Capital Without Borders
Capital Without Borders

Capital Without Borders

By consolidating resources over generations, it creates dynastic wealth, which in turn fuels a political power elite—a new aristocracy, symbolized by people such as Mitt Romney and George Bush, whose inheritances and multiple trust funds were factors in their ability to run for the U.S. presidency. (Location 258)

With regard to the market, tying up family fortunes over multiple generations—and, increasingly, in perpetuity—puts wealth managers in conflict with the dynamics of capitalism. (Location 295)

This strategy of doing business through indirection and sidelong approaches to clients is an essential component of the habitus of wealth management, and makes it particularly difficult to teach. (Location 1482)

Ultimately, this means shoring up a larger system of inequality: by keeping private wealth intact within families and thwarting the usual processes through which assets get redistributed, wealth managers contribute to enduring patterns of stratification. (Location 2829)

In many jurisdictions wealth managers face civil or criminal penalties if they divulge any information about clients’ capital flows. Should suspicions arise that their clients are engaging in illegal activities, the STEP training manuals caution practitioner about reporting those concerns to anyone, due to “strict confidentiality statutes, which not only ensure that the disclosure of client information to third parties is actionable in a civil court, but also render the offending professional liable to a fine and/or imprisonment for a criminal offense.” (Location 2867)

The first is lawsuits, which often generate public trial records in which the magnitude and structure of individuals’ wealth are exposed; examples include the Pritzker case mentioned in Chapter 1, and the Wyly case discussed in Chapter 4. These data, while highly suggestive, are unsystematic and likely to be biased, limiting their value for analysis and generalization. (Location 2873)

These files revealed billions held offshore by business leaders, celebrities, and politicians—a virtual “who’s who” of the global elite. (Location 2880)

Wealth, also known as “net worth,” is the surplus of assets one owns once all basic needs have been met and debts discharged. If wealth is our stock of accumulated resources, income is the flow of those resources into our individual and household economic systems.19 (Location 2896)

This provides stability, opportunity, and security.20 In contrast, income can vary considerably in the short term, both because of windfalls (such as bonuses) and because of misfortunes (such as unemployment). (Location 2899)

wealth permits us to think long-term, and potentially to change our position within the socioeconomic structure. (Location 2902)

“Wealth not only tends to perpetuate itself, but … tends also to monopolize opportunities for getting ‘great wealth.’ (Location 2917)

Specifically, economic research has found that for the most part, “the extremely large incomes of the income-richest are the realized capital gains from the sales of shares or other assets.”27 (Location 2921)

In contrast, the median American household has a net worth of about $64,000—just a bit larger than its median income of $53,000, and lower than the median household wealth measured at any other point in the past fifty years.31 While it is possible to amass a fortune through careful saving, the evidence suggests other sources for the wealth of the 1 percent: more than 75 percent of their net worth derives from ownership of financial instruments (such as stocks and bonds) and real estate (not including their primary residences).32 (Location 2932)

not just their compensation from work but their ownership of assets that boost their incomes and multiply their wealth at a rapid pace. (Location 2938)

Hostility to inherited wealth, far from being a radical idea, was the mainstream in political and social thought long after the Enlightenment. (Location 3003)

which revealed that his $250 million personal fortune was held in a complex global web of trust funds managed by a private banker at Goldman Sachs: “His Goldman investments are handled by Jim Donovan, who … gave Mr. Romney’s trusts access to the bank’s own exclusive investment funds and helped him execute an aggressive and complex tax-deferral strategy known as an ‘exchange fund’ in 2002. (Location 3029)

wealth managers deserve a great deal more attention in this respect than they have so far received from scholars or journalists. (Location 3038)

Extremely wealthy people are able to structure their affairs in such a way that they are able to pay much less tax than they would if my work and my industry didn’t exist. (Location 3052)

A defining characteristic of dynastic wealth is that it endures and becomes “relatively indestructible” through legal practices and structures.70 (Location 3062)

Having all one’s eggs in a single basket, financially speaking, makes one’s wealth very vulnerable to economic downturns. (Location 3106)

This may take the form of a private exchange of art, houses, and other assets, as described by Michael in Guernsey (see Chapter 3). There (Location 3114)

