Offshoring

John Urry

• Publisher: Polity
• Year: 2014
• Print ISBN: 9780745664866, 9780745664859
• eBook ISBN: 9780745684628
• Edition: 1
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

The concealment of income, wealth and profits in tax havens has brought the topic of offshoring into public debate, but as John Urry shows in this important new book offshoring is a much more pervasive feature of contemporary societies. These often secretive activities offshore also involve relations of work, finance, pleasure, waste, energy and security. Powerful and pervasive offshore worlds have been generated, posing huge challenges both for governments and for citizens.

This book documents the various patterns of offshoring Ð of the economy, sociability, politics and the environment. In each case, offshoring generates new patterns of power, reduces the responsibilities of the powerful 'offshore class', and limits the conditions for democratic governance. Offshore, out of sight, over the horizon are some of the troubling processes and metaphors by which much life has been rendered opaque and dependent upon secrets and lies. By analysing these patterns and processes, Urry sheds fresh light on the hidden worlds of offshoring and exposes the dark side of globalization.

The book concludes by considering whether offshoring can be reversed Ð whether it is possible to bring about the systematic 'reshoring' of relations that would be good for democracy and for developing low-carbon futures. Urry portrays the coming century as being poised between even more extreme offshoring and various endeavours to bring back 'home' that which has currently escaped 'over the horizon'.

1

What Is Offshoring?

The problem

Warren Buffett, sometimes described as the twentieth century's most successful investor, recently maintained: ‘There is class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.’¹ This book describes in detail how this rich class did indeed wage class war and has so far won that war, partly through deploying the relatively new and striking strategy of offshoring. I document how this strategy came to be implemented as a key element in enabling the rise and rise of the rich class. The informal term ‘rich class’ refers to the putative global class made up of high net worth individuals and families, the owners/managers of major corporations and professional service companies, many thinktanks, and leading policy-makers.

To illustrate the significance of offshoring, consider ActionAid's major study published in May 2013. It reports that ninety-eight of the hundred largest publicly listed UK corporations (FTSE 100) own subsidiaries, associates, or joint ventures offshore in what that charity defines as ‘tax havens’.² Moreover, corporations typically hold many such accounts. ActionAid reported that advertising giant WPP held 618 offshore accounts, HSBC 496, Royal Dutch Shell 473, Barclays 471, BP 457, RBS 393, Lloyds 259, British Land 187 and Prudential 179. The banking sector is the most prolific user of tax havens, with over half of the overseas subsidiaries of major banks being located in ‘treasure islands’ of low tax.³

Tax havens are also sometimes known as ‘secrecy jurisdictions’. Most corporations and wealthy people locate their income and wealth offshore in such secret locations. Often it seems that ‘only the little people pay tax’,⁴ with the rich class able to direct their wealth and much else ‘offshore’ and very often out of sight.

Moreover, these companies are built rather like Russian dolls, with multiple layers of secrecy and concealment.⁵ For example, there is a company called Goldman Sachs Structured Products (Asia) Limited based in the tax haven of Hong Kong. It is controlled by another company called Goldman Sachs (Asia) Finance, which is registered in another tax haven, namely Mauritius. That is administered by a further company in Hong Kong, which in turn is directed by a company located in New York. This is controlled by another company in Delaware, a major tax haven, and that company is administered by yet another company, also in Delaware, GS Holdings (Delaware) L.L.C. II. This in turn is a subsidiary of the only Goldman company that most people have actually heard of, namely the Goldman Sachs Group which occupies a glitzy tower completed in 2010 and located in Battery City Park in New York City. This company generated in 2012 a worldwide turnover of around US$34 billion and employed nearly 30,000 staff.

This chain of ownership is one of hundreds of such chains within the single company Goldman Sachs. Overall Goldman Sachs consists of more than 4,000 separate corporate entities scattered across the world, many offshore. Some of these entities lie ten layers of control below the New York headquarters. Around one-third are registered in tax havens; and in the world of Goldman Sachs the Cayman Islands are larger than South America, and Mauritius is bigger than Africa!

