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Great Wealth Pays No Dues

Brooke Harrington follows the One Percent's money around the world in Capital Without Borders and shows how the world's richest stay rich.


Capital Without Borders

Publisher: Harvard University Press
Price: $29.95
Author: Brooke Harrington
Length: 400 Pages
Format: Paperback
Publication date: 2016-09
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Given the political climate of the 2016 Presidential Campaign, and the prevailing atmosphere of a post-Occupy and Bernie Sanders world, Brooke Harrington’s overhaul of the One Percent, Capital Without Borders, couldn’t arrive at a better time. Through leaks of the clandestine financial activities of the two Presidential Candidates, including the New York Times' revelation of Donald Trump’s avoidance of federal income taxes for nearly 20 years, and the mass release of private financial data within the Panama Papers, Americans have gained a broader look at the private activities that are normative for the world’s wealthiest and most influential people and organizations.

Harrington’s most sobering revelations depict a world where the concepts of national sovereignty and even of nationhood and statehood are increasingly meaningless in the face of nigh-unstoppable capital interests and influences.
With the heightening cry to know more, Harrington’s text is a welcome, comprehensive introduction to the financial world operating behind the scenes of everyday life. Taking a distinct approach by holding a candle to the pool of people responsible for handling the One Percent’s money: the little-known professionals called “wealth managers”, Harrington provides an in-depth expose of the people who personally process, safeguard, and hide the world’s largest collections of capital, and the immense social, economic, and political consequences of their actions.

Capital Without Borders is an unparalleled exploration of an especially darkened corner of world finance, the result of eight years of comprehensive research into the very guarded field of Wealth Management, including Harrington’s own completion of the wealth manager training program. What she discovers is a relatively new profession, finding its feet in the Wall Street boom of the '80s, that strives especially hard to keep its work and very existence under the radar. Through interviews with numerous wealth managers from across the world, Harrington’s reporting uncovers a culture responsible for maintaining and moving the world’s largest and most valuable assets: the roughly half of the world’s capital owned by one percent of its population. As Harrington shows, these same advisers show varying degrees of comfort with the activities they are required to conduct on behalf of their supremely powerful clients.

Harrington begins her book by providing a detailed history of the wealth management profession, citing its short era of professionalization in comparison with its much longer history as an honorable duty, one dating back to medieval times where it served as a knightly responsibility towards wealthy landowners seeking to avoid the legal seizure and taxation of their assets. These original trustees were tasked with having their name assigned to certain lands, holding them in their name on behalf of their lords. But even continuing into the 21st century, wealth management serves as a rather chivalrous undertaking as managers are trusted not only with their clients’ assets but with their very lives.

In outlining the duties of wealth managers, Capital Without Borders is as much a portrait of the one percent as it is of the people handling their money, revealing a nearly comical perpetuated culture of elitism akin to something out of My Fair Lady or Downton Abbey. Harrington’s portrayal of many one percenters, often through their own wealth managers’ testimony, regularly inspires sympathy for anyone having to deal with them. The world’s most powerful people (primarily men) often come across as the hedonistic, insecure boys’ club individuals depicted in films such as The Wolf of Wall Street or The Big Short. For wealth managers, the flip side of a fairly lucrative career is dealing with these especially difficult clients, many of whom demonstrate a startling lack of insight or wisdom into how to handle their own money, or who are so insecure or attached to their assets that managers have to pry it from their fingers to safeguard it.

Often, even the most proven and talented of financial advisers are required to learn the customs and behaviors of wealthy people just to get their foot in the door, as it’s more often a passing knowledge of this culture than one’s actual skills or capability that seems to encourage one’s entrance into the field and world of financial management. One memorable chapter includes several amusing vignettes about wealth managers who are broken into their new jobs and tested on their loyalty via veritable hazing from their employers, who hand out ridiculous tasks just short of doing pushups on the boardroom floor. One example proves particularly memorable:

I was phoned up from Osaka once, by a client who said, 'I’m sitting across from Owagi-san, who speaks no English, but we are bowing to each other. He has just said to me through a translator that he needs a thousand slides of smoked salmon by Tuesday, and I’m relying on you to get them.

I said, ‘I’m your wealth manager, not your fishmonger.’

And the client said, ‘well, today you’re a fishmonger.’”

But even given these insights, Harrington creates a relatively balanced work by not inherently demonizing wealth managers or even the clients they represent, instead dissecting the culture and needs of the wealthy that inspire the demand for such positions. Emphasizing the “sandals to sandals” analogy that defines generations of wealth in a regulated society, Harrington acknowledges many capital holders’ natural wish to provide for their children and grandchildren without substantial losses in their assets. The job of their wealth managers, therefore, is to create legal structures and schemes designed to circumvent the taxation and regulation of these assets in particular countries. However, as Harrington explains, the societal consequences of this evasion more often than not fall squarely on the shoulders of people at the bottom of society, those with no wealth to begin with. As much as the wealth managers Harrington speaks to justify the opportunity to flex their creative muscles in terms of legal navigation, it’s this very creativity that can prove quite damaging.

Harrington outlines the three primary structures through which one percenters accumulate and protect their capital: corporations, trusts and foundations (a particularly toxic word this past election season given the controversies surrounding both the Trump and Clinton foundations), and describes in detail the ways in which such structures have been the havens for untouchable, invisible, and hypermobile capital. Her particular focus on the player agency of contemporary financial machines highlights the effect not just of systems, but of individual actors within those systems, on society. She shines a particular light on wealth managers’ capacity as state builders, who often possess a truly appalling degree of national and governmental influence.

