welcome.

and we're going to be talking about offshore finance today. with me is professor brooke harrington from dartmouth and i want to start kind of where you started in the book about trying tohink about offshore finance from a sociology point of view. you're a sociologist, you're not an economist, a political scientist, a journalist. can you just sort of explain what the difference is and how that shapes how you approach something that's kind of at the nexus of money and power in finance and international relations.

i came to sociology rather late in in life. i come from the humanities. i was an english major, and then i was a reporter for associated press and newsweek and various local newspapers. and then worked in the silicon valley for several years in startup firms and that experience it's generated some questions that nothing in my education could really answer. as i started casting about for answers, i discovered that there was this field called sociology and that it actually seemed to have some of the answers. so i applied to graduate school and miraculously got into a special program, an organization in theory organizational sociology at harvard. and lo and behold, i actually got very concrete and useful answers to a lot of my questions about the world. and in the process of that, i also found out that there was a field called economics sociology, in which you could

take an approach to money and markets. it was different from the way economists and political scientists study it. economists tend to look either just into visuals, maximizing their utility and and being fully rational in their stylized models, or they look at like big institutions. but there isn't as much interaction between those two levels as as i would have found satisfying intellectually and political scientists look at political institutions and how people like voters interact with them. and that's all very interesting. but sociology is like a really, really big tent where you can study how individuals respond to organizations and institutions just as you do in political science and you can look at how people are engaged with money and markets, just as in economics. but you can also look at small

groups and organizations, most importantly, you don't have to start with the assumption that people are rational, which, as we all know, is well the most polite way to put it is a very stylized assumption that the human beings that we are human beings, we all know, are often not rational in a coldly economic sense. we do things that seem self-destructive sometimes we do things based on fat and fashion, sociology allows us to study those things, and it allows us to study power, which is something that political scientists also do. but both power, fat and fashion, the quest for status, which is something that i think only sociologists in anthropologists study maybe a little bit in social psychology. but as a sociologist, i can draw

from things that you might associate with economics or political science or anthropology, and i can use them all together, knit them into. a sort of a textile, a single thing that allows us to to to wrap around a complex phenomenon like how ultra wealthy people are using this highly secretive offshore system to achieve several goals at once, not just tax evasion. and you're writing almost about this is a is a cultural phenomenon, not as i mean, it's an economic phenomenon, too, but you're writing in some ways kind of gets at how this is a, you know, the culture of wealth managers, the way that rich people, very, very rich people think about themselves and their money. so can what is that culture like and kind of what have you found as you've talked both, you know,

to wealth managers and and gone to some of these places around the world. what is that culture of the ultra what is ultra, ultra rich and what is that culture like? that's i'm really glad that you made this point because it sort of allows me to give a better answer to your first question as a sociologist, i can look at offshore finance as a phenomenon that is similar tenuously cultural, economic, political and social in the sense of like social networks and social status, competition and i think complex phenomena really need that multifaceted treatment. otherwise, if you just look at it as an economic phenomenon, many things are still hard to understand. like, why is it that the biggest users buy by volume of cash of the offshore system? are people from countries where there are no taxes like that doesn't make any sense from a

from a purely economic point of view. but there are other reasons that they want to use the system. so as you alluded to, i learned about this by trading for two years to become an offshore wealth manager. it was a very rigorous process to earn the credential somewhat like i would describe it as like a combination of law school and business school, but with the subjects pared down and tailored exclusively to the needs and interests of serving ultra rich people. so essentially i made myself kind of client service to the ultra rich. now i never but the process of getting that credential and then obtaining it allowed me entree into the world of these other high end servants who are then asked if they would speak to me on condition of anonymity. and i didn't go undercover. that's that's important, because that would have been a violation of sociological ethics and it would have prevented me from publishing any of this in

sociological outlets. so i had to approach other wealth managers at the training courses or at the professional society meetings that were draw thousands of people in places like hong kong or los angeles. and i would approach them with my little name badge, with my real name and institutional affiliation, and say, hello, i'm a sociologist, very interested in the work you do. i don't want you to disclose anything constant unsure about your work or your clients, but i wonder if you'd be willing to talk to me about the nature of your work, what you like about it, what are its challenge as to what you think about the whole and amazingly enough, 70 of them so far i've spoken to me in 19 offshore centers and you know, i even though this is a reporter, you know, this, you know, as a former reporter, people like to talk about themselves. what how how did you find those conversations to go and how forthcoming were people,

