Capital without Borders: Wealth Managers and the One Percent

"This is a fascinating book. Brooke Harrington is a sociologist, not an economist. She spent some years getting the qualification to become an asset manager and immersing herself in their world, travelling around the world and talking to clients and other asset managers. So this is real immersive academic research of a kind that is very rare. It takes so much time—you’re only going to get your one article out of it or your one book—while the incentives among academics are to do lots of little articles to get promotion and recognition. It’s an absolutely fabulous piece of scholarly research. The insight into how private wealth managers think is completely fascinating. They think it’s really immoral for governments to take their money. They see themselves as guardians of the assets that they have acquired, from rapacious governments who want to tax them. This massive global wealth has obviously been enabled by globalization, by policy changes, and tax changes. They don’t see there is anything immoral at all about what they’re doing. “The global rich cannot avoid all contact with society, and at some stage, it all collapses. It would be nice if it didn’t collapse in a cataclysmic way, but I’m not sure that we’re not heading for cataclysm.” The clash of worldviews that this book illustrated was a complete eye-opener for me. And it makes you wonder how on earth it’s going to be possible to tackle it, because it is global. This money moves around really quickly, it’s very hard to think about how you would control that without some kind of global regulatory structure. And there’s no sign of that happening, or being discussed. She talks about the example of one country, Israel, which has apparently done something to tackle this footloose money and tax it properly. But, it seems to me, that it will take a sea change in moral worldview, not only among the global rich themselves, but also among people in general. I suppose we’ve always thought, ‘Well they’re very rich, but we’ve got other problems to worry about.’ It takes me back to that point about Aristotelian virtue ethics. What’s your moral universe? What kind of moral universe does the global economy operate in? And how on earth would you change that from the one we’ve had that creates all those terrible losers from globalization and technology? And this attitude that if you’ve got money, not only do you deserve it, but you’ve got a duty to safeguard it from contributing to the societies around which you’re flitting? I don’t know how we make that transition. There’s a self-reinforcing influence on economic policy. They can change the regulations that govern how the economy works. You see it more directly in the corporate sector, where very powerful companies—in tech, in banking, in the oil industry—have much greater access to policymakers. They pay lobbyists and shape regulatory structures in ways that have made Western economies much more concentrated, in terms of market power, than they were 20-25 years ago. The latest report from the Council of Economic Advisers in the US suggested that that concentration and loss of competition in markets was one of the explanations for the much lower productivity growth than in the past. You get an increasingly parasitic economy, and what Acemoglu and Robinson would call ‘extractive institutions.’ There have been efforts, led by the OECD and others, to plug the gaps in the global system, but there only needs to be one holdout — a holdout tolerated by the big powers. If the Americans had been more gung-ho about it, then that process of cracking down would have gone much further. But it is, in the end, going to fall down. Because if there’s no tax base, and you don’t have public services and you don’t have infrastructure, then you get the kind of political reaction that we’ve been seeing. You get roads and airports that don’t work. The global rich cannot avoid all contact with society, and at some stage, it all collapses. It would be nice if it didn’t collapse in a cataclysmic way, but I’m not sure that we’re not heading for cataclysm. But the book is all about the really clever lawyers and accountants they have. It’s just very easy to avoid taxes. These very clever people—people in the parasitic professions of law and accountancy—help it happen. As a part-time academic, if anybody accuses me of being ‘elite’ I think, ‘Have a look at my bank account please!’"