Zombie Colonialism: How Colonial Structures Became Modern Tax Havens

Harrington opens Chapter 3 with an image that stayed with me for days. In Cusco, Peru, the Spanish conquistadors built a Catholic church directly on top of an Inca temple to the sun god. They used the same stones. The same walls. They conquered the Incas by using Inca roads, then built their empire on Inca foundations.

That is exactly how the offshore financial system was built. On top of the British Empire.

Nearly Every Tax Haven Is a Former British Colony

Here is a number that should stop you cold. About 68 percent of all offshore finance is based in current or former British territories. If you count the United States as a former colony, that number goes to 83 percent.

Not Spanish colonies. Not French. Not Portuguese, German, Italian, or Dutch. British. Out of all those globe-spanning empires, it was almost exclusively the British one that gave birth to today’s tax havens.

Why? Three things. Low taxes in the colonies. The common-law legal system. And a specific strategy London used to push colonies toward economic independence after decolonization.

Think about that for a second. The infrastructure of colonialism did not die when the colonies gained independence. It just got a new job.

The Tax Thing

American readers especially will find this interesting. We are taught that the American Revolution was about unfair taxation. But British colonists actually had it very good. Before 1776, American colonists paid about 1 to 1.5 percent tax. Their relatives back in Britain paid 5 to 7 percent. Spanish colonists in Mexico paid 50 percent more than people in Spain. The tax burden on Spanish colonies was thirty-five times higher than on British ones.

The British kept colonial taxes low on purpose, as a perk for white settlers, to get them to move and stay. After the American Revolution, they got even more generous, passing the Taxation of Colonies Act of 1778, which basically eliminated taxes in the Caribbean colonies.

So by the time these places became independent in the mid-twentieth century, not paying taxes was practically a tradition. It was baked in.

Common Law as an Operating System

Here is the part that really clicked for me. The British common-law system works fundamentally differently from the civil law that came from the Romans and governs most of continental Europe.

Civil law tells you exactly what is allowed. Everything else is forbidden. Like a game of “Mother, May I.”

Common law tells you what is forbidden. Everything else is allowed.

That one difference is enormous. It means common-law jurisdictions can innovate their way around regulations. They can compete with each other by tailoring laws to what the ultra-wealthy need. And the key tool, the common-law trust, was invented in medieval England specifically to help noblemen dodge taxes owed to the king. It is now the backbone of offshore finance worldwide.

What gets me is that trusts are not even legal entities. They cannot go bankrupt. They cannot be sued. In many countries they do not have to register with anyone. They can just exist, in secret, holding billions. And because common law spread through the British Empire to dozens of countries, a trust set up in one former colony is recognized by courts everywhere. It is like having a universal adapter for moving money around the world.

The Rogues Gallery

So here is what happened when the empire started falling apart. Three things converged at once. Decolonization freed up the colonies. The new welfare states in Britain and America jacked up taxes. And currency controls eventually loosened, making it possible to move money across borders.

The former colonies had the legal infrastructure. They had the low-tax tradition. They just needed someone to connect the dots.

Enter the con men.

In the Bahamas, it was Wallace Groves, an American financier who had already served two years in federal prison for financial crimes. He sailed to Grand Bahama on his yacht, saw the opportunity, and basically colonized the place for himself. The Bahamian government gave him 50,000 acres of land, about 15 percent of the island, to own and administer personally. Tax free. For ninety-nine years. He could distribute business licenses, administer police payrolls, expel people he called “undesirables.” Life magazine compared his authority to a feudal baron’s.

Groves created Freeport. A colony within a colony. He was assisted by a Canadian gambler with Mafia connections and a former Swiss banker who had escaped from Devil’s Island, the French penal colony from the movie Papillon. And eventually, Meyer Lansky moved in, one of the most feared mobsters of the twentieth century. Groves’s “silent partner.”

The American press literally called Groves “King of the Bahamas.”

The BVI and Cayman Miracles

It was not just the Bahamas. Throughout the dying empire, the same pattern repeated, driven by remarkably similar characters.

In the British Virgin Islands, attorney Michael Riegels, born in British East Africa, educated in Kenya and Oxford, led a team of five lawyers who wrote the International Business Companies Act. This law was so radical, so attractive to the wealthy, that the BVI went from what an imperial administrator had called “the most backward unit in the British Colonial Empire” to hosting about 40 percent of global offshore business. Well over half of the country’s national revenue now comes from incorporation fees. The law was copied so widely, often word for word, that for a time all offshore companies everywhere were just called “BVIs.”

In the Cayman Islands, attorney William Walker, born in British Guiana, educated in Barbados and Cambridge, designed the trust and company laws that turned the islands into one of the world’s leading tax havens. Within twenty years, the Caymans went from a poor, mosquito-plagued dependency of Jamaica to the Caribbean’s highest per-capita income, beating Great Britain itself. The Queen made Walker an Officer of the Order of the British Empire for this “economic miracle.”

But here’s the problem. The real reason money flooded into the Caymans was not just clever law. Barrister Milton Grundy, who helped Walker, told Harrington plainly in a 2019 interview: “There was a lot of political uncertainty, because power was moving from white people to black people, so wealthy people wanted to get their money out.” The Caymans were attractive because the governor was white and there was no political agitation.

So the racial power structure of colonialism was not just preserved through offshore finance. It was the explicit selling point.

The Recipe for a Tax Haven

Harrington lays out the formula at the end of the chapter, and it reads like a historical crime report. Establish a colony within a colony. Repurpose imperial legal and financial institutions for private benefit. Accumulate wealth through dispossession. Enforce it all with authoritarian white supremacy.

That is the recipe.

The Bahamas went from widespread destitution and occasional death by starvation in the 1940s to being called “the richest country in the Caribbean” by the Financial Times in 2019. Twenty percent of its economy comes from offshore financial services. But inequality skyrocketed alongside national wealth. The landscape became, in Harrington’s words, poverty punctuated by “tremendously wealthy private empires” owned by a few white men.

The colonial structures did not die. They stumbled forward, decayed but indestructible, extracting resources at the expense of locals. Marx compared capitalism to a vampire. Harrington compares offshore finance to a zombie. Zombie colonialism. The old empire’s corpse, reanimated by modern finance, still walking, still feeding.

The Inca walls are still there, under the Spanish church. And the colonial structures are still there, under every offshore trust, every shell company, every secret bank account in Nassau.

This is post 5 of 8 in the Offshore by Brooke Harrington retelling series.

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