particularly with that grant who had an enmity, but how forthcoming were people in talking about the work they do and the place they occupy in this system of of protect thing at the assets of very, very wealthy people who were amazingly forthcoming. when i first started out and was trying to get the grant funding to go take this wealth management credentials certification course. one of the big questions looming over the whole thing was, will anybody talk to me? because as i discuss in the book, the what offshore financial centers are really selling is secrecy and tax avoidance. tax evasion is just the tip of the iceberg. and that's why, for example, so many people from countries that don't let your taxes still use the offshore system, they want the secrecy. so the question arises is why would anyone whose business is secrecy talk to a sociologist or any outsider?

so that matter and i'm very lucky that the people who ultimately funded those first steps were willing to take chance on me. i had to go to europe to get the funding to do this because the the social sciences are not well funded, at least at the basic research in the u.s. and the kind of concert it is. they don't want to fund super high risk projects where the chances of success are kind of they're kind of iffy. but to my amazement i showed up at these five successive courses you have to take to become certified as a wealth manager. one courses sort of a general overview of the philosophy of offshore finance like what's it for? what are you trying to do for clients? another course is on trusts, which are a structure for holding assets offshore, another course on offshore corporations, and then one on trust law and

one on investing and accounting. so it was very challenging. i confess that i went in perhaps over contract thinking, well, i got a ph.d. from harvard, i'm sure i can do this, but especially the accounting class really challenged me. i was doing it while i was seven months pregnant and i was super tired all the time and i, i still find the whole accounting way of thinking about money very counterintuitive, but i managed to pass all these courses and then in the process of doing that, i was in these hotel conference centers taking classes all day with practicing wealth managers, and i would approach them and say, hi, i'm brooke harrington, i'm with the max planck institute for the study societies or i'm with the copenhagen business school, and i'd like to talk to you about the nature of your work. it was it was very surprising

how many of them said yes. and even more surprising how once we sat down to talk, the problem became shutting them up. one guy i spoke to only stopped talking after three and a half hours because the café we were sitting in, started putting the chairs on top of the tables and sweeping up around us. and i think that's because not just that people like to talk about each other, about themselves. sorry, but that people could do complex things for a living and controversial things for a living. they feel misunderstood, but they're somewhat limited in their ability to clarify what they view as misunderstand things. because in order to make themselves understood, they first have to explain exactly what it is they do. and there's lots of jargon and procedures that outsiders not understand their family sick of hearing about it, their

coworkers who knows what their coworkers would do with information about a colleague's war, stories. it's risky to share this kind of stuff just with your coworkers. so i came along as someone who was well versed enough in the wealth management profession that i didn't have to stop the conversation in every few minutes and say, wait a second, what are you talking about? i had a baseline of information that allowed the conversation flow, but i wasn't a journalist. so they didn't feel like i was there to expose them. and i wasn't a coworker, so they weren't worried that i was going to use that information against them in the marketplace. so they just kind let it rip. and like everyone, they have war stories, things they're proud of that they did at work, things that they they're still frustrated by, that they want to share. and especially with wealth managers, they feel deeply misunderstood by society.

and i all these interviews mostly before the panama paradise papers and pandora papers broke and really unleashed a torrent of public opprobrium towards what i was managers. but even then,. in 2007 to 2016 wealth managers like they were shamed publicly for helping the rich get richer. they kind of had scores to settle. and i think some of them thought i be their instrument for doing that. and, you know, the book is quite critical of the offshore finance system and how it operates and what accomplishes. but did you come away with sympathy for the maybe that's the wrong word, but some of, you know, sympathy for the people you were interviewing, for these people who not maybe not the ultra, but are there you are

helping them and, you know, are they actually misunderstood and did you did what your what are the and then what are they like as as you know, are these like gregarious salesman types or sales woman types or are they, you know, what's kind of just the vibe of of international wealth manager and did you like them. you know, that's an interesting question because it really individual biases this this issue of wealth management and what wealth managers do. i think i'm very critical of the offshore financial system. it like the evidence is very clear that it undermines democracy and it undermines capitalism. but, you know, our economy and and the democratic system of governance cannot properly when offshore finance allows people to sabotage, it. but my my opinion of people who work in wealth management is is

