The Hidden Wealth of Nations ― The Scourge of Tax Havens

We are well aware of the rise and dominance of the one percent as the rapid growth of economic inequality has seen the majority of the world’s wealth held in the pockets of fewer and fewer. One much-discussed solution to this imbalance is to significantly increase the rate at which we are taxing the wealthy. However, an enormous amount of the world’s wealth is hidden in tax havens, in countries like Switzerland, Luxembourg, and the Cayman Islands, so it can’t be fully accounted for and taxed fairly. To complicate it further, no one, from economists to bankers to politicians, has been able to quantify exactly how much of the world’s assets are currently being hidden—until now. Gabriel Zucman is the first economist to offer reliable insight into the actual extent of the world’s money held in tax havens. And it’s staggering.

In The Hidden Wealth of Nations, Zucman offers an inventive and rigorous approach to quantifying how big the problem is, how tax havens work and are organized, and how we can begin to approach a solution. His research reveals that tax havens are a quickly growing danger to the world economy. In the past five years, the amount of wealth in tax havens has increased over twenty-five percent—there has never been as much money held offshore as there is today. This hidden wealth accounts for a least eight percent of the global financial assets, equivalent to $7.6 trillion. Fighting the notion that any attempts to solve the tax haven problem are futile, since some countries will always offer more advantageous tax rates than others, as well the counter-argument that after the financial crisis many countries have successfully fought tax evasion, Zucman shows how both sides are actually very wrong. InThe Hidden Wealth of Nations he offers an ambitious agenda for reform, focused on ways in which countries can change the incentives of tax havens. Only by first understanding the extent of the wealth being secretly held can we begin to estimate the kind of actions that would force tax havens to give up their practices.

Zucman’s work has quickly become the gold standard for quantifying the amount of the world’s assets held in havens, and in this concise book, he lays out in approachable language how the international banking system works and the dangerous extent to which the large-scale evasion of taxes is undermining the global market as a whole. The Hidden Wealth of Nations is essential reading if we are to find a way to solve the problem of increasing inequality.

Gabriel Zucman is assistant professor at the London School of Economics.Teresa Lavender Fagan is a freelance translator living in Chicago; she has translated numerous books for the University of Chicago Press and other publishers.