The POV Interview: Harold Crooks

Revealing the truth about offshore banking

31 mins read

One of the surprise bestsellers of 2014 was a heavy tome by French economist Thomas Piketty. Capital in the Twenty-First Century describes how income from accumulated wealth is bound to create a world with continuing and growing inequality. Harold Crooks’s new film The Price We Pay dramatically explains how corporations and their small cadre of professional enablers are going even further. By taking advantage of globalization, digitization and the remnants of ancient laws, they are avoiding taxes, pulling money out of every country in the world—both rich and poor—and concentrating it in the hands of a very few people. Countries all over the world are facing growing fiscal crises, unable to hold on to their basic infrastructure, let alone maintain their social safety net, because of tax avoidance on a truly staggering scale. The golden age of the liberal welfare state is over, replaced by a new feudalism.

The Price We Pay expertly presents the case against this new greedy oligarchical Offshore World, using spliced-together interviews from experts, critics and even some of the people who are proponents of the world of globalized finance. Crooks and his research team also draw on clips from hearings in the U.S. Congress and the British Parliament, interviews with residents of Ireland, a country impoverished by creative tax policies, and archival footage showing us the idealized North American middle class of the 1950s.

The soundscape guides our emotions, through the anxiety that accompanies the gathering storm clouds to the jaunty, and ironic, Caribbean music that we hear along with the story of Canadian bankers moving to the Caymans to live a better—tax-free—lifestyle. Crooks explains the mechanics of each step in the tax evasion process, the law that enables it and the means by which governments could decide to work together to put an end to it. Animated graphics present some of the data to make the point visually as well as orally. The irony now is that one needn’t ever step foot in the Caymans or any of the other tax havens: the transactions exist in the unregulated virtual world and the money stays in London. One person quoted in the film tells us that even if the Caymans disappeared in a hurricane, the money would still exist.

Crooks was inspired by Montreal tax expert Brigitte Alepin. In 2004, Alepin explained how the super-wealthy avoid paying taxes in Canada, by hiding their wealth and income in offshore tax havens. Her 2010 book, The Price We Pay, demonstrated the impact that tax evasion has on governments and, consequently, on the citizens who depend on government to provide benefits such as health care, social assistance and old age security. Crooks and his team have interviewed the leading experts in North America , Europe and around the world. We see the evidence of the drain of money that should be going into public coffers on our democratic institutions and on people’s daily lives. It’s a very Canadian film; interviews are presented in their original language, whether English or French, with subtitles. The film is being viewed by politicians and bureaucrats all over the world.

POV interviewed Crooks in our office at 401 Richmond St. W. in Toronto during the 2014 Toronto International Film Festival.

HC: Harold Crooks | POV: Judy Wolfe

POV: Brigitte Alepin is a force in the film, and her book formed the basis for the thesis. Can you tell me about your relationship with her, how you came across the material, and why you decided to make it a film?

HC: Brigitte is a well-known Quebec fiscal expert and, like many of the people in the film, a former insider. Brigitte was an accountant for very well-known corporations. She had a transformative experience when she went to Harvard to do an MBA—a mid-career kind of thing—when she became interested in the issue of what she calls the unsustainability of public finances throughout the western world. She became particularly focused on the revenue side, rather than the expense side, and therefore on the tax gap—with the way in which what she calls ‘fiscal termites’ were eroding the base of public finances—and she wrote books on that. At some point she felt the books, such as Ces riches qui ne paient pas d’impôt (2004) and La crise fiscale qui vient (The Coming Fiscal Crisis 2010) weren’t making the kind of impact that she had hoped for, so she met with Nathalie Barton of InformAction Films, who took on the project.

As that was happening, and they were trying to get the project off of the ground, I was invited to do a panel with Mathieu Roy, with whom I had co-directed Surviving Progress, at the RIDM, the international documentary film festival in Montreal. We were doing a panel on the making of Surviving Progress, and at its end, Nathalie came up and handed me her business card—I didn’t know her—and said, “I’d like to talk you about a project.” Some weeks later she phoned and started talking about a project about the hidden face of taxation, and as deeply versed as I am in economics—before I went to film school I was working on a doctorate and I was very interested in the theory of socialist planning, but at some point I decided socialism wasn’t something that was happening any time soon, so I went to film school—I’d never really thought about taxation. I mean, there are those two issues, death and taxation, that you try to keep as far away from you as possible. I didn’t think it was a particularly glamourous subject; however, once I began to realize that taxation is actually a lens for understanding power—how power is distributed in society, who has power, who doesn’t have power, and whether or not the regular person has a hope in hell of getting ahead—then I was hooked.

