Moneyland: Why Thieves and Crooks Now Rule the World and How To Take It Back

by Oliver Bullough

The top 10 per cent of Russians own 87 per cent of everything: a higher proportion than in any other major country – pretty stark for a place that was communist just three decades ago.

The American sociologist Mancur Olson traced the origin of civilisation back to the moment when pre-historic ‘roving bandits’ realised that, instead of raiding groups of humans and moving on, they could earn more by staying put and stealing from their victims all the time. Early humans submitted to this, because – although they lost some of their freedom when they submitted to these ‘stationary bandits’ – they gained in return stability and security. The bandits’ interests, and the community’s interests, became aligned. Without bandits constantly raiding them, and stealing their property, groups of humans built increasingly complex communities and economies, becoming increasingly prosperous, which led eventually to the birth of the state, to civilisation, and to everything we now take for granted. ‘We see why the warlord’s subjects, even though he extracts tax theft from them year by year, prefer him to the roving bandits that rob sporadically. Roving banditry means anarchy, and replacing anarchy with government brings about a considerable increase in output,’ Olson wrote in his 2000 book Power and Prosperity.

Stable government aligns the interests of the strong and the weak, since they both want to see everyone get wealthy. The weak want to be wealthy for their own sake, while the strong want the weak to be wealthy, so they can take more from them as taxes. Olson used the parallel of a mafia protection racket. If the mafia’s grip on a community is complete there will be essentially no crime, since it is in the boss’ interests for local businesses to make as much money as possible, so he can extort proportionately as much money as possible from them. Crime, for a society, is an unproductive activity that forces people to waste money on guards and fences and locks. It is in all our interests to be governed. But Olson had a caveat: the argument only works if everyone is thinking in the long term. Moneyland turns his calculation on its head. Because its citizens are able to keep their assets outside the communities they steal them from, they don’t care what happens in the long term. The more they steal now, the more they and their children get to keep. In fact, they make money from instability: the more disputes there are, the more money there is for them to cream off. These ‘offshore bandits’ combine the worst features of the old roving bandits with the worst features of their stationary successors. Thanks to the magic of the modern financial system and the anonymity provided by offshore jurisdictions that accept money whatever its provenance, they are oppressing their subjects wi...

I am not describing a conspiracy. Moneyland is not controlled by an arch-villain, stroking a white cat on the arm of a leather chair. If there was a controlling brain behind Moneyland it would be easy to deal with. The reality is far more complex, and far more insidious: it is the natural result of a world in which money moves freely, laws do not, and where a good living can be made from exploiting the mismatches that result. If a tax rate is low in Jersey and high in Britain, there’s money to be made for anyone who can move her clients’ assets out of Britain and into Jersey. The same goes for jurisdictions all over the world: they all have subtly different rules and regulations.

Nevis prospers by renting its sovereignty to rich people who believe America is over-litigious, that women get too much money in divorce settlements, and that lawyers lie in wait for the successful. These beliefs are widespread among the rich, and Moneyland has given them the power to do something about it.

Jersey’s speciality is the trust. Trusts are said to date back to the Middle Ages, when knights went away on a crusade and wanted to preserve control of their property for their wives and children. The knights gave their assets to a trusted retainer on the condition that any income they generated would continue to flow to their children. This principle has multiple applications in all legal systems based on Britain’s, including one of the great offshore tricks, since it separates the legal ownership of something from the benefits it provides. A condo may be in New York, and you may live in it, but you do not own it; it is owned by a trust company in Jersey which has a legal arrangement to pass it on to your grandchildren. The advantages of this from the perspective of a potential Moneylander are clear: if you no longer own something, you cannot be taxed on it, only on the revenue that it generates. Trusts are central to ‘succession planning’ – the euphemism for when rich people dodge inheritance tax – and Jersey lawyers are very good at setting them up.

The creation of these long, nested chains of corporate structures across multiple jurisdictions is an extremely effective way of hiding both the origins of assets, and their ownership. The more plastic bags you wrap around a dog turd, the harder it is for outsiders to realise what’s inside. And if the last bag says Tiffany & Co. on it, perhaps no one will ever realise it’s full of shit.

‘Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked at?’

Limited liability is, in the words of the Economist, ‘the key to industrial capitalism’. Companies are good; without them, our modern prosperity would have been impossible.