This book explores how this world of offshoring came into being and some of its major consequences. Offshoring affects countries losing taxation, especially in the developing world, and the seventy or so tax havens. Moreover, this is an issue not just of money and taxation but of many other processes that are offshored and wholly or partly rendered secret, including manufacturing industry, pleasure, energy, waste, carbon dioxide emissions and security. All of these are to some degree offshored and situated in ‘secret locations’. As they go offshore they are linked together in various chains of concealment. As Shaxson more generally argues: ‘offshore is how the world of power now works.’⁶ This world of offshored power is what this book seeks to reveal. In the next section the strategy of offshoring is placed within a brief historical context.

Beyond borders

All societies entail the movement of peoples and objects, but capitalist societies elevate its scale and impact. Much social thought has described capitalism's continuous and restless movement.⁷ In 1848 Karl Marx and Friedrich Engels described how, over the previous century, the bourgeoisie had created more extensive productive forces than all preceding generations.⁸ The need for a constant expanding market caused the bourgeoisie to chase over the surface of the globe, forcing fixed, fast-frozen relations to be swept away. All that is solid, Marx and Engels maintained, melted into air. The cheap prices of commodities produced by capitalist factories ‘battered down all Chinese walls’, undermined ‘national one-sidedness’ and created a world in its own bourgeois image. Marx and Engels pointed to the increasing ‘cosmopolitan character’ of production and consumption, describing how the exploitation of workers was regularly ‘shifted elsewhere’ as new cities and factories were developed, while older ones were destroyed.⁹

So capitalism is all about movement and especially the movement of capital and of workers. Capitalist societies involve a restless acceleration of economic, social and political life. This speeding up of movement is thought to have developed especially during the last quarter of the last century. Much academic and policy writing emphasised how the contemporary world was becoming ‘borderless’, with many frontiers increasingly irrelevant to how people's accelerating lives were lived and experienced.¹⁰

Writing in 1990, Ohmae famously described this borderless world: ‘the free flow of ideas, individuals, investments and industries … the emergence of the interlinked economy brings with it an erosion of national sovereignty as the power of information directly touches local communities; academic, professional, and social institutions; corporations; and individuals.’¹¹ Ohmae optimistically argued that this borderless world would engender boundless economic and social growth. Borderlessness would generate new business opportunities, international friendship, family lives organised across distance, international understanding, greater openness of information and more wealth.

At least a hundred studies each year documented the nature and impact of many global processes. Overall it seemed that economies, finance, media, migration, tourism, politics, family life, friendship, the environment, the internet, and so on, were becoming less structured within nation-states and increasingly organised across the globe.¹² Some analyses emphasised an increased density of interactions across the globe, with the liberalising of world trade, the internationalising of production, the globalising of commodity consumption, the declining costs of transport and communications, and the internationalising of investment. Global corporations seemed able to operate on a worldwide basis, with reduced long-term commitment to specific places, labour forces or societies.

Other studies detailed the global infrastructures that linked together people and places around the world. Further analysts argued that the ‘global’ is to be viewed more as a set of effects brought about by powerful actors undermining national limitations upon the free flow of information, images, people and money. The ‘global’ here is something performed through the actions and writings of free-market consultants, such as Ohmae, as they contest the powers of ‘old-fashioned’ national states to make and uphold national laws and regulations.¹³

Overall it was thought to be good to move, as well as to receive these various flows of people and objects arriving from other places. Many analysts believed that mobilities would reinvigorate societies through new ideas, information and people, thus making societies, places and people more ‘cosmopolitan’. Old-fashioned structures would dissolve.¹⁴ Social theorist Bauman conceptualised these processes as constituting a ‘liquid modernity’, contrasting it with a more fixed and stable older modernity.¹⁵

In developing such a mobile global order, a cluster of system changes occurred around 1990 as Ohmae was analysing and advocating the notion of borderlessness. First, Soviet communism disappeared almost overnight, partly because of its failure to develop and embed new informational technologies. Especially following the demolition of the Berlin Wall in 1989, many significant barriers to the flow of information, people and capital dissolved across Europe, with some Soviet bloc countries joining the European Union – which has as its goal reducing many barriers to movement.

