Treasure Islands - Nicholas Shaxson [80]
The U.S. crime-fighting lawyer John Moscow summarized the problem. “Money is power and we are transferring this power to corporate bank accounts run by people who are in the purest sense of the word unaccountable and therefore irresponsible.”1
Secrecy jurisdictions had penetrated the public consciousness, a little, but still only as marginal, dubious oddities at the exotic fringes of civilization. Under cover of this great misunderstanding, often artfully encouraged by those who wanted to conceal the true nature of the new financial revolution, the offshore system would play out in ways that would become increasingly significant in the 30 years to follow.
What was happening was nothing less than a head-on assault on the progressive New Deal in the United States; on the foundations of social democracy in Europe; and on democracy, accountability, and development in vulnerable low-income countries across the world.
Take any significant economic event or process in the last few decades, and offshore is almost certainly behind the headline and probably central to the story.
Poverty in Africa, for example, cannot be understood without understanding the role of offshore. The world’s worst war for years has been the civil conflict in the Democratic Republic of Congo, which is tied in with the wholesale looting of its mineral resources—via tax havens. Large-scale corruption, and the wholesale subversion of governments by criminalized interests, across the developing world? Offshore is central to the story, every time. Nearly every effort to generate large flows of capital to developing countries since the 1980s has ended in crisis because the money has escaped offshore. Towering inequalities in Europe and the United States, not to mention in underdeveloped countries, cannot be understood properly without exploring the role of secrecy jurisdictions. The systematic looting of the former Soviet Union, and the merging of the nuclear-armed country’s intelligence apparatus with organized crime, is substantially a story that unfolds in London and its offshore satellites. The political strength of Saddam Hussein had important offshore underpinnings, as does the power of North Korea’s Kim Jong-Il today. Prime Minister Silvio Berlusconi’s strange hold over Italian politics is significantly an offshore story. The Elf affair, discussed earlier, which helped powerful French elites float above and out of reach of French democracy, had secrecy jurisdictions at its heart. Promoters of frauds such as “pump and dump” schemes to hype up stocks, then dump them on an unsuspecting public, always hide behind offshore entities. The death of a Russian oligarch’s lawyer in a mysterious helicopter crash? Arms smuggling to terrorist organizations? The growth of mafia empires? Offshore. The narcotics industry alone generates some $500 billion in annual sales worldwide2: To put this into perspective, that is twice the value of Saudi Arabia’s oil exports.3 The profits made by those at the top of the trade find their way into the banking system, the asset markets, and the political process through offshore facilities. You can only fit about $1 million cash into a briefcase. Without offshore, the illegal drugs trade would be more like a cottage industry.
Financial deregulation and globalization? Offshore is the heart of the matter, as I will show. The rise of private equity and hedge funds? Offshore. Enron? Parmalat? Long Term Capital Management? Lehman Brothers? AIG? Offshore. Multinational corporations could never have grown so vast and powerful without the tax havens. Goldman Sachs is very, very much a creature of offshore. And every significant financial crisis in the world since the 1970s, including, as noted, the latest global economic crisis, is very much an offshore story. The decline of manufacturing industries in many advanced countries has many causes, but offshore is a big part of the story. Tax havens have been central to the growth of debt in our economies since the 1970s. The growth of complex monopolies in certain markets, or insider