The subtitle of this book by investigative journalist Oliver Bullough pretty much says it all: The inside story of the crooks and kleptocrats who rule the world. If you recall, my review of the film The Laundromat (2019) dealt with how the firm Mossack Fonseca specialized in creating shell companies for people to hide their ill-gotten gains from their victims and governments. This book lays bare how the corrupt system works, providing multiple detailed examples from all over the world.
Bulloch says that there are three kinds of extremely wealthy people who wish to hide their money away from governments and the public. There are those who made their money legally (to the extent that one accepts that vast sums of money can be made legally) but are scared that their governments might seize those assets or that they may be the victims of kidnap and ransom plots if the scale of their wealth became known or are seeking to hide it from their spouses in the event of a messy divorce. Then there are those who seek to avoid paying taxes. And then there are those, often people in positions of power in various countries who have essentially stolen the money from the people through bribes, kickbacks, and the like. This has led to the creation of what Bullough calls a new ‘country’ called Moneyland which is not a real place but a virtual country of the lawless, stateless, super-rich that consists of money-sheltering devices scattered all over the world into which tainted money disappears, gets laundered, and then reappears as ‘clean’ money to be spent lavishly on luxury items and used to gain respectability and an entrée into elite social and political circles. Economist Gabriel Zucman estimates that in 2014 about 8% of the world’s financial wealth was in tax havens, amounting to about $7.6 trillion. (p. 46). Others economists such as James Henry have come up with even higher figures such as $21-32 trillion. Because of the secrecy shrouding Moneyland, it is hard to get an accurate figure. As Henry says, “We are up against one of society’s most well-entrenched interest groups. After all, there’s no interest group more rich and powerful than the rich and powerful” (p. 47)
The shell companies that facilitate this are able to keep the identities of the actual owners of these properties secret. Much of this money has gone into buying expensive properties in London, New York, San Francisco and the like, thus leading to rapid price rises even though many of which are unoccupied for most or all the time.
He describes the vast siphoning away of wealth from countries by its corrupt politicians. But he says that pointing the finger of corruption at those countries only tells part of the story, since that corruption is facilitated by countries in the developed world like the US and the UK that provide the expertise that enable the corruption to occur and then benefits from the money that flows into them. In the US, the states of Delaware, Wyoming, and Nevada serve as the main tax havens for foreign money.
His book provides a wealth of case studies. It begins, interestingly enough given how much Ukraine is in the news now because of the impeachment investigation into Donald Trump, with how Paul Manafort, Trump’s one time campaign manager, helped the corrupt former president of Ukraine Victor Yanukovich enrich himself and bankrupt his country. He describes the lavish homes and possessions that he took for himself and how Manafort also indulged in expensive pursuits. Manafort is currently in prison as a result of the Mueller investigation.
Bullough says that this is possible because countries compete to be safe havens for this money and keep relaxing their rules to make them more attractive to global capital flows, while at the same time raising high barriers to anyone who tries to find out who owns what. Many of the laws in these small countries like Nevis, Malta, Jersey, that serve to house these shell companies are actually written by lawyers and accountants from the developed countries, especially the US and UK, and then rubber-stamped by the legislators. As Bullough says, “Money flows across countries, but laws do not. The rich live globally; the rest of us have borders.” (p. 19)
The wealthy use every possible means to thwart investigators from revealing who the money belongs to. For example, they use the strict libel laws in the US to threaten journalists who seek to publish, articles, books, and films that might do so and have been successful in preventing some revelations. Even though the truth is on their side, many media publications fear that they will be bankrupted by the money required to fight the case, even if they ultimately win, because the people who bring the lawsuits have vast amounts of money at their disposal. Moneylanders are also able to buy citizenship in countries that have favorable tax rates and protections against outside investigators. The selling of passports has become a lucrative source of income for some small countries. If need be, the wealthy can also buy diplomatic status to give them immunity if they happen to fall afoul of laws in other countries.
Bullough argues that this corruption vastly increases inequality within and between counties and greatly impoverishes the people of many developing countries, leading to instability and the rise of terrorist groups that can take advantage of people’s misery. The only way that this can be countered is by global transparency requirements. But while the US and the UK have started demanding transparency from other countries because of the loss of tax revenue to them, they are not willing to be transparent about those whose money comes into their shores and thus the plundering continues.