Second, new systems of global news reporting developed. The First Gulf War in 1991 was the first major event in which there was 24-hour real-time reporting around the world. This generated a ‘global stage/screen’ for many major events: wars, terrorist atrocities, sports events, concerts, celebrity scandals, and so on. These became more mediatised, visible and apparently shared. New social media transformed the character and temporality of information and rumour circulating around the world and arriving from ‘elsewhere’.

Third, during the late 1980s, many major financial markets moved to online real-time trading that was accessible somewhere or other 24 hours a day. This increasingly global system of electronic financial trading resulted in the much greater speed and volatility of financial and other markets, often involving high-frequency computer-based trading.¹⁶

Finally, the World Wide Web was ‘invented’ by Tim Berners-Lee between 1989 and 1991. He defined HTML (hypertext markup language), HTTP (HyperText Transfer Protocol) and URLs (Universal Resource Locators). The web initially stemmed from the need for more extensive communications within scientific communities, but it soon led to the proliferation of countless virtual worlds which so transformed economic and social life. The internet is characterised by mostly seamless jumps from link to link, person to person, company to company, without regard to conventional national boundaries through which information was historically located, stored and curated.¹⁷

This cluster of changes came together in the ‘West’ to generate a 1990s ‘global optimism’ as to a progressive open future. The economist Stiglitz described the ‘roaring [nineteen] nineties’.¹⁸ Having ‘won’ the Cold War, the West set about making the rest of the world in its own global, consumerist and borderless image. A vast array of food, products, places, services, friends, family and experiences became available to those with reasonable incomes. The world was indeed ‘open’ and full of choice for many living, working and consuming near the centre of this borderless global society.

Moreover, this open world was seen as lasting well into the new century through continued American global dominance. The Project for the New American Century (PNAC) developed during the 1990s, involving many figures who held high office in the Bush administration of 2000–8. This project sought to ensure continuing American pre-eminence by guaranteeing that the US and its allies could access sufficient oil and related resources, so preventing other powers from challenging the ‘West's’ capacity to spread ‘freedom’ worldwide.

But, significantly, this 1990s global decade did not turn out to be the harbinger of a long-term, optimistic and borderless future. The 1990s were more like a fin de siècle, of intense opulence and decadence for some, combined with the anticipation of a doom-laden ending. And that ending came fast with the dramatic attack on the Twin Towers of the New York World Trade Center on 11 September 2001. This generated the most dramatic images viewed in real time upon the 24-hour global media.

The ending of the decadent ‘roaring nineties’ engendered various apocalyptic visions for this new century. A different academic and political agenda developed, focused upon the many dark sides of these liquid processes, including the possibility of an environmentally induced ‘collapse’ of societies. Just as previous major civilisations, such as the Roman, Mayan, or Soviet, collapsed, so various analysts now argued that this might happen to contemporary Western civilisation through its own unfolding contradictions.¹⁹

This dark agenda was described in some of Bauman's books published in the last decade documenting the ‘collateral damage’ resulting from a liquid modernity characterised by process and flow.²⁰ His texts, as well as those of other scholars, reveal that moving across borders are not just consumer goods, new experiences and pleasurable services. Also there are many ‘bads’, of environmental risks, terrorists, trafficked women, drug runners, international criminals, outsourced work, slave traders, smuggled goods and workers, CO₂ emissions, oil spills, untaxed income, asylum seekers, property speculators, financial risks, hurricanes, and so on. There is a dark side to borderlessness and movement.

From the turn of the century onwards it beca...

Table of contents

• Cover
• Title page
• Copyright page
• Preface
• 1: What Is Offshoring?
• 2: Secrets
• 3: Work Offshored
• 4: Taxing Offshored
• 5: Leisure Offshored
• 6: Energy Offshored
• 7: Waste Offshored
• 8: Security Offshored
• 9: Out to Sea and Out of Sight
• 10: Bringing It All Back Home
• Index