What this all means is that, once again, if you’re rich enough, the rules are negotiable. If you could afford the $8,000 fee to open an account at a bank in the Cayman Islands, then you didn’t need to worry about paying US taxes. If you are the family of a wealthy foreign official, then private banks in London and New York alike have a history of bending the rules to make sure it is they who get your money, rather than one of their competitors. If everyone is applying the law, then there is money to be made in being the banker who doesn’t, which is a strong incentive for no one to be too scrupulous.

Criticising the doctors for being corrupt was like criticising the clouds for raining. That was just the way they were. It would be better to spend your time finding an umbrella.

Everywhere that researchers have looked, they see a correlation between corruption and misery. The greater the level of corruption, the more money is earned by the elite, which drives inequality, and frays the bonds connecting societies together.

In the dry language of economists, money invested in schools and healthcare and roads and safety has a higher multiplier effect – you get a better return for the economy from every dollar you spend – than taking it offshore and spending it on ostrich-leather shoes. Better governed countries have a higher standard of living, better health, longer life expectancy, improved educational outcomes, and better performing economies.

‘We have become so used to talking in millions and billions that we have ceased to have proper respect for the sheer size of such numbers. I sometimes startled my students by telling them it was not yet one million days since Christ was on earth,’ wrote Achebe. ‘Nigerians are corrupt because the system under which they live today makes corruption easy and profitable; they will cease to be corrupt when corruption is made difficult and inconvenient.’

the nature of Moneyland prevents the exposure of the nature of Moneyland.

Polonium-210 is perhaps the deadliest substance on Earth: a millionth of a gram, less than a speck of dust, will kill a human. The world’s yearly output of the metal – about 100 grams – could kill everyone in Britain, with enough left over to kill most of France. The alpha particles it emits are like atomic artillery: they smash into everything around them with lethal force, destroying cells, shredding DNA, extinguishing bodily functions.

It is not in the Kremlin elite’s interest for Russia to become governed by the rule of law, as Westerners fondly hope that it will be; instead, Kremlin insiders profit from the fact that they – and they alone – can earn vast fortunes in Russia, and export that money to safety in the West. Chaos and mismanagement not only allow them to earn further fortunes, but also provide them with the means to protect themselves and their friends from retribution.

As cash has poured into Moneyland, its wealthy citizens have competed to buy a limited range of real world assets in a limited number of locations, with inevitable results: staggering price inflation, which has in turn made them even wealthier.

Kapur’s insight was that, if the majority of a country is owned by very few people, it doesn’t necessarily matter what the oil price does. The oil price is important to people who are on a budget. If the cost of a daily commute doubles in the space of a couple of months, then inevitably that will reduce the amount of money you have to spend on other things: holidays, trips to the cinema, even food. But if you are very wealthy, then the proportion of your income that you spend on travel is very low, so your spending will barely be affected at all. If your customary purchases are Birkin bags, Sunseeker yachts, or a fourth home, perhaps in Miami, then changes to the oil price don’t matter, which has important consequences for the profitability of the companies that make those products.

‘In a plutonomy there is no such thing as “the US consumer” or “the UK consumer’”, or indeed “the Russian consumer”,’ Kapur wrote. ‘There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.’ According

leading manufacturers of exclusive timepieces were gloomy about the future. The reason for the misery came not from a recession, or from any problem with the products, but rather from the fact that the government in China was cracking down on corruption, which was harming sales of the kind of lavish gifts that crooked officials had previously accepted in return for favourable decisions.

Similarly, after the Brexit referendum, the UK government’s agenda to open up the offshore world to fight both tax dodging and corruption almost entirely halted. ‘The anti-corruption phone just stopped ringing,’ said Jon Benton, an ex-policeman who worked in the Cabinet Office as a senior adviser for the pre-referendum prime minister, David Cameron. In a country that is focused on its own troubles and concerns, there is little appetite for leading a global quest to rebuild the world’s financial architecture. It is possible to cheer this development, as a reassertion of one country’s democracy against the snares of international bureaucracy, which of course it is. But it is ironic, too, that a democratic outburst sparked by anger over the arrogance of a distant elite should have destroyed an initiative designed precisely to rein in that very elite.