This last point is crucial, and often overlooked: one way to get rich and stay that way is to keep transaction costs to a minimum. (Location 3121)

“People with inherited wealth need save only a portion of their income from capital to see that capital grows more (Location 3152)

This makes possible an age-old technique for consolidating and growing family wealth and power: “The great families intermarry among themselves and, in a veritable collective alchemy, they produce the miracle of the multiplication of the loaves, in every form of capital.”90 At the same time, trusts and other structures (Location 3164)

the interview data from Chapters 3 and 4 suggest, heirs sometimes are the biggest threats to the continuity of a family fortune, and wealth managers guard against them accordingly.93 (Location 3173)

is a truism in sociological theory that organizations seek above all else to survive.95 This observation is as applicable to the organizational structures created by wealth managers as it is to corporations and government agencies. (Location 3179)

The heirs to the Rockefeller fortune, for example, have written about the ways it was impressed upon them that their inheritances represented a burden and a duty rather than a gift.97 (Location 3185)

This has ominous long-term implications for human capital and national development. Drastic cuts in public services are occurring now in Greece, Spain, and other EU countries where massive levels of tax avoidance by the wealthiest citizens depleted government (Location 3234)

Perpetual trusts are also likely to contribute to the preservation of the current distribution of society into classes, increasing the likelihood that the descendants of today’s wealthy class will be members of the wealthy class of a hundred or two hundred years hence. (Location 3244)

“The traditional architecture of the tax state was based on the assumption that all taxable events have a clearly identifiable place in space.”16 (Location 3491)

And you’ve got people in Brussels desperate that there is tax leakage all over the place—that they can’t control people’s mobility in an era of increasingly easy jet travel, lack of border controls, et cetera.” (Location 3507)

For example, when Germany paid about $5 million for data that quickly led to collection of more than $30 million in back taxes, the move was denounced in the domestic press and brought a stinging rebuke from neighboring Denmark, whose tax minister called the move an “advanced form of handling stolen goods.” (Location 3523)

In a process usually directed by wealth managers, high-net-worth individuals simply acquire a more convenient citizenship, usually in low- or no-tax jurisdictions. (Location 3647)

That location, plus its strategic detachment from the web of international treaties that once made Switzerland a financial powerhouse enable it to rebuff international pressure with impunity and provide it with an unbroken record of success (see Chapter 4). (Location 3757)

“tax havens have the protection and support of the major countries that sponsor them, but sufficient independence for their sponsors to claim that they are not their responsibility and hence are beyond their control.” (Location 3804)

The IBC Act was created in response to the United States’ cancellation of its double-taxation treaty with the BVI, a change that threatened to bring about a dramatic downturn in the islands’ economy. (Location 3847)

Thus the BVI government’s postcolonial development strategy could be described in lay terms as making the country as hospitable as possible for the wealth management industry and its clients— (Location 3876)

Yet local people cannot use the laws and services they provide to foreigners: for instance, no BVI International Business Corporation is permitted to trade or conduct business with any citizen of the islands. (Location 3887)

wealth managers continue this tradition by advising their clients on creating their own banks and other tools that provide wealthy families with zones of autonomy from state authority, as well as the capital to mount a meaningful challenge to state institutions. (Location 3944)

“The secret point of money and power,” wrote Joan Didion, “is neither the things that money can buy nor power for power’s sake … but absolute personal freedom, mobility, privacy.”1 (Location 3974)

This ideal of stewardship, of course, is itself a medieval holdover, originating in the management of a feudal lord’s household.18 Similarly, the family “whole” as an organizing principle of social life hails from the pre-Enlightenment era, before the triumph of individualism.19 (Location 4065)

creation of a family system of governance or a family bank, as described in Chapter 6. Ultimately, this collides two forms of organization that are ordinarily thought to stand in opposition to each other: bureaucracy and the family. As (Location 4074)

The sense of obligation to public service and to model civic behavior has sometimes been mocked as a false front or derided as noblesse oblige, but it had real consequences. (Location 4282)

recent book of policy scholarship proposes “abolishing borders and transforming all human beings into citizens of the world.”71 The seriousness with which this proposition has been greeted suggests how deeply impaired the centuries-old world system of states, sovereignty, and citizenship has become, partly thanks to the work of wealth managers. (Location 4294)