sort of neutral, really. if anything, i, i have great respect for their intelligence and their their skill and i'd say at least 25% of the people i've interviewed have genuine qualms looking at the big picture of their impact on the world. these are people who said effectively, i realized that i'm contributing to helping very rich people get even richer. and that is at the expense of other people. middle class people, poor people. it's at the expense of society. and so here's what i try to do to mitigate that impact. and what was unsaid there is. i think what many people face in their jobs is if they're ambivalent about their jobs, which is, well, you know, i'm 40

years old, i've got a mortgage i've got children school fees to pay. people depend on me. i can't just flounce off and say i'm never doing this job again because what am i going to do that will allow me to meet my commitments? i'm i think for a lot of people, once they figured out they had moral issues with, the nature of their work, they were kind of tied into it in way that that made them have to make compromises. and i think it's those who become the job, those, in other words, the people who do the big leaks from offshore. that's their motivation. it's a way of basically keeping job and keeping their income while at the same time, trying to undermine system and undo of the harms they view themselves as doing. and, you know, some some of the people i interviewed were quite frank about how they do that. so again, my my answer to your question is.

i don't like or dislike people who are wealth managers. you know, they're their individuals. and just like any other individuals, i find some of them personally likable and others less so. but i'd say the only ones that i felt uncomfortable with were people who were aggressively towards me. they kind of made it personal towards. but i didn't come in with a sense of like, i'm going to get these people. they're baddies. i was genuinely curious and open minded about what what they did, and i still feel curious and open minded about about what they do. and just to step back describe what the ultra rich is like. who is this sort of stratosphere of people that you're that you're talking about when they use this offshore finance system and then describe what offshore finance is when you talk about. right. we is the people with you the sort of canonical swiss bank accounts or like what what is it

when you say ultra rich and when you say offshore, just since those are terms that kind of you define in the book somewhat but you know for for the audience help help people understand what you mean by those. i'm glad you asked. so let me start with what is offshore finance, and then i'll get to like what is what is a rich person or at least what are the rich people? i'm talking about? because i'm going to define them in relation to offshore finance. so the offshore financial system is a system of countries that sell secrecy to very rich people. and sometimes those places are called tax havens because. they in some circumstances allow people to hide money from the tax authorities in their countries, although that's not all that they do. some countries don't provide any tax relief at all. they they provide what's called asset protection. so for the cook islands, which are an archipelago in the south

pacific between tahiti and fiji, they only provide protection trusts. and that's for people who are they're going to get sued or if they have some sort of assets that they might find encumbered by international, like an art collection that might be subject to the un treaty. human patrimony for which would prevent them from making money that art collection in certain ways. so the us is one of the biggest offshore financial centers in the world. many people know that corporations over the world get registered in the state of delaware it's a major moneymaker for that state and states like. wyoming and south dakota are increasingly popular as places for non-u.s. citizens to form companies trusts to hide their wealth from their home countries. as u.s. citizens, we can't take

advantage of offshore centers that are on this, but they're very popular among foreigners. so switzerland is the classic one. people often think about bermuda to now singapore. they're all the world and essentially what they're selling, as i mentioned before, is secrecy to rich people and what the rich people want. secrecy from is a culturally dependent question like people who are billionaires in russia and china, they're not so much worried about taxes as they're worried their autocratic governments seizing their assets because they, you know, politically. they air on some political point that the regime cares about. like if you are found to be

criticizing president xi of china, for example, you might get thrown in prison and all your assets seized. putin 20 odd years ago, famous lee seized the assets, one of the oligarchs named mikhail horus. please excuse me for butchering russian pronunciation and put color of skin in prison for ten years and, you know, stole his billions appropriated to themselves. and that was sort of to teach a lesson to the other oligarchs because porowski himself had dared to criticize putin's corruption. and putin wanted to send a message to the other oligarchs saying, don't even think about it, or you won't be a billionaire anymore, you're going to cool your heels in prison for. so lots of people put money offshore or because they're afraid of governments that or they come from a country with a corrupt government, they're afraid of asset seizures. they're of things like current devaluation or many americans