Not only do the activities of wealth managers deprive the marketplace of the liquid capital it requires to thrive and function, but they are also personally involved in designing legislation to best suit the needs of their clients, often writing up the very laws and clauses that are put through and accepted by governments in need of said clients’ investments. The ultimate tragedy of these actions is that despite being what most would view as morally corrupt, they are not technically illegal, operating “within the letter but against the spirit of the law.”

Harrington’s treatise includes some valuable looks at a number of frequently debated and discussed facets of the current financial climate. One especially enlightening segment of her book outlines the distinction between income inequality and wealth inequality, arguing for a greater focus on the latter in order to truly understand the glaring differences in opportunity between the world’s poorest and wealthiest people, leading to one of the most standout, noteworthy passages in the book:

Stratification in terms of wealth-as opposed to income-is problematic because it hardens and stabilizes such advantages into an enduring class structure… this is because wealth comes with special economic and political privileges that enable the wealthy to protect their assets better than others. For example, wealth provides well-being in the form of a safety net, offering the freedom to take risks and recover from missteps that might detail the lives of less wealthy individuals. In addition, wealth enables individuals and families to ride out economic declines, and even to profit from them by buying investments at rock-bottom prices… while wealth generates income, it is more difficult for income to generate wealth.

Harrington’s analysis demonstrates the ways in which wealthy people and corporations actually managed to profit off of the 2008 Housing Crisis, a move Trump aloofly declared “business” in the first 2016 Presidential Debate. Illustrating inequality as the disparate access to opportunity of progression and advancement from one economic stratum to another, Harrington shows how class barriers are solidified by activities that create “substantial immobility in wealth and income” and “shift the fiscal burdens of the state downward.”

At a time when basic provisions of the past such as a college education, a home, and a sufficiently paying job are increasingly distant possibilities for the young save for those from already well-to-do backgrounds, Harrington’s commentary is a magnifying glass held towards those who are gaining opportunities at the expense of those losing them. For a true overhaul to provide greater financial opportunity, there needs not only to be a greater increase in income, but a greater mobility of wealth, without which there's no guarantee of better opportunities from one generation of poor families to another. The old American myth of “pulling oneself up by one’s bootstraps” out of an underprivileged background is increasingly simply that: a myth. As capital flows out from the bottom, it’s pumped to and stored at the top.

Harrington describes a complex, top-heavy machine built of increasingly intricate legal structures and methods through which the world’s wealthiest people manage to both accumulate grandiose amounts of capital and then legally or bureaucratically distance themselves from it in the event of an investigation or attempt at taxation. It’s often impossible to connect an individual or family to a particular stockpile of capital, and even when it is, the extensive legal procedures required often prove too physically and financially exhausting to justify a full investigation, let alone punitive measures. At a time when the world’s most rich and powerful are seeking to expand the already appalling reach of big money through increased deregulation of business, Harrington’s book is a cold, stern look at just how harmful this could be.

Capital Without Borders gives a clear picture as to how the world’s wealthiest people live in a parallel reality to the rest of the world: one out of reach of laws and regulation on a global scale. The ultimate goal of many one percenters is to be citizens of no nation: only to the nation of ultra wealth itself, a worldwide construct with no boundaries, borders, or restrictions. Harrington’s most sobering revelations depict a world where the concepts of national sovereignty and even of nationhood and statehood are increasing meaningless in the face of nigh-unstoppable capital interests and influences, where not only is fungible, liquid capital “hypermobile” across borders, but so are the people who own it. These people occupy a unique position in society: standing just outside and above it.

In the fifth chapter of her book, Harrington sums up the culture and outlook surrounding wealth managers and many one percenters by providing some examples of statements found on the very TEP exam required for wealth managers in training.

One startling question reads: “How do you feel about preserving wealth at expense of the few?”

A statement callously argues how “onerously high” taxes “act as a chill upon the entrepreneur as a creator of wealth; whereas, on the other hand, the poor may then be caught in the poverty trap and rely on state welfare handouts than engage in productive work.”

These two sentences together form a striking portrait of many one percenters: viewing themselves as the victims and oppressed, and those at the bottom as cheats, allowing the wealthy and powerful to justify the socially detrimental activities that have for them become customary.

As Americans are giving a second glance to the true contributions of corporations and the wealthy to society and the state, Capital Without Borders serves as a rallying cry to look beyond the complacent attitude of “that’s the way things are”, and a manifesto of how things may worsen if we decide not to. One sentence from the book proves especially resonant in light of the 2016 Campaign: “It becomes increasingly difficult with time to reverse these inequalities without revolution.” Many may criticize and ridicule those striving for the kind of revolution promoted by Sanders, but given the current state of wealth inequality and class rigidity not just in the US, but worldwide, without some kind of change there ultimately may be few alternatives.

At a time when the public has gained a greater insight into the world of the ultra-wealthy, Harrington's book is a detailed look at how commonplace certain morally questionable, socially destructive actions are among the one percent. It’s a book that begs the question: how much should the world’s wealthiest people be protected, especially at the expense of the world’s poorest?

Capital Without Borders is a vital text for the modern age and a must-read for anyone looking towards a more egalitarian economic future. While heavily empirical and factual, the personal anecdotes and interviews provided instill the human side to a purposefully complicated and bureaucratic profession, and Harrington presents her findings in such a way that the concerned reader will be fascinated and empowered just for being informed. Anybody who walked out of Adam McKay's The Big Short (2015) angry at the exploitative activities of big money, but determined to learn more, will want Capital Without Borders to be their follow-up.

8

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