BOB GARFIELD: So, after the Panama and Paradise Papers opened our eyes to the lifestyles of the rich and famous, we’ve still glimpsed only the tip of the Bilderberg. So says Brooke Harrington, professor of Economic Sociology at Copenhagen Business School and author of Capital Without Borders. According to Harrington, if we really want to understand the world of ultra-high net worth, we have to look past the wealthy to the network of wealth managers responsible for keeping capital intact. Brooke, welcome to On the Media.
BROOKE HARRINGTON: Thank you. I’m very pleased to be here.
BOB GARFIELD: You have a kind of Remains-of-the-Day approach to this or Upstairs Downstairs. You look at the system of wealth and privilege through the prism of the support staff, the occupation called “wealth management.” What is wealth management?
BROOKE HARRINGTON: A wealth manager is a professional, usually from a background in the law or accounting, who specializes in helping ultra-wealthy people put assets offshore. It started in the Middle Ages in England, with the first trust funds and trustees that were created, but it was only in like the last 25 years that a profession called wealth management has coalesced around service to the ultra-rich. To do the job well, you have to be super competent but also extremely sympathetic. It’s a very unusual combination of skills. Like, no one asks their surgeon to be a super-sympathetic person. All that we ask of our surgeons is, just be good at, at removing my brain tumor. You don’t have to hold my hand and talk to me about my family problems.
But the wealth manager has to do all those things and excel at them, without rolling your eyes at unacknowledged privilege or, in some way, letting on that you might not take them seriously.
BOB GARFIELD: This suggests a kind of, well, a literal subservience and the indignity that goes with it. Your research shows that indignity is, indeed, often a part of the package.
BROOKE HARRINGTON: Many of the people I spoke to complained bitterly about an attitude of like, I have the money and you don't, so you're my puppet. One of the first stories I ever heard was from a lady in Switzerland who said, yeah, I had a client call me saying I had to help her find her lost bracelet. And I said, well, do you know where you lost it? And she said, well, I’m outside a restaurant in London, and this woman was based in Switzerland, the wealth manager. So the client was asking her wealth manager to find a piece of jewelry that was lost in a different country. The client couldn't even name the restaurant or the street that she was on.
So somehow the wealth manager triangulated on the, the general location of, of the client, sent some people out, found the bracelet and billed the client for it. But it, it was that sort of handholding that was astounding, what some of the people I interviewed called “social work for the rich.”
BOB GARFIELD: I talked about “Remains of the Day.” Now I’m thinking of Smithers, the majordomo of Mr. Burns in The Simpsons. Is it a world of Smithers?
BROOKE HARRINGTON: In a way, yeah, it’s, it’s a world of much more straight faced and less overtly obsequious Smithers-es.
BOB GARFIELD: And the notion is to look at the gross amount of assets and income and to shield them, to the degree legally possible and sometimes extra-legally possible, from taxation and from just simply the view of the outside world?
BROOKE HARRINGTON: That might also include debt avoidance or not wanting to pay divorcing spouses, wanting to disinherit your children, wanting to dodge trade restrictions, There are all kinds of things that offshore can help you get away with, and tax is just the tip of the iceberg.
BOB GARFIELD: Is everybody in the business a crook?
BROOKE HARRINGTON: I would say very few people in the business are crooks, in the sense that it's extremely important to do this job well, that you don't break the law because even if you're only charged with an offense, it's a disaster for your career. Even if you win, the game is over because you’ve lost your secrecy. There's a wealth management firm in the UK whose motto could serve as the model for the entire industry, and it’s, “I want to be invisible.” That’s what they're selling to clients and that is what the wealth management industry, itself, tries to emulate. And so far, you know, 18 months plus since the Panama Papers broke, I'm aware of only one instance in which anyone has even attempted to bring a prosecution, and that's in India. Given that it was the largest data dump in the entire world and practically everyone [LAUGHS] was pawing through it looking for something to pin charges on, I think that's pretty extraordinary.
