Nicholas Shaxson ‘Treasure Islands. Tax Havens and the Men who Stole the World’ (2011)

What did I learn from this? When I stopped whimpering and came out of the wardrobe, I guess I could say I learned pretty much what it says on the back cover:

• Tax havens have declared war on honest, law-abiding people around the world.

• Wealthy individuals hold over ten trillion dollars offshore.

• Tax havens are the most important single reason why poor people and poor countries stay poor.

• Britain and the United States are the world’s two most important tax havens.

In a race to the bottom, governments have conceded whatever the multinational corporations want in the way of tax breaks and banking secrecy – otherwise they’ll take the little tax they do pay elsewhere. A banking system devised to enable dictators, crime bosses and other kleptocrats to hide and launder their money has been rolled out globally, so it’s no longer just third world peasants who have their bones picked clean – the governments of developed countries have also been captured by the financiers.

The history goes back further than I realised – not just to the deregulation of the Reagan-Thatcher years, but to the late 1950s, when the City of London created an unregulated market in dollars (the Euromarket), allowing American money to escape American regulation. Switzerland was at it even earlier, of course, but Britain comes very badly out of the story, with a “spider’s web” of colonial and offshore (Jersey, Guernsey, Man) tax havens acting as fronts for the City. But everybody’s at it now – Delaware! Who knew that Delaware was the new Cayman Islands?

Shaxson looks back to the Bretton Woods Conference of 1944, and praises the world order engineered then by John Maynard Keynes. Keynes appreciated that the interests of finance capital and investment capital are at odds, with the former always inclined to gravitate to where taxes are lowest, not to where it can be most productive. For a brief, prosperous, period, Bretton Woods controlled the international movement of capital in order to minimise capital flight. It was also partly an American attack on the British Empire, and the long fight-back was partly a reassertion of British (or at least City of London) global interests.

Can anything be done? Shaxson ends with a list of actions that need to be taken, e.g. “pursue transparency”, “tackle the intermediaries and the private users of offshore”, etc. Big question – you and whose army? In chapter 10, he has already described the failed 1998 attempt by the Organisation for Economic Cooperation and Development to challenge the tax havens. All the OECD managed to do was to shift the ability to tax multinationals more towards the rich countries and away from the poor ones.

As it is, governments are fighting each other for the taxation crumbs. At the moment, many people are congratulating the EU on its efforts, as they see it, to clamp down on the City of London. To my way of thinking, the EU simply wants to cream off revenue for its own corrupt bureaucratic spending, at the expense of Britain, and nothing else would change.

I can’t imagine any solution that doesn’t also wipe out my savings and my pension entitlements. In other words: bank failures, sovereign defaults, currency collapses. After all, those trillions that the kleptocrats are holding – it’s largely imaginary wealth. Money is mostly digital. Their wealth is in the form of IOUs held against us. That’s not going to be paid. There isn’t that much productivity in the system, even if they squeeze our children and grandchildren dry. It’s going to be protectionism. Tatties all round, with a bit of salt herring if you’re lucky.