On one side you had Brigitte, who was preoccupied with the unsustainability of public finances, and then there was me, coming off of Surviving Progress, which was concerned with the unsustainability of civilizations. So we met between these two poles and began to construct the film focused on the impact that the offshoring of the world’s wealth is having on the major social innovations of the 20th century: the middle class, the welfare state—in other words, democracy itself. So that was my starting point: the way in which this major, mother-of-all fiscal termites was eroding the base of the nation state—that is, public finances—and I decided that the story of how offshoring came into being and how it has evolved was the story that I wanted to tell.

POV: You have a reputation as a great storyteller on film. How did you construct this? You take us all the way from William the Conqueror through to the impact on the digital economy of the labour force. You cram a lot of both micro- and macro-economics, finance and international relations, as well as power and taxation, into the film—how did you do that?

HC: Well, with considerable effort, and it took us about two and a half years to accomplish it. Someone told me that Michael Moore was saying at his talk (at TIFF 2014) that documentary filmmakers should not be shying away from theatrical films, from making entertaining films, from competing with Hollywood in the Cineplexes. We should be looking beyond television documentaries and television financing as the primary venue in terms of films being a tool for social change. That was exactly what I had in mind for The Price We Pay. Having had the privilege of having a small role in Mark Achbar’s The Corporation, for which we co-wrote the narration, I will always remember a review in The Economist of The Corporation where the reviewers said that it was ‘a thinking person’s Michael Moore.’ I feel I really operate in that strand of documentary filmmaking: trying to make big-picture film essays that are entertaining. That’s what we tried to do with Surviving Progress, and it was absolutely critical to me in embarking on The Price We Pay that I had the same editor as we had for Surviving Progress, a brilliant young Quebecois named Louis-Martin Paradis. He’s a very musical editor; not only is he deeply informed about and interested in politics and economics, but he’s also a gifted craftsperson. There’s a lot of evidence of this in the film, and he knows how to use music with humour as well. There was a sense that this would be a film essay that was a cinematic experience, so that it would engage audiences at many levels.

One of the things that I do bring to the film in terms of trying to make this complex material accessible—as the Quebec expression goes, to monsieur et madame tout le monde—is that, first of all, I have quite a good education in economics, so I did have a grasp of the material. There was a book by Nicholas Shaxson that was very important to me in terms of having a sense of the story I wanted to tell. He appears in the film as a very important presence, and he wrote a book called Treasure Islands, in which he describes the birth of the offshore world, which gave me the starting point for the film.

The offshore world, which today represents such a threat to the future of democracy, was born at the end of the British Empire. Basically, the British Empire collapsed after the Second World War, and this presented a predicament for London bankers, because London was the capital of global finance so the bankers came up with a way of maintaining their position, which they still do to this day, by creating a second empire, and that second empire is offshore world. Many of the former colonial dependencies were transformed into tax havens—there are all the famous names: the Caymans, Bermuda, the Bahamas—and they represent, even today, over 50 per cent of the offshore world.

The film tells the story of how this came to be in the Sixties, and it talks about the growth of the Euro-market. The Euro-market is nothing more than the financial transactions that take place in U.S. dollars, but which are not regulated by the United States because they are offshore. Well, offshore itself, as the film shows, is actually a legal and accounting fiction—there’s nothing offshore. As someone in the film says, the Caymans could disappear beneath the ocean and it would still be the fourth-largest financial centre on the planet, because there’s nothing there, really; it’s not invested there, it’s not in a pirate chest on the beach. It’s just all on a separate set of books in London or New York or Zurich or wherever. One of the things in the film that was very important to me, in telling the story of offshore world, was to make audiences understand that there’s nothing there. You know, there have been a slew of films about tax havens, and how rich people go down there, or how dictators rip off their countries and put their money there, but there’s nothing there.
It’s a convenience; it’s a tool of global finance and of multinational corporations for evading democratic control, not only taxation and regulation, and that’s what represents such a threat.