don't know that in other countries, the world, they're governed by what's called civil law, which comes from roman law. and civil law says, that when you die state, really determines what happens. your assets, you don't just get to make a will say, i give all my money, the animal shelter or to my parakeet. you can do that in common law, countries like the u.s., the u.k., australia. and so forth. but in most of the world, you can't. the government says we're going to take say, 40% of your assets and it will go to your closest living relative and another 30% will go to your other living relatives and you only get to dispose of 30% the way you want. some people don't want to do that. people for example, who live in countries governed by sharia law, they have daughters whom they want inherit equally to their sons well, you can't do that in the sharia law country.

so what do you do? you get your assets offshore, you write up a will or trust instrument that says my will inherit equally to their brothers and then once those assets are offshore, their governed by the law of the offshore country, and then you can do as you please them, is this is this something the you know, especially now that the us has instituted over the past 15 years or so some measures to have more visibility into what americans are doing around the world. is is this a system that american citizens tend to use or is this more about non-u.s. citizens using both the us and other countries, americans use it to famously, robert, who is an american hedge fund, had an offshore what was called by the press war chest and i believe $60 million which he used to circumvent election laws both in

the us and the uk contributing in 2016, both to the brexit campaign on the pro-brexit side and to former president. trump's 2016 campaign. americans just can't use america as offshore haven. i'm how. you know some of the countries you mentioned and you get into this in the book some you know even especially if include the us are former british colonies and you have a sort of nice in the book of why you know you sort of connect that colonial legacy to the current existence of these offshore financial in former british colonies. what what what happened there like is there i mean besides the common language and legal system like what is what is there that

drives former colonies to have a propensity toward this? a couple of things that i realize i forgot to answer your question about, like who uses the offshore system? it's the the of the rich. it's a little confusing because in the us we talk about like the 1%, which means the top 1% of income earners. but with offshore, we're really talking wealth, which is different like my income might spike dramatically if i went the lottery this year but even if i wanted $1,000,000 free and clear in the lottery, i might not become rich from it like i could just go spend it all and a lot of lottery winners do that and they end up in two or three years, more or less of the same net worth that they started at before they won the lottery. so wealth means all of your the value of all your assets minus all of your debts, whatever is

left over there, that's net worth. so in order to use the offshore system, the absolute rock bottom minimum, you probably have to have is about $5 million of investable assets. so that's your net worth minus the of your home very. very few people clear that bar there's probably a couple of hundred thousand in the world there are fewer than 3000 billionaires in the world we hear about them a lot, but they're quite a small group in number. so all using the offshore system and what we saw from the leaks of the panama papers in 2016, followed by the paradise papers in 2017, followed by the pandora papers of 2021, which. i think seven terabytes of data onto the world. is that above a certain level of wealth? no. what their walk of life. all rich people are using this

so that the people revealed those leaks included everyone from the late queen of england to soccer stars, entertainers like jackie chan and emma watson, heads of state, heads of corporations. all they had in common was it they're rich. and what rich means in this context is people who have at least 5 million us or more in investable assets, not including the value of their homes. and so, you know, a typical client of offshore financial services would really more like have ten or 20 or $30 million of investable assets. so. right. and then on the british colonies, why is it there? and then one thing i always wonder is like, why can't the especially ones that are still, you know, basically governed by in some fashion by the uk, why can't the uk itself just stop these from happening or does it not want to the uk is probably

the world's center of the offshore financial services business. it always has been. the us is giving it a run for its money, but like the uk would be slitting its own throat if it shut this down. i don't know if you remember or if any of the viewers remember 2016 right before the panama papers broke, then prime minister of the uk david cameron was making a name for himself, saying that was going to crack down on the use of of offshore financial centers. he was known for wagging the scolding finger at english boybands, for example, who were incorporating themselves in ireland in order to avoid taxes because. ireland is one of the world's most used corporate tax havens. so come to find out when the panama broke that david cameron was the beneficiary of an

