Oligarchy

Hello, and welcome to Oligarchy. We are tracking how Covid-19 and the world’s response to it is affecting the super-rich — and what that means for power and politics.

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 MALTESE DOUBLE CROSS

There has always been a cliffhanger built into Malta’s Individual Investor Program — the scheme it created in 2014 to sell European Union passports to anyone who passes the checks it says it imposes. The cliffhanger was this: only 1,800 golden passports could be sold. It was an exclusive club, when all of those 1,800 lucky families had signed up, applications would be closed. Forever.

This raised an interesting philosophical question: the investor program is basically free money. Malta has been earning money from selling successful applicants the right to live — almost invariably — somewhere else in the EU. All of the benefits accrued to the Mediterranean island country, and yet it had to face none of the potential downsides caused when very wealthy oligarchs start moving into a neighborhood.

When the program’s built-in cap was reached, would Malta walk away from all of this free money, amounting to some 50 million euros a year? Decision time is now upon us. At the end of this month, the program will close. If you want to grab one of the handful of places remaining, you have 28 days left. 

Or, you could just wait. 

The program will be replaced by a new scheme, also super-exclusive, which will have a cap of its own: 1,500 applicants. Surprise! Malta isn’t turning away free money.

•  “Many of you have asked: are we selling our national identity? We will not hesitate in our reply: national identity can never be sold,” wrote Alex Muscat, Malta’s Parliamentary Secretary for Citizenship and Communities. So if Malta isn’t selling its national identity, what is it doing? “We are providing the opportunity for a number of exceptionally talented people to invest in our islands.”

It’s the same with me. I don’t sell copies of my books. I just provide an opportunity for exceptionally discerning people to invest in my literary output. 

It may seem a bit harsh to compare Maltese citizenship to a “limited edition” chocolate bar that goes on sale around Halloween, and then becomes widespread if it proves popular, but that is what it increasingly resembles. So how will the new scheme be different from the old one?

• Previously, a passport cost 650,000 euros, but it will now cost 750,000 (unless you’re prepared to wait three years, in which case it will be just 600,000 euros).
• Previously, you had to spend 350,000 euros on property in Malta. Now, you have to spend 700,000.
• You also now have to donate 10,000 euros to charity.
• In short, it’s a bit more expensive and, to qualify for it, you’ll have to buy a slightly nicer flat.
•  As before, a whole cottage industry of advisers, lawyers and consultants will do all of the actual paperwork for you. 

The Individual Investor Program is dead, long live the Individual investor Program.

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EU TAX HAVEN 

Regular readers of this newsletter will know I have a bit of a thing about the EU saying it’s taking action against tax havens, when it’s actually only targeting places too weak, too poor and too irrelevant to matter. In case you haven’t read the newsletter before, the problem with the EU’s approach is that it penalizes places like Vanuatu, while ignoring countries like the United States, while giving the impression that it’s doing something valuable. 

We now have a new data point, thanks to the Organization for Economic Co-operation and Development’s Global Forum — the premier global body for ending bank secrecy and tax evasion — which has published a new assessment of nine of its members.

Among the countries assessed was Malta, now rated as “partially compliant.” That is only one step up from the Global Forum’s worst rating of “non-compliant,” and is worse than the British Virgin and Cayman Islands (“largely compliant”), and worse than Jersey and Guernsey (“compliant”). Malta now ranks even lower than both St Kitts and Nevis, and the Marshall Islands.

• “The main concerns identified refer to the effectiveness of enforcement and supervision activities to ensure the availability of ownership, accounting and banking information, particularly considering the filing compliance rates. Malta also had a large number of inactive companies registered during the review period,” the report noted.

Will the EU recommend blocking Maltese companies from receiving state aid in the EU? I very much doubt it. Will it continue to pretend to be doing something substantive by bullying places too small to fight back? I fear so.

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CENTIBILLIONAIRE SEASTEADING IN SPACE

Excitingly, we have gained another human being with a net worth greater than $100 billion, thanks to the astonishing increase in the Tesla share price this year, and Elon Musk’s 21 percent stake in the company. He is not just duelling with Jeff Bezos up at the top of the global income distribution, however, he is also duelling with him in space.

Musk is known for his ambition to reach Mars, while Bezos is pushing for a mission to the moon, with the goal of having a full time base there by 2028. I am beginning to wonder if this is the new iteration of seasteading, the libertarian tax-dodging ambition to live out on the ocean to avoid rules created by governments. To date, seasteading schemes have always failed because the weather is so extreme away from land that existence is untenable. In space, perhaps things could be more controllable.

• “Earth’s super wealthy ready to abandon planet,” noted the New York Post, in the headline to a story about people signing up for Richard Branson’s Virgin Galactic.

If they are indeed hoping to abandon the planet, then they may prove disappointed in the service Branson will provide, however. He plans to return them to earth just 90 minutes after take-off, and charge them $250,000 for the privilege.

WHAT I’M READING

It’s a big week for klepto-literature, with the publication of Bradley Hope and Justin Scheck’s “Blood and Oil,” a superb portrait of Saudi Arabia’s Mohammed bin Salman; and Tom Burgis’ long-awaited “Kleptopia.” I’m going to be busy.

See you next Wednesday,

Oliver