So I begin the story, which in the end is not that complicated a story, but I tell it. It’s a story that’s not well known, how the bankers of the city of London created a second British Empire, and how American banks moved to London to take advantage of this completely unregulated space—and it’s no coincidence that in the financial crisis of 2008, many of the key players were American insurance and banking companies, but they were in London, in what someone in the film calls an unregulated space of money.

POV: There’s the other piece of it that also is centred in London in the film, and that is the corporations which fabricate head offices or subsidiaries in this unregulated space and pretend that they are actually American or British to their consumers. My new favourite person in the world is the Labour MP Margaret Hodge, and she’s just superb at exposing the immorality of these people. Somebody says in the film that there’s a new nobility. I don’t know that nobility is the right word, but there is this class—it’s not even the one per cent, but it’s the professionals, the accountants, the lawyers who enable this fiction to exist and to suck money out of the world. The Guatemala story I also thought was very illustrative, and very helpful.

HC: The issue that you are raising is of the French Revolution itself, and what the film suggests is that, in some alarming way, as offshore world pushes us into some post-democratic reality, we’re coming full circle back to pre-revolutionary times. We’re coming full circle back to a period leading up to the French Revolution, in which the nobility of that era, or the one per cent of our era, no longer pay taxes. The entire fiscal or taxation burden of society, as it was in pre-revolutionary France, is on the commoners—what the French called the third estate. It’s not simply on the middle class; it’s not simply on the working class, but it’s also on domestic, small and medium-sized businesses in all of these countries in the western world, which provide the majority of employment. So at the same time as businesses are being squeezed out by Amazon and the cloud economy high-tech corporations, global corporations are reducing employment throughout the Western world and shifting their profits into the cloud, beyond the reach of democratic control. You mentioned Margaret Hodge, the wonderful Labour parliamentarian in London who is onto this issue and has dragged Amazon and Google and Apple and a few other corporations to testify before Parliament as to their tax avoidance practices, and there’s a wonderful story about her. She’s so effective at tearing through their rationalizations that there’s a new service that you can avail yourself of now in London: if you are being called before Lady Margaret Hodge to testify and explain yourself, there are psychological counsellors in London that provide a service of how to cope with her. She cuts through all the rhetoric and jargon of massive tax avoidance so well that she has a very important function not only in raising public awareness, but also in stirring the pot and causing more and more public pressure to be put on the political process.

POV: Which is terribly important, and most people don’t have a good sense of these issues. I was impressed by the people from Ireland, many of whom do seem to have a proper ambivalence toward Ireland’s approach to taxing these companies.

HC: The ambivalence is a very real moment in the film, because Ireland was devastated by the financial crises of 2008. The Irish banks, with such rapacity, ripped off the Irish, and unlike the United States where a very wealthy society—relative to all other societies on earth—could bail out the banking system without creating massive distress, that wasn’t the case in Ireland. The Irish are going to be paying for this bailing-out of their banking system for generations.

POV: One of the stories you tell—the race to the bottom— is that countries, knowing that they have to compete for jobs, continue to lower their taxes.

HC: Someone who speaks very well to that issue is an economist who, when we interviewed him a year ago, was not the most famous economist in the world, but between the time that we interviewed him and the time that the film was finished, became the most famous economist in the world—Thomas Piketty, whose book Capital in the Twenty-First Century is on hundreds of thousands of bedside tables now around the world. Piketty is one of the leading economists writing about American inequality in the last hundred years, so that’s why we had gone to talk to him, to somehow weave in the inequality story, which is the ultimate raison d’être of our film. In the course of interviewing him, he predicted that corporate income tax would not survive the next two decades unless countries began to collectively tax global corporations and prevent global corporations from gaming countries, and unless international tax rules were rewritten to allow countries to tax global corporations collectively.