offshore trust established by his father. and of course he knew about it. this this was no secrets. and that sort of goes to show something that we've also seen in all the subsequent leaks, which is many of the parties asians who who yell the loudest about how terrible offshore centers are and how going to crack down on tax evasion. they end up being participants in the system. they themselves at the expense of the countries they're supposed to govern by using the offshore financial system to avoid taxes, to take bribes, to invest in illegal, highly profitable activities. so the people who are empowered to change the laws and to shut down the offshore system have a massive conflict of interests they benefit from that system. so that's why it never gets changed. but you actually end the book retively, somewhat hopeful that there are some ways to curb

the use of offshore financial centers. why is that? well, one of the things that we saw after the most recent russian invasion of ukraine in february of 2022, was that it is actually possible for. the offshore financial system to band together to expel people who are socially stigmatized like as the russians were following this invasion. so for decades attempts to reform offshore finance have been met with comments like well you know you you can't world you can't ask us to up climate confidentiality because we would be destroying our own business model like switzerland or bermuda or the british virgin islands would say we can't give up information that other countries want in order to pursue tax cheats or rich people

don't want to pay back their debts because. that would compromise our our business model. you drive us out of business, but suddenly everybody turns on the who are among the most liquid of clients of offshore finance. they pump billions and billions into the offshore system every year. suddenly, switzerland and the us, the uk, the eu government, we're going to sanction these people. we're going to sanction all the oligarchs who have been aiding and abetting putin in his effort to just roll over ukraine illegally. and suddenly they're not just canceling these people's accounts. they're they're helping the of various countries seize the assets of these individuals. so all these things that have been said to be impossible instantly became possible. and that gives you a glimpse of what could happen if social opinion really turned against

the use of offshore finance not just for russian oligarchs, but for everybody. and is that. when we talk about these offshore financial centers, a good chunk of the book goes into the trade that these places are making for themselves. they're basically, you know, a what might seem like a relatively small financial industry for the us. the whole is quite sizable in. the bahamas or the cayman or the cook islands. and so it can provide a, you know, a pithy radically enough revenue and jobs to keep those those countries going if they're sort of, you know, beyond tourism is often one of their prime industries. can you talk about how countries these, small nations have decide to go down this particular path and and whether it's turned out well for, any of them generally

does not turn out well. and that's a phenomenon called the finance curse. when countries decide to become offshore financial centers, it usually works pretty for a while. it brings in a bunch of money. but then what happens is that the interests of foreign capital, it subsume the interests, the people who actually live in those countries. so the tax base gets undermined, all the public services start to crumble and the voices of local people in in elections, for example, get drowned out by the outsized influence of the wealthy people who place their money there, but who may not ever physically come to those offshore tax havens. this sort of gets to your question about why so many offshore centers to the the former empire. and it is true that with only

two exceptions, i can think of right now, all the all the offshore financial centers the world are, former british colonies, the exceptions that come to mind right now are aruba and curacao, which are former dutch colonies or islands in the very far south of the caribbean. but they play a pretty minor role in the in the offshore economy. but if you, of course, switzerland, which has doing this sort of business for centuries but all the other all the other major tax havens of the world, the british virgin islands for which gets most of the business by volume of money. former british colony, the cayman islands, the same thing. the us, the uk itself was the center of this empire and the reason for that is that the british managed their their overseas empire very differently

than other countries like the spanish had a huge colonial empire too. the french had an empire. the germans had an empire. like what? so special about the british? well, what's special about the british that in order to as a strategy to lure people out from england, to colonize the rest of the world, they gave people massive tax breaks. so if you, a colonist in what we now call the united states in the mid-17th hundreds, you were paying like a tiny fraction of what your counterpart back home in england would be paying like maybe 1% or 10% of the income tax. the spanish, for example, the opposite strategy you paid more tax as a colony, as a colonist than the spaniards back home in spain. it's amazing that anyone went out to the colonies under those circumstances. that was just a difference of

strategy. so people in the former british got used to expecting either no tax or very, very low taxes. the other thing is that the common law, which is the law of england and all of its former, which was transplanted to the during the empire common law allows you to place certain tricks with ownership like a shell game to hide who really owns what. a shell game that is not permissible under civil law, which is the law of continental europe and of the rest of the world. a classic example is what's called the trust, where you can divide ownership of a single asset into what's called legal ownership, which has all the legal responsibilities like paying taxes on a thing and beneficial ownership, which is the use of an object. so i have i have a wristwatch here. mm hmm. if i lived in a place where

