Offshore': A dark vision of shell game
Source:
www.charlotte.com, JAMES PRESSLEY, Bloomberg News, August 15, 2005
William Brittain-Catlin, a former investigator for Kroll Associates Inc., nurses a dark vision of capitalism.
Capital, as he describes it, is a protean beast, a "wild animal let out of a cage." The nation state has become "a servant of stateless capital," its citizens suppressed by the "controls of bourgeois capitalist society, in particular the work ethic."
Never mind his hyperventilating style. "Offshore: The Dark Side of the Global Economy" is a convincing description of a perverse world in which capitalism is a giant shell game, where mainstream multinationals shunt assets and liabilities around the globe to evade taxes, hide debt and buy political favor. The fall guys for this scam are shareholders, taxpayers and society at large.
"Offshore" has many strengths, offering a solid primer on how capital slithers in and out of brass-plate subsidiaries as companies ranging from General Electric Co. to Wal-Mart Stores Inc. seek to lower their tax bills.
The author wisely avoids hopscotching from haven to haven, choosing instead to bring offshore finance into focus through the lens of the Cayman Islands. The sun-soaked British dependency proves an effective setting for this dark drama, as Brittain-Catlin combines snippets of the Caymans' seagoing past (Columbus, turtles and Blackbeard the pirate) with its role in the collapses of companies such as Enron Corp. and Parmalat Finanziaria SpA.
In lean prose, the author captures the convoluted story of U.S. energy trader Enron in 20 pages and boils the fraud at Italian food company Parmalat down to nine. While these summations bring no new revelations, they do create crisp snapshots that illustrate how multinationals funnel profits offshore even as they milk governments onshore.
Enron, for example, used hundreds of Cayman subsidiaries to slash its U.S. taxes and hide losses. The Houston-based company also used its clout, including a friendly connection to President George W. Bush, to keep the government from regulating energy- derivatives trading, he says.
Like multinationals the world over, Enron combined offshore freedom with the kind of onshore protection that prompted government bailouts of Chrysler Corp. and the entire U.S. savings and loan sector.
"The modus operandi for the corporation is to pass the cost of its losses onshore onto society and its taxpayers, while the corporation runs off with the profit and parks it offshore," Brittain-Catlin writes.
The same dichotomy lies at the heart of the success of Lakshmi Mittal, the author says. The Indian magnate created the world's biggest steel company -- with mills from Cleveland to Kazakhstan -- through offshore holding companies in tax havens such as the Netherlands Antilles. Yet he built Mittal Steel Co. with the help of politicians like U.K. Prime Minister Tony Blair and soft loans from the European Bank for Reconstruction and Development.
"As a global strategy, Mittal's onshore ducking and diving - - his exploitation of the differences between states and their fears of competitive disadvantage -- worked wonders," Brittain-Catlin writes.
"Offshore" blames this mess on Western philosophy. Brittain-Catlin traces the roots to Immanuel Kant, who argued that the individual had absolute moral autonomy -- a vital bulwark against the utilitarianism of the age.
Along the way, though, this freedom was subverted in the struggle against absolutism, the author argues. Political freedom suppressed individual rights, forcing us to conform with bourgeois mores. "What was billed as freedom in fact turns out to be a pretext for coercion," he says.
It doesn't take too much imagination to draw a line from the age-old urge for autonomy to a modern German's desire to protect himself from punitive taxation by dragging a suitcase full of cash to a bank in Luxembourg. Unfortunately, Brittain-Catlin muddies the argument with a sometimes-tortuous line of reasoning that leads from Greek mythology to the hypocrisy of the European bourgeoisie.
Equally irritating is the author's failure to offer any solution. He challenges neocons and reformists alike, yet offers no answers of his own.
One thing is clear: Brittain-Catlin rejects the argument that there is a legitimate use for offshore finance. "A distinction cannot be made," he says, "between the use and abuse of offshore tax havens any more than it can be made between the light and dark side of the international financial system."
That distinction, made routinely by bankers and accountants, has worn thin in our age of terrorism, money laundering and corporate fraud. Bankers may bristle at Brittain-Catlin's rhetoric; they cannot ignore his message.
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