BOB GARFIELD: One striking aspect of all of this culture is that laws apply generally to citizens but if you are wealthy enough, you can be from everyplace but no place at all, at the same time. You can sort of choose your location anywhere in the world to operate essentially out of the reach of not only your own government but any government.
BROOKE HARRINGTON: One of the people I interviewed in Switzerland said she found her clients actually kind of scary and dangerous because for them national governments are just playthings. They, they buy and sell them at will. Heaven help you if you’re a refugee or an immigrant because all the doors are closed to you, but if you're wealthy enough they roll out the red carpet for you. Companies and, and countries compete to get you new passports. They, they’ve actually managed to create a situation of representation without taxation.
BOB GARFIELD: I have a, a check that I have to write to the Internal Revenue Service and I am seething that various kinds of oligarchs and corporations can shirk their responsibilities to whomever they otherwise would owe taxes to. But in the overall scheme of things against the whole world economy, is what is not paid kind of a drop in the bucket? Does it matter?
BROOKE HARRINGTON: I think it matters a lot. I mean, the big lie is that we’re all sort of self-made individuals and everything that happens to us is a result of her own personal choices, as though we don’t use the roads and the internet that was created, you know, from the taxpayer-funded ARPANET. I don’t know about you but I went to public schools. We are the product of investments that society has made in the future and, until recently, the social contract has meant that we’re obligated to pay forward so that other people can benefit from living in our society, just as we did. If people break that social contract to enrich themselves, pretty soon things start to fall apart; you get sort of French Revolution type conditions.
BOB GARFIELD: If we can agree that these multilayered offshore schemes are antithetical to general equity, morality and the operation of a society through taxation, what can be done?
BROOKE HARRINGTON: I don't think any of the effective answers are legislative because wealth managers have 24/7, 365 to invent clever ways to get around whatever law you put up as an obstacle. And, more importantly, they have the eager cooperation of many countries to help them write laws that are tailor-made to the interests of their clients. In fact, many wealth managers are, themselves, tapped to directly write the laws of offshore jurisdictions.
BOB GARFIELD: How do you force people to pay their fair share? Is it doable?
BROOKE HARRINGTON: I don't think enforcement and forcing are going to work. Many of the people we’re talking about have more wealth than the GDP of small countries, so nobody forces them to do anything. I think short term and long term there are some social forces that you can harness to bring about change.
I'm old enough to remember a time when it was considered patriotic to pay your fair share of taxes. That changed starting in about the ‘80s, but that's relatively recent in the grand scheme of things; I believe it could be turned around. The other thing is rather than focusing on the wealthy people, themselves, who benefit from these offshore schemes, recognize that they’re not doing this themselves, that they're not inventing these offshore schemes. They're paying people to do it.
And so, if you want the offshore schemes to stop, you have to shift focus and look at the professionals who make it happen because without them the whole offshore system falls apart. People who can't find their own bracelets outside restaurants in London are not masterminding multilayered offshore schemes. And I would say about 25% of the people I interviewed were really conscience stricken about the nature of their work. They could really see that it was making the world a worse place to deprive states of tax revenue and, of course, they were instrumental in making that happen. I believe that those are the John Does of the future, you know, the, the people who leaked the Panama Papers. There are still lots of leaks to come and, and pretty soon there won’t be any place to hide.
BOB GARFIELD: Thank you, Brooke. I really appreciate it.
BROOKE HARRINGTON: Thank you. It was a pleasure speaking with you.
BOB GARFIELD: Brooke Harrington is a professor of Sociology at Copenhagen Business School and author of Capital Without Borders: Wealth Managers and the One Percent.
[THE SIMPSONS CLIP]:
SMITHERS: Your new duties will include answering Mr. Burns' phone, preparing his tax return, moistening his eyeballs, assisting with his chewing and swallowing, lying to Congress and some light typing.
BOB GARFIELD: Coming up, the press gangs up on a bully, whew -- or, oh-oh! This is On the Media.