wristwatches were, i could form a trust with you. we could just make a handshake deal like you live in a place where wristwatches are not taxed. so we make you the legal owner of my watch. maybe we write it down on a napkin or something, but it can be that informal. you're the legal owner of my watch, but i'm the beneficial owner, so i get to wear it. but if the tax authorities come to me and say, okay, time to pay up your taxes on that watch, i can say, oh, no, no, no, i'm not the owner. that sounds ridiculous. it sounds ridiculous to people from civil law countries. they're like, what are you talking about? you can't divide ownership like that. but you can. under english law, it's a custom that goes back to about the 13th century in england when british english nobles were trying to avoid their taxes because the taxes on people's estates were only due of the owner died. so a clever way to that is to

say, i'm going to live in this castle, but i'm going to hand the title to the property to my young neighbor over there and even if i die, as long as the neighbor is still alive, there's no tax due on my property so my heirs can continue to live there, enjoy it. tax free. so it's kind of a weird idea. it's in the middle ages that was flexible enough that it survived into the modern time and. that's a linchpin of the whole offshore financial system. in fact, it's a linchpin of the global financial system, because most pension funds rely on that idea. you talked before about the cook islands is a place that i you know i've never been. most americans, i think have never many americans probably never even heard of you in the book. talk about an experience you had there. can you just describe what the cook islands are like and and

tell tale of of your time? there? well, it's kind of goes back your question about what happens to countries that become offshore financial centers a lot of them are the struggling economically and this tends to happen to those smaller island nations that used to be colonies and they would get payments from the imperial center to of keep them afloat. but once become independent they those payments from the imperial center. they have to kind of make it on their own and it becomes a real problem because there's only so much revenue you can generate from tourism, especially if you're very far away like the cook islands are a 12 hour direct flight from angeles and they're not as well known as fiji or tahiti, so they don't get as many. they have a pearl fishing. they fish fishing industry. but that's not enough to sustain a nation. so they have to do something

and. if you have an english speaking populace asian and an internet connection used to be just a phone connection. you can participate in the global system by becoming an offshore center. and so it seems like a route to economic salvation, but it has the problems i mentioned before of sort of undermining democracy and ultimately hollowing out the economy of these countries. so when i went to the cook islands in 2015, of course, i think like most visitors, i was dazzled by the beauty of the place. imagine all the pictures you've ever seen. it's like treasure island or tahiti or fiji, and it's like that lovely. people lovely geographical environment. however, the first night that we were there, i brought my young child and my mother. first night we were there, we were robbed, and the person robbed the the house i had

rented came right into the room where i was with my then five year old son. and. i thought it was my mother and i said, mom and all of a sudden the door slammed and i knew something was wrong. it wasn't my mother. so i got up and i ran around the house and i discovered that we've been and i didn't know what had happened to the person it was about. i want to say 3:00 in the morning, pitch black, couldn't see anything. and the problem was being in a very, very remote place is that at least at the time, you can just pick up the phone and call someone. and one of the things that happened so it was my mobile phone for which i just bought a local sim card that allowed me to connect by and internet to the rest of the world but otherwise we were really like cut off. things may have changed the last nine years, but back then, even a regular global telephone, you

couldn't connect in in the cook islands. so even like calling for help was a problem, much less using the internet or finding like flights to get out there anyway. so we finally the police and they rolled up, i think about 2 hours later, i made report it was scary. it was i was mostly scared about. the fact that someone had come into the room where i was with my child and how badly that could have gone had, the person decided to stay or or had a weapon or attacked us. so i was really shaken and then i spent some time once i found an internet connection looking for ways to get us off the island. basically, i just wanted to leave immediately and that there you were partway into your work at that point or. yeah, i hadn't even started doing interviews by 2015. i was eight years into the project, collected a lot of

