David Runciman reviews Nicholas Shaxson's Treasure Islands: Tax Havens and the Men who Stole the World and Jacob Hacker and Paul Pierson's Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class, in the LRB:
Since the 1980s more and more corporations have moved to Delaware to take advantage of the state’s extreme laissez-faire attitude to the rights of shareholders and employees against company managements. If you took your business to Delaware (and this was often just a question of establishing a shell office and filling in some forms), it would be much harder for anyone to prove anything against you, because the Delaware courts did not think that much of what you did was any of their concern. Again, other states faced a choice: they could try to isolate Delaware by tightening up their own standards or they could try to compete for a share of the spoils. Enough of them decided to compete to start a race to the bottom. Offshore had moved onshore.
When officials from Delaware toured the globe in the late 1980s advertising their services (and hoping, among other things, to provide a haven for all the hot money that was expected to flow out of Hong Kong in the run-up to the handover to China), they did so under the slogan ‘Delaware can protect you from politics.’ Shaxson defines a tax haven as ‘a place that seeks to attract business by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere’. But this is the crux: where is the politics? Why aren’t these moves more politically unstable, or at least politically contentious? In the case of Delaware, as with other goldfish bowl communities, size probably tells (for a long time Delaware politics was shaped by the influence of the Du Pont family, whose vast chemical operations dominated the local economy). What, though, about Washington, where the shift to an offshore mindset at the national level might be expected to run up against some serious political opposition? What happened to the representatives of all those people who don’t have lots of money to move around, who can’t relocate even if they wanted to, and who have an interest in a fair, open and broadly progressive tax system? Didn’t they notice what was going on?
This is the question that Jacob Hacker and Paul Pierson tackle in Winner-Take-All Politics. They don’t spend much time talking about offshore, but the story they tell has striking parallels with the one laid out by Shaxson. One of the ways you can identify an offshore environment, according to Shaxson, is that local politics gets captured by financial services.