Someone else in the film actually comes up with an analogy that I love and that I think is very apt to the situation that we are in today—he makes an analogy with the famous French comic book character Astérix the Gaul. Astérix is a Celtic villager in the time of the Roman Empire, and his village is surrounded by Roman legions, and the villagers have to cope and resist the Roman legions. He says that nation-states are the Celtic villages of our time—even in the biggest countries, even in France, even in the United States, the political process is captive to these corporations. Every country in the world now, to some degree, is analogous to the Celtic villages of Astérix the Gaul; they’re surrounded by multinationals, and the only way to reverse these dangerous trends, to reverse the collapse of progressivity and to prevent the collapse of corporate income tax is to come up with ways of globally taxing corporations—either on a European basis, a North American basis or what have you. This is one of the take-aways of the film: we now have entered a phase where democracy must be protected across borders, because nation-states and government have been so weakened, relative to offshore finance and global multinationals, that we have to reinvent the way we think about defending democracy.

POV: What is the audience that you are hoping to reach for the film, and what would you like to see them do?

HC: The audience is the same audience that goes to Michael Moore films, that goes to Mark Achbar films, that goes to films like Inside Job [dir. Charles Ferguson, 2010]. It’s an audience that is concerned with understanding the forces at play that are creating the predicaments that we’re in and, having seen the film, becomes involved in forms of public pressure, activism, outrage, that are directed to different ways of reversing these trends. One of the things I’ve concentrated on in the film, because I think it has real populist appeal across the political spectrum, is financial transaction taxes or what are known as Robin Hood taxes, and that’s a part of the storytelling logic of the film. I begin with the creation of offshore world by the British banking system in the ’50s and ’60s and show how it has expanded, so that to some extent the city of London and the banking system are the bêtes noires of the film. We move through the different stages and bring ourselves from the ’50s and ’60s to the 21st century, with the banking system still in the background of this offshore system, layered over by Wall Street, layered over by the fact that, as no less than a former vice-president of Goldman Sachs talks about in the film, more and more of the investment activity of the capitalist system is now directed toward utterly speculative activity.

POV: Gambling, really.

HC: Gambling. This is addressed by at least by two people in the film, one the former chief financial regulator of the United Kingdom, and the other the former Goldman Sachs vice-president. Both are now free to speak frankly and are alarmed by these trends, and what they are alarmed by is what John Maynard Keynes warned us about many decades ago, about our economies becoming bubbles on the surface of speculative activity. Both the Goldman Sachs guy and Lord Turner say that we have moved into an era where, with high-frequency trading and this mad so-called investment activity in the 21st century, directed to the most speculative kind of activity, where at the end of the Second World War the average time that a share was held onto was two years, now it’s measured in billionths of a second—investment no longer has anything to do with investing in our futures. As the former Goldman Sachs vice-president said, this has nothing to do with providing investment in jobs for anyone outside of Wall Street—it has nothing to do with transforming our economies to a sustainable future. So, to answer your question, one of the things that the film advocates for is taxation on the trillions and trillions of dollars that are traded every day and that are churning through the London, Chicago, New York and various other financial markets.

Europe is trying to move toward financial transaction taxes. It’s a new form of tax on capital that has escaped the kinds of taxation on capital earnings that existed in the ’50s. That is one of the very practical things that I hope people are going to realise, that our economic systems have become taken over by this frenetic, speculative activity that amounts to trillions and trillions of dollars and that that activity has to be a source for the redistributive stability of our economic systems. Wall Street and institutions involved in this speculative activity, to the tune of trillions of dollars, have to be a source for taxation that is to be used for the sustaining of the democratic nation-state and for finding new forms of revenues for sustaining social democracies. Of course, in the end, we want to go much further than that, because a sustainable future is going to require more than sustaining capitalism. We have to preserve democracy, and it’s certainly the view of this filmmaker that we have to move into a post-capitalist future. I was very touched by Monique Simard, who is now the head of the Quebec film finance agency SODEC (Société de développement des entreprises culturelles). The other night at the SODEC party, she was listing all of the Quebec-based films here at TIFF and when she came to The Price We Pay, she said, “If you’re a leftist, you’re going to love The Price We Pay, and if you’re not a leftist, you’re going to become a leftist.”

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