interests
of the holders of these secret accounts, resulting in a ‘captured state.’ The third thing that happens is that local
crime actually increases due to the government-backed impunity of the rich.
Rising inequality across the world is the fourth impact, as it solidifies
generations of wealth through ‘perpetual trusts’ which live off of rent and
investment income far into the future. This is something even Piketty did not –
or could not - include in his books. Harrington especially investigates the
social situations in the Cook Islands (‘Crook’ Islands christened by some),
Mauritius, Panama and the British Virgin Islands to show how being a finance
haven has affected the poverty and powerlessness of the locals and indigenous. Harrington
calls this an extension of the ‘resource curse’ – it is the ‘finance curse.’ As part of this whistle-blowers, journalists
and investigators have been intimidated, jailed, deported or in a case in
Gibraltar, done away with.
Colonial theory might allow one to cheer on the looting of
the metropolises by these tiny countries, but the benefits go to an
international capitalist elite, not to the local working-class, farmers or
small shop keepers. The ‘revenge of the
colonized’ is bogus. So what is the real solution? Clearly the majority of capitalist
politicians in hock to their owners will not put a significant dent in
international rules around secrecy, money-laundering, estate perpetuity, tax
avoidance or legal impunity. The present
capitalist legal system does not function on an international scale, though
the economic system does. So there is
a contradiction here. The capitalist
nation-state is still their main operative political and legal vehicle and it
is not possible that capital can avoid that. The nation-state has to be transcended by the
international working-classes in practice, through political power on the
local, then national, then international level, with the U.S. being one
battleground. In these local jurisdictions some livelihoods are based on secret
banking, so that will be a battle there too.
Harrington’s micro-reformist solution about wealth advisors cannot grasp the width of the
problem. Blocking wealth advisors might
help, but that will force part of the profession underground, as there is still
‘money to be made.’
Prior blogspot reviews on this issue, use blog search box,
upper left, to investigate our 17 year archive, using these terms:
“The Wealth Hoarders,” “Ozark,” “Capital in the 21st Century”
(Piketty); “Yesterday’s Man,” “Life Under the Jolly Roger” (Kuhn); “Black
Sails,” “Trade Wars are Class Wars.”
And I bought it at May Day Books!
Red Frog / October 13, 2024
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