Oliver Bullough is the Author of Moneyland: Why thieves and crooks now rule the world and how to take it back
Bristol Ideas www.bristolideas.co.uk
Oliver Bullough
In conversation with Andrew Kelly
Andrew Kelly: Hello, and welcome to Bristol Ideas. I'm Andrew Kelly and I'm talking to Oliver Bullough about his new book, Butler to the Word: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals. Oliver is a journalist and writer, author of two books about the former Soviet Union, The Last Man in Russia and Let Our Fame Be Great, and Moneyland: Why Thieves and Crooks Now Rule the World and How to Take it Back. This event is part of our ongoing work on the future of democracy.
Thank you for joining us, Oliver.
Oliver Bullough: It’s my pleasure. Thanks for having me.
Andrew: It’s said by many reviewers, and as I was reading this it occurred to me as well, that this is an incredibly timely book for reasons we'll be discussing. But you've been pursuing these stories and these ideas and these issues for a while, even running special tours in London. What might you see on a kleptocracy tour in London?
Oliver: Well, the kleptocracy tour was not my idea – I wish it was – it was the idea of my friend, Roman Borisovich. He was a Russian-born former bankert urned anti-corruption activist. The idea is modelled on the Hollywood celebrity tour. I think the problem that you have in Hollywood and the problem you have in London is essentially the same in that you can drive around the Hollywood Hills and see all of these mansions and one mansion kind of looks quite a lot like another mansion, just like one luxury, beautiful, detached house in Highgate or a townhouse on Eaton Square looks much like another one. How do you know which ones belong to Scarlett Johansson in Hollywood or to Oleg Deripaska or another oligarch in in London?
So essentially what we do is we put people on a bus – we normally pick people up on the Embankment, just near Portcullis House, the sort of annex of Parliament, because the Russian former deputy prime minister has a really lovely duplex apartment overlooking the River Thames, just looking south. There's a nice garden in front of it and then the Thames and then you look down towards Vauxhall. We pick people up there and normally pile into the bus, and then, essentially, where we go next slightly depends on the whims of the guides. There are about five or six of us who act as guides and normally we take in a Tube station that belongs to a Ukrainian oligarch, Dmitry Firtash, just because I like the fact that he owns a tube station. I say ‘like’ – appalled by, but you know what I mean. And then we might go up through St John's Wood where there's a big house that belongs to the former head of Russian Railways. And if the traffic isn't too bad, we'll go to Highgate where Witanhurst, the second biggest house in London after Buckingham Palace, belongs to a Russian fertiliser magnate. We don't only do Russians. If we have the guides available, we might do Nigerians, Egyptians, Malaysians… London is famously the home of the Russian billionaires but we're equal opportunity when it comes to taking money. We're not just ‘butler’ to the Russians, we’re butler to the world. So essentially, anyone who's anyone and has enough money will buy property in London and we like to show that, the idea being to try and cut through the webs of shell companies and so on that disguise ownership of top-end property and just say, look who owns our capital city. Normally, I think, after an afternoon or morning in a bus – we can show five or six properties –normally people are pretty appalled. And I think we've had a small but not insignificant amount of success in trying to change the conversation about foreign direct investment in Britain, and whether perhaps we should be a bit more discriminating about who we take money from.
Andrew: Certainly, it's an important book that you've written, and one that we can all learn so much from. I want to come back to the Tube station, actually, because I think that's really a critical part of the book. But let's talk about ‘butlering’ just for a moment, because you have some fun in the book – P G Wodehouse, Jeeves – but I thought it was a very apt analogy, in fact, the way you used it.
Oliver: Yes, I did actually try to, as it were, embed myself with real butlers. I had this sort of idea that I could write about butlers and maybe perhaps go through butler training myself. But they rumbled me quite quickly, that I wasn't a would-be butler but was in fact a journalist who writes about financial crime, and the invitations just dried up. I wasn't able to do that. But I wanted to structure the book around examples of butlering. And so,obviously, I turned to Jeeves, though people regularly point out that he was in fact a valet, rather than a butler. But it's just a different word for the same thing, really. And what was interesting about reading the P G Wodehouse books again – I’ve read them many times and loved them – is that I'd never really realised quite how dark a character Jeeves is. If you cut past the humour and the amazing way that P G Woodhouse writes, he is essentially prepared to do anything for money. He bribes a policeman at one point, or he gives him ‘a little present’, as he puts it. He knocks a policeman unconscious, he sets up an illegal bookmaking ring, he uses inside information for political advantage. He’s a really amoral human being. And actually, all of those things are essentially kind of what Britain does on behalf of its oligarchic clients. Jeeves turned out to be a really useful guide through the enabling of financial crime. That essentially, if you cut past the immaculate tailoring and the cut-glass accents, the British elite behaves in exactly the same way as Jeeves does, and just takes money from anyone in order to help them get away with anything. And that goes right back to the early post-Empire days, right up to the present. And it involves the use of shell companies to disguise property, the use of lawyers to help people obfuscate their crimes, get away with their crimes, intimidate journalists, buy top-end property. And it's a deeply troubling industry, that I think in the same way that Jeeves’ actions are when you read the P G Wodehouse books, you just don't notice how dark they are because of the Marcus Aurelius quotes and so on that surround them. If you look at what Britain does, and strip away the old Etonian charm, it's just being a conciliary to a mafia Don, really, but just with better tailoring.
