• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Trillion Dollar Tax Havens, Inequality and Recession

    James Henry Pt2: Vast amounts of money avoid taxes and productive investment -   August 8, 2012
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


    Share to Facebook Share to Twitter

    I support the real news because they deal with real issues, not meaningless articles and sound bites - Gary
    Log in and tell us why you support TRNN


    James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co and as an investigative journalist his work has appeared in numerous publications like Forbes, The Nation, and the The New York Times. He was the lead researcher of the recently released report titled 'The Price of Offshore Revisited.'


    Trillion Dollar Tax Havens, Inequality and RecessionPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

    This is the second part in our series of interviews about offshore tax havens. Somewhere between 20 and 30 trillions of dollars, says a new study, is being stashed in these various tax havens to avoid tax, primarily.

    Now joining us to continue this discussion is James Henry. He's an economist, an attorney, investigative journalist. He was a chief economist, I should say, at the international consultancy firm McKinsey & Company. And he's the lead researcher of this report, titled The Price of Offshore Revisited. He's also a global board member of the Tax Justice Network. Thanks for joining us, James.


    JAY: So how many people are we talking about? Like, how many people are rich enough and are taking advantage of these tax havens? And give us again the sense of the kind of money involved.

    HENRY: Well, when you look at the distribution of wealth here that's offshore, we think there's no more than about 10 million people that really account for about 83 percent of the $21 trillion that is at a minimum offshore. And that's pretty concentrated. The top 100 are multibillionaires. They account for about 8.1 percent of the total. The next 2,900, billionaires with an average wealth of $1.4 billion, account for another 7 percent of it. So that's about 3,000 people that already are owning nearly 15 percent of the world's financial wealth.

    And then we have—the next step in the ladder is the sort of ultra high net worth crowd, which are—their average wealth is on the order of $58 million, and there's about 117,000 of them in the world. And then, finally, there's another fortunate few, who are about 9.9 million, whose average wealth is on the order of $6.3 million, and they account for about 60 percent of this. So 82 percent of the world's wealth, then, when you add all this up, is—of the offshore wealth is owned by about 0.14 percent of the world's population.

    So if you look at it from the standpoint of who's actually benefiting from this industry, you know, it's a tiny share of the global population. And that group has—in terms of global wealth, which is about $231 trillion, they own about a third of all that global wealth. And so that's a—you know, 0.14 percent is a tiny fraction owning that much wealth.

    JAY: You do a calculation in your study about what kind of tax revenues might be derived from this if this was taxed.

    HENRY: [Yeah, I've done a] calculation, rough estimate that somewhere between $250-300 billion a year of revenue, if all this money were—all this wealth were really declared and the earnings on it were—you know, and that's assuming kind of a very conservative 3 percent yield on the wealth and a 30 percent marginal tax rate. So it could be far higher than that depending on the year.

    Obviously, it's presumptuous to assume that tax authorities are ever going to be able to get people to declare this income, but the option that we're suggesting is that, you know, since it's concentrated in these big banks, we could imagine having 0.5 percent annual withholding tax on this wealth that would be easy for the banks to implement. They know what these folks' wealth is every quarter 'cause they have to report to them. And if it was just 0.5 percent applied to these anonymous assets, you might generate, you know, somewhere that would be big enough to basically pay the world's aid budget, which is about $89 billion this year. So we're talking about—if you want to talk it about in Occupy terms, the top 1 percent of the world's population now owns about 61 percent of all financial wealth and 100 percent of the offshore wealth that we're talking about in this study.

    JAY: And what are the consequences of this on the global economy, that so much money is sitting in these tax havens?

    HENRY: Well, first of all, we know that inequality is understated. The standard statistics for inequality leave out all this wealth. And even though it's only 10 percent of the world's total wealth, it all accrues to this tiny fraction of the population. So that means that the GINI statistics, all the other kind of routine statistics we've used to measure wealth inequality are understated.

    And secondly, we also understated the growth of inequality, because all of this activity is relatively new in world history. And so it goes back to the beginnings of 1970s, when havens started to take off and then a lot of this offshoring of wealth started to soar, partly financed by the debt crisis, partly because the haven infrastructure was being refined by these banks. And, you know, since then it's taken off.

    And we learned a lot more lately about the impacts that inequality really has on welfare, on people's lives, on the performance of the macroeconomy as well. For example, one characteristic of all this wealth is that it's invested in relatively low-yielding time deposits and secure assets in First World countries. You know, and compared with investing in a high-growth developing country like Brazil, the opportunity cost is really pretty high here for this kind of investment.

    And the people who are this wealthy are not consuming. I mean, they've consumed about as much in the way of real estate and yachts and art and other things as—you know, the finer things in life as they can, but at the end of the day, they are almost required to save it. So they do consume a lot of political power, which is—seems to be an outlet for virtually unlimited expenditures. But aside from that, you know, they're not creating a lot of jobs with their savings here.

