The Wealth Hoarders. Chuck Collins
the Covid-19 pandemic, we have developed a deeper understanding of how decades of tax dodging and public austerity led to insufficient investments in public health and equity. Tax shifting contributed to the fragility and extreme inequalities that were the “pre-existing conditions,” the determinants of who lived and who died. In the face of trillions in deficit expenditures in response to the health emergency and its economic disruption, we should anticipate an acceleration of wealth hiding. Like freeloaders trying to slip out the back door of the restaurant when the bill comes due, the wealthy will be hiring their wealth managers to engineer their escapes.
How Much Wealth is Hidden?
Researchers estimate that some ten to twelve percent of the world’s wealth – trillions of dollars – is now hidden through a combination of tax-haven secrecy jurisdictions, shell companies, opaque trusts, and other mechanisms. The exact amount of hidden wealth is difficult to measure because … it is hidden. At the low end, researchers estimated in 2014 that eight percent of the world’s private wealth is hidden, over $7.6 trillion.3 Economist Gabriel Zucman, who wrote the 2016 book, The Hidden Wealth of Nations: The Scourge of Tax Havens, estimated that between 2010 and 2015, the amount of wealth in tax havens increased over 25 percent.
But global wealth has increased substantially since 2014. According to the Credit Suisse 2019 Wealth Report, total global wealth is US $360 trillion. Eight percent of this would be $28 trillion.4 Researchers from the global Tax Justice Network argue that these estimates grossly underestimate the amount of hidden wealth. They estimated in 2015 that hidden wealth ranged as high as $24 trillion to $32 trillion if non-financial assets such as real estate, yachts, art, and gold are included.5 John Christensen and James Henry write:
Many assets are not unrecorded but misrecorded in the names of trustees or nominee directors, not beneficial owners. Since there is a recorded owner, there is no mismatch, hence Zucman omits this missing wealth. He also ignores some $5–10 trillion in offshore non-financial assets like real estate, art, yachts, and gold.6
A recent study by the International Monetary Fund estimates that globally 40 percent of foreign direct investment – about $15 trillion – “passes through empty corporate shells” with “no real business activities.”7 All participants to this exercise agree with two basic facts: the pace of wealth hiding is increasing, and the amounts of money are staggering. To update the famous quote by Senator Everett Dirksen, “A trillion here, a trillion there, and pretty soon you are talking about real money.”8
Hidden Wealth Touches Us All
A few blocks from where Dee’s family office was located are the global Headquarters of the Boston Consulting Group, the company that worked with Isabel dos Santos and her shell companies – and the project to siphon the wealth of Angola into private offshore accounts. From its glitzy glass tower, looking over Boston harbor, the windows face east toward Africa and Angola.
Down the street rises a luxury building called Millennium Tower, one of the several thousands of new luxury apartment buildings constructed in Boston in the last several years. Over 35 percent of the 443 condominiums are owned by shell companies and trusts, and almost 80 percent of the unit owners do not claim a residential exemption, indicating that the condo is not their primary home. The 13,256 square foot penthouse was sold for $35 million to John Grayken, a private equity investor from Texas. Grayken, who renounced his US citizenship to avoid taxes, can legally live in his condominium four months a year.9 With average condominiums selling for over $4 million, Millennium Tower is not only a wealthy residence for the rich, but also a “wealth storage unit” for global capital looking to park itself and hold value. Over half the units are acquired by trusts and shell companies, many masking the identities of the real owners. The astronomical prices of these wealth storage units have helped raise average prices, artificially inflating land values and housing costs and contributing to an affordable housing emergency in the city, which includes homelessness, displacement, and increasing incidence of shelter poverty.
I don’t know anyone in my hometown of Boston who was swindled trying to buy a computer from Blue Hippo. It is exactly 7,127 miles from Boston to the Cook Islands, so I’m not planning to visit and see where Joseph Rensin parks his offshore trusts. But I don’t have to go far to find ways the Wealth Defense Industry has touched me personally. In Boston, the Covid-19 pandemic has fueled an unprecedented housing emergency. Tens of thousands of households are unable to pay their rents in the private speculative market. People are marching in the streets in protests over racial injustice and the ways that inequality weakened our society’s ability to respond to the pandemic. Meanwhile the wealth of the billionaire class – the wealth that is not hidden and still measured – is surging in the face of job losses, illness, and death. People are waking up to the ways in which our economic system extracts the wealth of the commons and funnels it upwards into the hands of the few.
Our main concern in this book is about how the Wealth Defense Industry aids the wealthiest 0.1 percent collect a larger and larger share of the national wealth each year and sequester it for future generations. In other words, our overriding concern is about the growth of dynastic wealth and extreme inequality. But we are also concerned with how this system is deployed to protect criminals and scammers who are stealing your personal information, hacking your online accounts, and swindling millions of people.
About the Book
This book is a primer to the secrets of the “Money River.” If it sparks your interest, you will find an appendix with books, articles, films, and advocacy organizations that can deepen your knowledge and engagement. There are many more financial shenanigans than could be described in this slim volume.10 Most of us, understandably, don’t know the secrets of the Money River, which is why wealth is vanishing from measurement and accountability. Since 1983, when I visited Dee’s family office, the Wealth Defense Industry has mushroomed in size, contributing to the concentration of wealth and dynastic power.
This book will not explore the drivers of inequality, though that is what most of my research has been about. You can find more information about economic inequality, corporate tax avoidance, and the offshore financial system at the web site that I coedit, Inequality.org.11 This book will also not explore the ways that philanthropy and charitable institutions, such as foundations and donor-advised funds, have become another form of wealth sequestration for the world’s wealthiest. While some charity is motivated by generosity and a genuine desire to solve problems, too much giving by the very wealthy is motivated by tax avoidance and the ability to retain power, control, and dominion over vast sums of money in perpetuity. This is a topic of complementary research I am involved with.12
The focus of this book is how this wealth, once created – or, in some cases, extracted – is hidden, sequestered, protected, and invested. I zero in on the gatekeepers in the industry and their essential role in the hiding of wealth. We explore who they are, the tools they use, how it affects us, and what we can do to change the practices of this industry. We attempt to explain the gray areas that this industry manipulates, the fuzzy lines between legal and illegal, and their role in writing or clouding the rules. Throughout the book, I will refer to this sector as the Wealth Defense Industry, the “industry” or “WDI.”
Chapter 1, “The High Cost of Hidden Wealth,” examines who is hurt by the hiding and sequestering of wealth. We look at how the hidden-wealth system enables the plundering of nations, the shifting of tax responsibilities onto the non-rich, and the coddling of deadbeats and kleptocrats. We also investigate how this system fuels runaway inequality and reshapes societies to protect dynastic wealth and oligarchies.
Chapter 2, “Who Are the Wealth Defenders?” introduces the players in the Wealth Defense Industry and explores a bit about how they work. We review what we’ve learned from leaks and hidden cameras.