Andrew: At the end of the book, you even give us the prices for what we might pay to learn certain butlering skills which I thought was a wonderful moment. Let's talk about Suez where your argument starts, and the national disaster and embarrassment that was. You mention Dean Acheson and his famous early 1960s statement about Britain’s lost empire.
Oliver: Yes, it’s a really interesting, in a way, thought experiment, because obviously Britain didn't used to be a butler. Britain used to be the oligarchy, right? What Vladimir Putin is doing to Ukraine now, that's kind of what we used to do to places. In the Boer War, we wanted to sell Africa’s gold so we attacked them and took it. If we didn't like a country’s trade policy, we would just bombard them with battleships until they changed their mind. That's what Britain used to do. We don't do that anymore. When did we stop? And when did we instead start helping other people do those things? That's the question. And there is this really fascinating moment which slightly predates the Suez Crisis but sets up the context of when butlering begins, which is in 1955, when the Soviet Union decided that they didn't want to keep their dollars in New York. Dollars were crucial if you wanted to trade with the international currency as established by the sort of United Nations at the end of the Second World War – you had to have dollars. But they didn't want to put them in New York because they were worried they would be frozen by the US authorities in the event of a crisis. So instead, they put them in London. They owned a bank in London, the Moscow Narodny bank, and they kept them there. But what were they to do with them? Well, they lent them to a British bank. And in this one trade, both banks made this astonishing discovery. The British bank realised that they could have capital, which they couldn't otherwise get because everyone was starved for capital in the days after the Second World War because there was so much destruction and so much rebuilding that was required. And the Russian bank realised it could charge a higher rate of interest than it could in America, where there were strict limits on how much interest you could charge in the sort of post-war New Deal settlement in the US. So, they discovered this loophole, which is if you use dollars, the international currency, which was super useful because you could do everything with dollars outside the US, you essentially had all the benefits of the dollars and none of the downsides. And essentially, they'd created a law-free space. And they needed a word for this – what do you call a law-free space? Well, we have a concept of a law-free space, that's what it is on the high seas. If you are outside the reach of land, you are outside the reach of terrestrial law, and we call that offshore – literally off shore, you are away from shore. So this is where ‘offshore’ comes from. But this could have been just an oddity, one single trade, two banks make a little bit of money and everyone forgets all about it. But then the next year, the Suez Crisis happens, Britain attempts to assert itself as a vibrant imperial power in an age when it no longer was, is utterly humiliated in its attempts to regain control of the Suez Canal, is forced by the Americans who froze our assets in the way that the Russians were worried, they essentially forced us to back down because otherwise we were going to go bankrupt. And in an attempt to limp on while this crisis was going on, the British Treasury imposed very strict restrictions on what could be done with pounds. And all the remaining merchant banks in the City of London who were already kind of down to their last few pennies were suddenly cut off from financing altogether. They were going to go bust. What were they going to do? Well, they discovered, as the Midland Bank had the year before, that if they just used dollars, they could do what they liked. Not only could they do what they like, but all the restrictions imposed by the British Treasury fell away. And all the restrictions imposed by the Federal Reserve fell away. And suddenly they had strings-free, totally marvellous offshore capital that they could do what they liked with. No taxes, no restrictions, no regulations at all, no capital reserve requirements, nothing. Do what you like. And this is the moment that the City of London is reborn. It goes from being the engine of the British Empire to being the engine of the financial elite –whoever they are, wherever they're from, whatever their wealth is, we will help you do what you like with it. This is when butlering is born. It radically changed the way the world works. It’s quite hard to get your head around how this works now, because there are no restrictions and interest rates when you use dollars, you can charge whatever interest rate you like. There are no restrictions on where you can move pounds or dollars, you can move from wherever you like. The reason why this is, is because all of those restrictions became defunct because of what London did. So the City of London radically reengineered the financial architecture of the entire world, and in whose interests? In the interests of people who own capital – rich people. Essentially, rich people had a problem, they came to Butler Britain and said, ‘We want to be able to move our money without restrictions, what can you do for us?’, and Britain said, ‘Very good, Sir,’ and sorted that out. And that's the model for everything that came subsequently. Rich clients had problems – journalists were writing about them, people could see what they owned, and so on – and we found a solution and helped them at the expense of everyone else.