    JAY: The theory's supposed to be that if they have this much capital, they're going to invest it. Are they not?

    HENRY: Well, you know, as Keynes pointed out back in 1936, the problem is that in a capitalist economy, investment depends on expected profitability, and savings can be made for other reasons. In this case, just because distribution of welfare is people who don't—you know, it's far too much for them to consume. So there's no necessary coupling between savings and investment, unless business people really expect the economy to get better. Right now we've seen that the investment side is very weak. So when you have all these people, you know, just necessarily saving rather than consuming, you know, it's—in a recession environment it makes things worse.

    JAY: And I suppose if the underlying motivation here is tax avoidance, which is why you have this money in these shelters, I suppose it's not so easy just to take it and then start investing it anyway, is it?

    HENRY: No, it's not easy at all. I think if, you know, you can imagine that if this wealth were taxed and the funds were distributed to the poor or to needy people or, you know, sort of people with a higher propensity to consume, you know, that would have some stimulating effect we're not seeing from all this wealth inequality.

    This is a political phenomenon. You know, the regulations are designed in Washington, in the City of London, and, you know, in the leading capitals of First World countries partly by an industry that receives—has enormous stake in this game, not only these wealthy clients, but, you know, the banking industry. For them this is a matter of, you know, billions of dollars a year of profits and a lot of shareholder value.

    They are spending, too, heavily on campaign contributions and lobbyists to make sure that their point of view is represented. Anytime there's a Treasury regulation, any time there's a major prosecution of a major bank, you know, one can be sure that they are there helping to write the regulations and lobby against the prosecutions. So in the last—since 1990, I calculated that the U.S. banking industry, for example, has spent about $6.6 billion on campaign contributions and lobbying in Washington alone. That's about $2,200 per congressman per day since 1990. And that's one of the reasons we're seeing this kind of result.

    JAY: Now, if a big bank helps someone from a developing country to avoid taxes and/or embezzle a public treasury and then park this money in a tax haven, that's a criminal conspiracy, one would think. And there is an argument that's been made, I think, by one of your colleagues, too, James Boyce, and others, that there's historic precedent for then the countries to say, well, banks, you did this knowingly, and now you're lending us money, and we're in debt to you, although on the whole we'd actually be a creditor if we could repatriate all this money that you colluded with, so maybe we don't owe you this money. And I think the concept is called odious debt. What do you make of that?

    HENRY: Yeah. Well, I'm familiar with that argument. It dates back to the United States' intervention in Cuba in 1898, where they ended up basically forgiving Cuba's debt to Spain because it had been imposed on them by a dictator.

    Unfortunately, the United States has stopped using that doctrine elsewhere or generalizing it. It doesn't really help us with these offshore assets. It would help us forgive some of the debt that developing countries still have, but in terms of this—at this situation, you have global private bankers basically helping the money to go out.

    Now, I would argue that the analogy really is to the kind of prosecutions that the U.S. Justice Department has been making against UBS for helping wealthy Americans take their money abroad and, you know, that we've already seen several private bankers go to jail. We've seen UBS heavily fined. The Justice Department just levied a $1 billion fine against HSBC for facilitating $14 billion of money laundering for the Colombian, Mexican cartels. But these major institutions which are involved in this—HSBC is, by the way, the third-largest player in this particular private banking industry that we're seeing here. They launder—they serve about $633 billion of offshore private wealth, and it puts them number three on the list.

    But basically the point is that, you know, developing countries might also want to take advantage of making the exact same argument against these banks when they come to Mexico or the Philippines, you know, to try to take money out there and basically enabling all of this kind of funny business.

    But we haven't seen such prosecutions, and it's for no accident. I mean, I've tried to understand why, for example, the Philippines, which was a major victim of bad banking by the foreign banks that were looking the other way while Marcos ripped off the Central Bank of the Philippines for billions and billions of dollars, parked it in Switzerland, and the Philippine government was left holding the bag for that debt. I asked the Philippine ministers at the time why they didn't go after these people. They said they were basically intimidated by the international banks and, you know, felt that the Philippines couldn't really have any bargaining power with them.

    So this is something that's very difficult for any individual developing country to tackle, you know, 'cause the banks quickly, you know, gang up on them and will make life hard and single them out and move elsewhere. But it is something that cries out for collective action.

    JAY: Well, in the next segment of our interview, we're going to talk about what that collective action could look like and what Americans might be demanding of their government on this score, given that all of these big banks, one way or the other, are touched by American regulation or a lack thereof. So please join us for the next segment of our interview, and we will be back soon on The Real News Network.


    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    University Sit-In Targets World's Largest Private Coal Company
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting