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and worsening an already bad balance-of-payments situation. So alternative ways were sought to stop capital from leaking out of the country. A new tax was introduced in 1963, a levy of up to 15 percent on income Americans received from foreign securities, to try to stop them from exporting capital to buy foreign bonds.10 As we have already seen, banks instead flocked to the offshore Euromarkets to finance their activities: London-based borrowing tripled just between 1962 and 1963. Chase Manhattan and others began to book more and more loans through the Euromarkets, in London and Nassau in particular. The United States continued to bleed capital, and in 1965 the Johnson administration introduced limited controls on outward capital flows, broadening the controls in 1966 and making them mandatory in 1968.11 “This was the first time in U.S. history there were rules to stop capital flowing out,” explained Jack Blum. “And the corporate community went apeshit.” In the face of all the lobbying that ensued, a compromise was accepted. Corporations could continue to keep their money offshore, and it would mostly remain untaxed and outside of these controls unless they repatriated it.12

In the tax world, this is a concept known as deferral: Companies may legally defer their taxes by holding profits offshore, untaxed, indefinitely. U.S. companies are only taxed on the income they bring back to the United States, usually in order to pay dividends to shareholders. Corporations know this is a bit of a game, partly depending on who is in the White House: Every now and then they are allowed to bring this un-taxed offshore money back home through amnesties. In 2004, for example, George W. Bush’s administration offered his corporate friends a 5 percent tax rate instead of the normal 35 percent for companies repatriating cash. Over $360 billion whooshed back to the country through this Bush loophole, under a claim that this would “provide jobs” as the capital returned home. Instead, however, much of it went into share buy-backs, boosting executive bonuses. The nonprofit research organization Citizens for Tax Justice, which studied the amnesty in detail, concluded, “There is no evidence that the amnesty added a single job to the U.S. economy.”

Deferred taxes—taxes that a corporation should (in a fair world) pay this year but can choose to delay—are described by Richard Murphy, a UK-based tax expert, as “a tax-free loan from the government, with no repayment date.” This sharply reduces multinationals’ cost of capital—a very big deal indeed, especially when this is accumulated over many years—and it in turn gives them a huge competitive advantage against smaller, locally based firms.13 When corporations dodge tax, others—that is, you and me—must pay the taxes that they won’t. The writer David Cay Johnston makes an interesting environmental comparison here. “Tax shelters are to democracy what pollution is to the environment.”14 He is quite right too.

This concession to corporations—allowing them to defer their taxes offshore and indefinitely—has been an enormous political boost for the offshore system. “Suddenly,” Blum explains, “every major corporation uses an offshore account.” Companies focused especially on the London-centered Eurodollar market but also on Panama, then under a right-wing strongman who venerated Adolf Hitler, and on the Bahamas, where Meyer Lansky had the politicians in his pocket. In the United States, Lansky had close links to the Mob lawyer Sidney Korshak, a true American Mafia kingmaker who in turn helped build up the career of several Hollywood actors, including Ronald Reagan. Some large U.S. corporations even opened their own offshore banks.

As this happened, the interests of big-time criminals, the intelligence services, wealthy Americans, and U.S. corporations began to converge ever more strongly offshore. The system was working two transformations simultaneously: helping criminal enterprises imitate legitimate businesses, and encouraging legitimate businesses to behave more like criminal enterprises.

“The trouble