“Laws stop at borders, money doesn’t”

A review of Moneyland by Oliver Bullough, Profile Books, 2018 by Nat Dyer

Until the global financial crisis of 2008, the assumption made by most economists, politicians, and many political scientists was that globalisation was more a law of nature than a political process. As Tony Blair put it those who question globalisation might as well “debate whether autumn should follow summer”. This comfortable illusion benefitted the very richest in society as Oliver Bullough shows in his important new book Moneyland, and has eaten away at the legitimacy of democracy and nation states.

To understand what’s going on Bullough says we need a new mental map of the world. Out goes the familiar image of multi-coloured countries on the political maps you might see on a classroom wall. The black borders between states now only bind ordinary citizens, the world’s superrich inhabit a new borderless country which is everywhere and nowhere. He calls it Moneyland. If you can afford the billion-dollar entrance fees, citizens of Moneyland can pick the laws and taxes they want like they choose lunch: “Maltese passports, English libel, American privacy, Panamanian shell companies, Jersey trusts, Liechtenstein foundations”. The magic ingredient which allows it all to happen is a blizzard of secretly-held offshore companies, which transport assets across the world in an instant. Each anonymous company, to use his analogy, acts like the plastic bag over your hand when you pick up a dog turd.

Each anonymous company, to use his analogy, acts like the plastic bag over your hand when you pick up a dog turd.

The book is chock full of well-crafted stories to put flesh on the central idea. Some of them will likely be new even for those who follow the anti-corruption and offshore world closely, and they often retain the power to shock. We learn about the Saudi billionaire who tried to evade an expensive divorce in the UK courts by, improbably, claiming diplomatic immunity as St Lucia’s ambassador to the International Maritime Organization (IMO). We see how the parents of childhood cancer patients in Ukraine have to bribe their doctors to get “free” treatment because of institutionalised corruption. And, how when a 30-tonne haul of weapons was seized on the way to Iran, in violation of a UN embargo, investigators could only link it back to a 28-year-old employee of Burger King in New Zealand who was paid NZ$20 to act as a company nominee, not the real masterminds. But how to resist it?

We cannot struggle against anarchic, offshore finance unless we are willing to understand it, a thing that many on the left and right have failed to do. Bullough helps by succinctly expressing the fundamental mismatch between global finance and bordered states: “laws stop at borders, money doesn’t”. He describes the “Moneyland pipeline” of “steal-hide-spend” and how the second and third steps are crucial for how much a corrupt official or businessman can steal. I like how he describes different types of money – the proceeds of drugs cartels, money hidden from the tax man, and wealth stashed away from volatile countries – as evil, naughty and scared money, and how they mix together offshore until they are indistinguishable and washed clean.

We are faced with a situation which is so unappealing that many find it easier to deny it. We have, essentially, a wrestling match between liberal financial markets and liberal democracy. The unfettered flow of finance undermines the concept of states and sovereignty. The story of how the architects of the post-Second World War order sought to constrain finance to keep democracy safe, and how it broke out again at first in offshore American dollars in London in the 1950s is briefly told in the book and should be much more widely known.

The glaring double standards and cheating of Moneyland have provoked political revolutions but like the pigs in Animal Farm, the new rulers often end up looking remarkably similar to the ones they overthrew.

But the question that really arises is not so much how the trouble began, as how ordinary citizens of the world can bring it to an end. The glaring double standards and cheating of Moneyland have provoked political revolutions in Ukraine and elsewhere, but like the pigs in Animal Farm, the new rulers often end up looking remarkably similar to the ones they overthrew. Bullough, echoing earlier comments by development economists Paul Collier, reminds us that the system he calls Moneyland was not created by accident or in a conspiracy but by “well-paid, imaginative and highly intelligent people”. As soon as one loophole is closed, they find another to open up. It feels like a real-life dystopia. George Orwell’s nightmare in 1984 was that the autocratic leaders were not like the ignorant thugs of the past, but were smarter than those trying to bring down the system. The bad guys understood the weaknesses and injustice of the status quo better than the scattered opposition and held on to power regardless. We are not in Orwell’s world yet, but the parallel is unsettling.

It is not all gloomy. In the past decade, as the book says, the US has forced Swiss banks to crack down on dodgy money with huge fine and information from a former insider. Just this year the UK parliament voted to make its overseas territories – which include some of the world’s most prominent tax havens – declare who owns the companies they register. A new automatic exchange of information between tax agencies, the Common Reporting Standard, is making it more difficult to hide dirty money. But while the US dollar remains the undisputed global currency, so much of the problem and solution lies with the USA. It remains the only country whose laws can shape financial markets globally.

The onshore and offshore worlds, which started out on opposite ends, are rapidly evolving to be part of the same system

That’s why it is particularly worrying that Bullough’s book shows, similar to Nicholas Shaxson’s earlier Treasure Islands, that the onshore and offshore worlds, which started out on opposite ends, are rapidly evolving to be part of the same system. They increasingly resemble each other – and the money looted from one part of the world is spent on Western libel lawyers, public relations experts and lobbyists to keep it safe. Moneyland is, in one sense, a description of the system which made possible everything coming out of Robert Mueller’s probe. The Trump-Russia saga is just the tip of the iceberg. Bullough, who has written two books on Russia previously, opens and closes this one discussing Donald Trump’s one-time campaign manager Paul Manafort who also worked for Ukraine’s Victor Yanukovych, and you feel he has more to say.

Moneyland is a sparkling collection of stories about what may be the greatest threat to democracy, but its message needs to reach voters who will not read a 278-page book. Bullough’s 20-minute chat with Caroline Binham of the FinancialTimes is a good place to start. To get the message further will require more creativity. Reading the book, I kept thinking about a Moneyland song, to spread its ideas further. Perhaps a rewrite of Woody Guthrie’s “This land is our land”, or a Moneyland rap. Now is the moment. This problem isn’t going away.