interviews and i was ready to sit down to start writing the book, but i had more interviews to collect in the cook islands because even though it was very remote, it is a very important part of the offshore ecosystem. it does this very special thing, asset protection and many, many extremely wealthy people use the cook islands for this purpose, not to avoid taxes, but to avoid paying their debts. like there's a a fellow named kevin trudeau who wrote a series of bestselling books called things they don't want you to know. like the debt sure was of those. anyways, he was found guilty in federal court in the u.s. for fraud and was sentenced not just to prison, but to paying a fine of tens of millions of dollars. but he knew this was coming so. he put all of his assets in cook islands asset protection, trust. and as far as i know, the us government still now 20 odd

years later has not been able collect a dime of what trudeau owes. he didn't go to prison, he didn't have to pay anything because the cook islands asset protection trust is so law proof that you just saunter off with millions of ill gotten gains and never pay a penny in fines or penalties, much less taxes. anyways, i had to i had to investigate this amazing place, kind of the wild west of the offshore. but then we got robbed and you know, i and my family were very upset and. we couldn't get off the island. there were no flights back to the u.s. that day or i mean, in the coming days. so it was kind of stuck. and i was i'd given my police report and i was walking around now in the daylight by the one of the harbors in the main island of the cook islands. and i was watching a fisherman

got a mahi mahi, which this big, beautiful fish i think you only see it in the south pacific. but anyways, i was watching him do his thing and i must have looked as upset as i felt. and he said, what's wrong? i told him the whole story. i just told you. and he said i thought he would be surprised or horrified, but on the contrary, he was like, oh yeah, one of those again. and he basically relayed how he'd grown in the cook islands. he was a native of the place. his parents and grandparents were natives of the place. and he said, this country is really, really changed since we became an offshore financial center. it used to be that our our indigenous hospitality were something to be proud of. we took extra good care of our guests. the thought of of robbing visitors was simply. but now they call us the crook islands because crime is so common and a major part of our

economy comes from ripping off other and organizations by giving sanctuary to foreigners, ill gotten gains like kevin trudeau's. he didn't mention kevin trudeau, but i'm just using that as an example. and you know, as i think about know all the structures in place to try to prevent people from hiding money or avoiding taxes or whatever, there's a sort of counter-narrative to that, that like, you know, that that money is like gravity, like water that. it finds its way that there is that this is ultimately, you know, either on one hand, sort of the purest form of capitalism or on the other hand sort of, you know, you just throw your hands up. it's not ever stoppable. how do you sort of think about that aspect of it? the you know, is is there are are there ways at all to to curb these given, you know, who's

involved and how much money and the fact that there may always be some other island, some other offshore financial somewhere? well, economists are very clear that capitalism cannot survive if too many people cheat like there is a a level of cheating that capitalism controls. right. i'm not aware of any research that has defined exact threshold of like how many people have to be cheating or, how much money can be dirty before the system falls apart. but as far back as adam smith continuing up to the most, well, economists of the 20th century, nobel winners, they've all stated very clearly capitalist sam runs ultimately on faith and trust. even alan greenspan, who was, i believe, the longest chairman of the us federal reserve and an

arch conservative, he gave a famous speech, i think back in the late nineties in which he said, you can't have capitalism without trust. you can't have capitalism if too many people are cheating. and then use of offshore finance is cheating. it's not just not paying your taxes it's not paying your debts. it's the inheritance laws of your country it's ripping off your investors by running off and your assets in the cook islands asset protection trust, it's cheating. so if enough people it the faith in the system is lost people don't want to put their money in banks. they don't want to invest in businesses that they know can rip them off in this way and for which they essentially have no recourse. so they hold on to their money and the economy stagnates. economy depends on people having faith that the laws will be enforced. so you can't have a bunch of

wealthy scofflaws basically saying, i don't care what the law says, object my money. we may as americans have kind of a love hate relationship with these scofflaws, but ultimately they the things we claim to value most like free enterprise and democracy as to what can be done about this. i think there has to be kind of a12 punch of law and changing social norms. when i speak to, policymakers like, for example, when the the european parliament asked me to come speak to them about my research after, the panama papers broke or when the governments of individual countries come to me with questions about how they can crack down on tax avoiders. usually their first question is what laws do have to make to stop this? and i said, well, i think that's the wrong question. surprisingly, it's because yes, legal change can be effective,