Andrew: One of the things which I found of great value in the book was making the complex understandable, even to the extent that I think I understand what Eurodollars are now, which is one of the things that we've been talking about. Let’s talk about some of the cases that you cover in the book. Another thing that really interests me is that it’s not just in the UK, but also the overseas territories where these things were taking place. And often at the instigation of an individual who had an idea that something could be pursued here. You talk, for example, about Gibraltar, and its move to being a major centre for online gambling. And it started with one betting shop and a couple of people answering the phone. What happened there and why did they move that way?
Oliver: It's a really important point that we're not just talking about the UK here. Butler Britain is the whole British archipelago, and there are these little leftover bits of empire scattered not quite all over the world but very widely. And they tend to be the bits that were too poor or too small or too remote to become independent. So the British Virgin Islands, the Turks and Caicos Islands, the Cayman Islands, Gibraltar, and so on. And these places were very, very small, as a rule very, very poor, and very, very desperate for business, for some form of revenue. And that's a killer combination if you are a lawyer looking for a way to help your client get away with something, and Gibraltar’s transformation is a fascinating one. And actually fascinating to me, because I didn't go to Gibraltar to write this story I wanted to write about a different story. And I went there and realised that Gibraltar is essentially the world's leading jurisdiction for offshore gambling, and its impact on the world of offshore gambling is immeasurable.When I was a kid, and I'm sure many of the people watching this can remember this, betting shops were totally different to what they are now. They were these very gloomy places with whited-out windows. If you went in there, there was no advertising. It was a bit like visiting a prison in a way, it was so unattractive. And that was how gambling was. It was very, very closely regulated, and also very highly taxed. Every single bet you made was taxed in the same way that if you buy alcohol, every pint of beer you buy is taxed, which made it very difficult for betting shops to offer attractive rates, which really restricted how much people gambled. And what happened was that, essentially, one guy initially in Gibraltar realised that because money flowed freely between Britain and Gibraltar, that if Gibraltar had no taxes on gambling, then people from the UK could call up Gibraltar, bet in Gibraltar and essentially on events which are happening in the UK, and undercut bookies in Britain. And this was only a small little idea and never really amounted to very much apart from this very small chain of betting shops in Gibraltar. But then big British-based bookies realised that if they put their telephone betting operation in Gibraltar too, they could do the same trick. And that essentially, within six months, the entire British telephone gambling operations of everyone, all the big bookies, William Hill, Ladbrokes, everyone, they all moved to Gibraltar, which caused a huge hole to appear in the British government balance sheet. They needed all these taxes that these people had been paying. And it made it incredibly easy and profitable for betting companies who didn't really have to pay tax anymore. It's a big problem for the British government. So in an attempt to get them to come back, the British government totally changes how betting is taxed, how betting is regulated. So the reason why we have this massive explosion of online gambling now, where you practically can't turn on a TV without being offered a free introductory offer for a bet or whatever, this is all due to Gibraltar. And this is what I mean by the butlering industry. Gibraltar offered this service to wealthy companies, betting companies who had a problem, they were being forced to pay these high rates of tax and faced these high rates of regulation, and by moving to Gibraltar, they could sidestep all these regulations, and it offered them a regulation-free space from which they could then impose their will back on the UK, and win all these concessions from the British government, that no-one outside the betting industry was demanding. There weren’t demonstrations on the street saying give us lower taxes on betting, give us regulation-free gambling, allow a massive explosion of fixed odds betting terminals or online roulette or whatever. It was only in the interests of the big companies, and they made an absolute fortune out of it. It has been transformational for Gibraltar. Gibraltar is now a very wealthy place. But it's been disastrous for the UK, because we now have these very high rates of gambling addiction, far higher than we used to have. And the entire debate is framed around problem gamblers, when actually what we're really talking about is problem companies, right? The companies who moved to Gibraltar, they're the ones to blame for what happened. And yet, essentially, in order to try and accommodate their will to try and gain some form of tax revenue out of the gambling operations, this was allowed to happen. Now, it didn't need to happen this way. This is just in the weird structure of what's left of the British Empire, whereby these sorts of overseas territories –they’re colonies, really – but overseas territories, they get to opt into which bits of British they want to be. They say, yes, we want to be British when it comes to being defended by the Royal Navy. But we don't want to be British when it comes to having the same tax rates as you or the same transparency requirements as you or the same police services as you. They get all the good bits about being British with none of the downsides. And that dynamic repeats itself in the British Virgin Islands who have these notoriously opaque shell companies, or in the Cayman Islands who have this huge fund management industry. It could theoretically repeat itself in the Falkland Islands, it just hasn't happened there yet, but there's no reason why it wouldn’t. And it’s a real problem. It means that unlike, say, France, which still has remnants of an empire too, but which all the bits of empire are essentially parts of France, we have multiple different bits of Britain, all of which can play off against each other, to the benefits of the wealthy people and the harm of the rest of us. It should be said, this isn't really a new thing. Two, three hundred years ago, you used to get slavery in the Caribbean colonies when you weren't allowed it in the UK. There have always been differences in legislation between the colonies and the metropolis, but you really would have hoped we'd moved on from that these days.
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