Reviewer: Jacquie; July 2020
Oliver Bullough's book is about the corruption of the super rich, something we all vaguely suspect but curiously accept. Why do we accept it? We definitely should not for as this book makes clear, it damages freedom and democracy, it is insidious and very dangerous.
“'Graft' (illegal payments) distorts the whole economy. Important decisions are determined by ulterior motives regardless of consequences to the wider community”, as the sociologist Stanislav Andreski in his definition of corruption wrote. He observed that corruption is organised as a pyramid, with rulers extracting large sums at the top while state employees have to take bribes to feed themselves at the bottom (because a state impoverished by rich people not paying taxes cannot pay its workers). This is what is happening today across the world and Britain is at the centre of it through its banks. It is a situation that crept up slowly.
Bullough is an investigative journalist who speaks Russian, tells the story of how people with large sums to invest can put their money in places where it is hidden from tax authorities, wives, competitors and enemies, and how they can then spend it. He estimates 5% of all wealth/money is illegal, either evil (crime various) or naughty (no tax), both take the wealth of the country unto themselves, hide it, and then spend it. It explains why houses in certain parts of London or New York cost £millions they are a way of holding wealth. The same is true of jewels and art.
Probably rich people have always hidden their money and not paid taxes, but Burroughs traces his story of today to London and 1960, and to three individuals.
The Bretton Woods (in New Hampshire) international meeting in 1944, created an agreement and method of stopping the flows of money from one country to another in order to stop money chasing from one great scheme to the next and destabilising economies. It created a quasi gold standard, by pegging all currencies to the US dollar which in turn was backed by gold, $35 would buy one ounce of gold. Money could move overseas but only in a controlled way, i.e. in long term investments, not to fund short term gains. Ian Fleming's novel Goldfinger explained the effect this had, his villain attempted to smuggle gold from pawnshops in the west to India where it was worth considerably more than $35/oz for gold jewellery. Moving gold was illegal. Gold was a national asset and moving it undermined the currency on which everyone depended. In 1962 Siegmund Warburg a German banker living in London devised a way of using the stores of capital in Switzerland, traditional home of hidden money, to make more money, by creating bonds, loans with fixed interest and length of years till pay back. Business wanted the money to develop. Warburg hired Ian Fraser and Peter Spira to find ways to dodge the restrictions. By issuing bonds from Schiphol airport, paying tax on them in Luxembourgh, listing them on the London Stock Exchange, and pretending the borrower was an Italian state motorway company not a state holding company, taxes were avoided and technically, no law had been broken. This is how it was done then. Twisting and turning. It is how it is done now, via Shell companies and non functioning Directors and addresses.
The rich have become so rich they are untouchable. If laws are broken they bring in a team of lawyers tying up the prosecutors in maybe years of court room expenses – more than any organisation or Government can bear.
Bullough lists of stories featuring Russians, Ukrainians, African dictators, who come often to London to hide and spend their wealth. He describes countries which accept illegal money, off shore islands, gain by some of the wealth being spent there. Banks which accept it – London being a prime example, do so with elaborate schemes, involving shell companies, pretend directors and head quarter addresses. Reading the book I am sure much of what the writer knows cannot be said, because of the threat of lawsuits.
Should we care about this? Yes of course. Because it bypasses democracy, laws and common sense. Indeed it made me wonder if just ordinary bribery and corruption explains HS2 and other inexplicable things going on in the UK at the moment. What can be done about it. I didn’t get that far in the book, too depressed.