but legal change is slow. the democracy is in dictatorships. the law can change overnight because it doesn't to go through a democratic process. but if you value democracy deliberation there checks and balances. a law is slow. i whereas highly mobile global capital very fast. so any laws shoemaker especially playing catch up with what people are already doing. so you need something else. you need something that is more quick acting. and one of the most surprising things i found in these years of studying the ultra rich in offshore is that while normies like me would think rich people don't care what the rest of us think of them. they're laughing the way to the bank. in fact there are a lot like the rest of us care deeply about their reputations. they care deeply if other people stigmatize them. and so the big difference

between us and them is that the ultra rich have the power to really prosecute grievances, to shut down a media that criticizes them, or to shut journalists who expose them. and i think that reveals something important that from a sociological point of view, could be used as leverage, make it socially not to pay your taxes, make it socially unacceptable, not to pay debts. this is this change in which it's publicly accepted in countries like the us for, say, a presidential candidate to get up, as donald trump did on october third 2016 and say, yes, i haven't paid taxes in 19 years, and that makes me smart for that not to be a campaign ending statement is very radical. change in culture. just within my lifetime and i'm

not that old actually that's why i wonder as we wrap up in the last five or 6 minutes here, that's kind of where i wanted to have you open the book by talking about your upbringing in in illinois in a place where you were not wealthy, but there were wealthy people that made you interested in understanding what wealth was. can you sort of talk about can you explain explain that interest in in wealth here and and how that shaped your work. yeah compare myself to a much more talented writer scott, who grew up in minnesota a middle class kid surrounded by much wealthier. and, you know, the wheels started to turn in his mind as a teenager and adolescence thinking there's something different about these people. and it's not just how much money they have. there's something different

about the way they live and look at the world. what is that? and i had the same questions growing up and like for were many of the really wealthy families that made chicago a prosperous industrial city. that's where they went to live and believe it or not back in the day, many of those families sent their children to public school because the public schools really good. so i was cheek by jowl with people whose parents never really worked or they worked in the family bank or what have and it was clear that there was something very different about their lives or many things that were different and i sort of went forward in life puzzling about that, trying to understand it. but it wasn't until i became a sociologist that i got the tools

to to really analyze it in a useful way. and a systematic way that might be insightful for other people as well. and then the question became how to get the funding to study the ultra rich because it is high risk to try to study. sociologists as a centerpiece of our discipline, study inequality. but the reality is most research on equality is about the poor because they're easy to study. it's like that old joke, the guy walking down the street around midnight on a saturday finds a well-dressed man on his hands and knees under lamppost and says, sir, what's happened? can i help you? and the man on his and knees says, i lost my keys. i'm looking for them. and the passer by. well, did you lose them here under the light? and the guy in his hands and knees? no, but the light is best here. so that's a joke about people going in where it's convenient

to look rather than where they're likely to find the most valuable information and being poor in america and in many other countries means that you're very highly surveilled and there's a mass of public information about you. a recipient of state benefits like welfare, food assistance, housing assistance, and you have to submit to that in order to get the assistance. so where the light is, is on poverty. but if you want to study inequality, you can't just study just the lowest end of the socio economic spectrum and say that, you know, anything about inequality, you've got to study the whole spectrum. so increasing know there are people who are trying to study the middle and then people like me, who are trying to study the far upper end of the socioeconomic spectrum. but the problem there is that the primary that unites rich people all over the world is

actually secrecy. and ability to shield themselves from inquiry by journalist or from nosy sociologists. they live in gated communities. they pay people to keep their names out of the newspaper, including lists like the fortune 400 richest people in the world. it's a that is a very nouveau riche phenomena, only trillions want to see their name on the list. the really rich people they don't want anyone to know that they're rich. because once someone knows you're rich, that creates all kinds of new problems hangers on, sycophants, all manner of people trying to separate you from your body. it's better for no one to know except your closest associates. so how do you study those people who don't even want to be known to exist much less a secretive system that helps their riches grow and grow in secrecy? and that's that's what i was lucky enough to find a pathway to do by to be a wealth manager and the funding to do it in

europe. oh, great. thank you for for the book. thank you for being with us today and explaining your trips around the world and what you found about offshore financial centers. professor brooke harrington from dartmouth. thank you. it was a