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to a future stream of income. When the bonds or shares are first issued, savings are mobilized, funds are raised, and they flow into productive investment. This is generally healthy. But the next step is when things change. A secondary market appears in these pieces of paper, where the shares and bonds are traded. These trades no longer contribute to creating new productive investment in the real world: They merely shuffle ownership. Well over 95 percent of purchases in global markets today consist of this kind of secondary activity, rather than real investment. Keynes explained what happens when you start to separate real business operations in the real world from their owners. The holders of paper, the investors, become detached from the real businesses that they are investing in, and incentives change dramatically. When this happens across borders, the problem gets worse still: “When the same principle is applied internationally it is, in times of stress, intolerable,” Keynes continued. “I am irresponsible towards what I own, and those who operate what I own are irresponsible towards me.”

Shuffling ownership of bits of paper may seem to promote efficiency by helping capital flow to those projects that offer the highest risk-weighted returns, Keynes noted. A little speculative trading in these markets may well improve information and regulate prices. But in the real world, when the volume of this dealing is a hundred times bigger than the underlying volume of real trade, the results can be catastrophic. “Experience is accumulating,” he said, “that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.”

His words seem more apt than ever in a world where credit derivatives, asset-backed securities, and other products of financial engineering have placed ingenious but impenetrable barriers between investors and the assets they own, becoming great financial tinsel that is repackaged and resold down chains of investors across the planet, at each step being distanced further from the people and businesses who populate the real world.

Now consider the offshore system in light of this. The secrecy jurisdictions, by applying a sort of super-lubricant to the flow of capital around the world, dramatically widen these chasms inside capitalism. They are the supreme generators of remoteness and artificiality: creating secrecy barriers and generating unfathomable complexity as corporations garland their financial affairs around the world’s tax havens to fox the world’s tax authorities and regulators, and to shield particular investors against other nations’ laws and regulations. As we have discovered since 2007, the system was wildly inefficient: consider the wealth destroyed and the costs heaped onto the shoulders of taxpayers.

Capital no longer flows simply to where it gets the best return but to where it can secure the best tax subsidies, the deepest secrecy, and to where it can most effectively evade the laws, rules, and regulations it does not like. None of this has anything to do with allocating capital more efficiently. Keynes would have viewed the explosion in offshore finance since the 1970s—and the massive capital flight it fostered—with horror.

With all this in mind, we can now turn to one of Keynes’s great feats: the construction of a new world order after the Second World War that was the antithesis of the offshore system that would follow.

As Britain entered into the Second World War, Keynes went to Washington to negotiate the terms on which the nation was to receive U.S. assistance and to discuss what might come after the war. Many Americans, he soon realized, were rather more hostile to Britain than he had supposed. Roosevelt, for example, despised the British empire, mistrusted England’s aristocracy, and, Skidelsky notes, “suspected the Foreign Office of pro-fascist tendencies.”8

Americans had fairly effectively chained and muzzled Wall Street after the Great Depression,