I’m finishing an alarming work on the worldwide network of offshore banking, which is a useful reminder that the spectacle many of us will be watching tonight has less to do with our future than we might wish. Treasure Islands tells the story of the cozy little banking havens in Jersey, Lichtenstein and the British Virgin Islands that make it possible to stash one’s money out of the sight of the taxman pretty much forever. I’ll be particularly curious now to see whether our sitting president has something nasty to say about his rival’s use of phony storefronts in the Cayman Islands to keep all his loot while sneering at the rest of us poor chumps who actually see our paychecks dinged for retirement and healthcare—i.e., our shameful ‘entitlements’.
But Romney’s use of the Caymans to reduce his tax bill is only the tip of the iceberg, and in fact his paltry millions are chump change, too. The ‘offshoring’ of corporations is part and parcel of how the global economy now works to enable our corporate overlords not only to rip out our jobs and send them to China but to shift their profits to a ratty office in a tax-free Caribbean backwater—or pretend to since it’s all on paper anyway. So while Obama might take a cheap shot at the Mitt for unpatriotic hoarding in foreign bank accounts, neither side is about to disturb the offshore system that bleeds wealth and undermines tax-collecting states everywhere.
One of the most startling facts in the book is the answer to this question: Which is the biggest, most important ‘offshore’ banking facility in the world? Vanuatu? Andorra? Singapore? Hint: note the quotation marks.
The answer: London.
As Shaxson explains, once the islands were permitted to establish offshore facilities, create phony front companies with opaque ownership and management structures, manipulate invoicing to create fake ‘losses’ in the high-tax countries and equally fake ‘profits’ in tax-free zones, shift billions around the globe with the click of a mouse, it was an easy next step to force governments to grant domestic banks (that were controlling all this activity in the first place) similar privileges for themselves right at home.
The results are catastrophic for people like you and me as was seen in the global meltdown of 2007-8 that we’re still suffering through. A lot of that financial manipulation and collapse can be traced to the ‘shadow’ banking system that thrives offshore. But it is far more nefarious for the world’s poor whose national wealth is easily siphoned through the offshore system by corrupt elites with the connivance of the rich countries (the same ones so eager to offer them lessons in ‘good governance’).
Shaxson estimates that the total value of capital leaving Africa through looting to be ten times that of all foreign aid poured back in for ‘development’. Kind of gives one a new perspective when you think the rich countries could eliminate all the fancy ‘aid’ programs and simply stop helping African presidents stash their countries’ wealth in Zurich, Bermuda and the East End.
Or how about another island tax refuge that we don’t usually associate with shady guys in linen suits lounging by tropical palms: the Republic of Ireland. The ‘Celtic Tiger’ whose metastatic growth so impressed the business writers during the pre-collapse decade turns out to have been built on a quicksand of hot cash. No wonder that when the whole house of cards collapsed, corrupt Irish politicians promptly saddled the whole populace with the overblown and unprofitable debt rather than let the German and French banks take their deserved losses. This is not naivety or poor judgment; it’s a feature of a bought and sold-out state.
So tonight we’ll hear a lot about how to manage our country’s budget and the need for ‘prudence’ on government spending. We’ll be treated to differing visions of how to create jobs, a lot of talk about price of gas at the pump, and how to rejuvenate the ‘middle class’. But we’re unlikely to be told much about the way corporate America has it covered no matter who wins.
One wag makes a saucy suggestion: Romney should attack Obama from the left. This former Senate staffer says Romney should turn to Obama and say this:
Your administration failed to hold any specific Wall Street executives accountable. If I’m elected president, my administration will prosecute the powerful when they break the law.
It would be an act of breathtaking hubris for a guy with tax-avoiding bank accounts registered on palm trees, but since when did that stop him?
[Keep up to date with the latest on tax havens at http://treasureislands.org]