Abstract
The production of wealth through offshore vehicles has been increasingly linked to corruption, tax evasion, and other dubious practices. Leaks like the Panama Papers and investigations from journalists and governments suggest the proliferation of worldwide networks of people, organizations, and practices that successfully elude government control and that profit from regulatory loopholes. Yet, what these networks may look like, how they are formed, who participates in them, and how they operate across borders remain unclear.
In Spiderweb Capitalism, Kimberly Kay Hoang provides a rich and fascinating account of how an invisible global network of people and institutions helps elites make and protect their wealth by “mastering the game of playing in the gray” (p. xiv). Based on Hoang’s global ethnographic research, the book takes us from meetings with potential investors in New York City, Newport Beach, and Seattle, to offshore funds in places like the Cayman Islands and Panama, to shell companies in Hong Kong and Singapore, to investments in the emerging markets of Vietnam and Myanmar. Spiderweb Capitalism offers an empirically, theoretically, and methodologically compelling story about the web of institutions and people, including financial and other professionals, that help ultra-high-net-worth individuals benefit from regulatory loopholes in emerging markets while minimizing the criminal and reputational risks of questionable and illegal practices. The book is written for financial professionals, legal scholars, economists, political scientists, and sociologists interested in offshore finance. Yet, I would also recommend it to scholars interested in the study of professions, relational work, corruption, and elites—and to anyone who enjoys reading deep, engaging ethnographic research.
Asking “how do global elites capitalize on risky frontier markets,” Hoang sets out “(1) to uncover the structure of networks, which I refer to as spiderweb capitalism, (2) to examine the people who make and move money around the world through offshore vehicles, and (3) to reveal how elites finesse the gray space between legal and illegal practices to establish significant social and political connections that allow them to exploit new frontiers” (p. 2). To fulfill these goals, the author structures the book in three parts. The first provides an overview of the spiderweb (Chapter 1), and the second (Chapters 2–5) explains how elites “syndicate risk by employing a group of financial professionals to do the work of playing in the gray” (p. 19). The third part zooms in on the moral dilemmas of individuals on the ground who effectively navigate the fuzzy boundaries between legal and illegal practices (Chapters 6 and 7).
The book stands out for Hoang’s ability to tell a big, complex, and global story through the experiences, actions, relationships, and dilemmas of real people. Chapter 1 sketches the spiderweb—involving rich and ultra-rich actors, financial professionals, bankers, wealth and fund managers, lawyers, accountants, brokers, and political elites—and the multiple layers that structure and distribute responsibilities, risks, and benefits and that protect most actors from seeing the whole picture. While this long and complex structure is legal or sustained by regulatory loopholes, the practices that Hoang finds while zooming in on the different links are not always so. Chapter 2 describes how investment deals are made and the type of relational work that goes into each stage of a deal. For example, actors set up 20-minute presentations in the U.S. to generate interest, highly curated trips to generate the right feelings for investors, and rituals of homoerotic bonding like orgies to develop trust and mutual assurance. The relational work of middle-level actors is what allows deals to be made despite institutional voids, weak regulations, and the unpredictability of emerging markets.
Far from providing a black-and-white account of capitalizing in risky frontier markets, Hoang theorizes across stories and interviews to show the different shades of gray. Chapter 3 is a must-read for anyone interested in the study of corruption. While examining this phenomenon often relies on surveys of citizens’ perceptions or studies of bureaucrats, Hoang provides a rich and nuanced account of how investors play with degrees of corruption as a necessary part of conducting business. Facilitation payments, gift giving, bundling, brokerage, money laundering, and embezzlement represent closely related yet strategically distinct practices that result both from actors’ personal orientations and from the conditions in which business is conducted. In a similar way, Chapter 4 outlines the different tax strategies—evasion, avoidance, or certainty—that are used according to the stage of the investment and the actors involved. Chapter 5 describes how dominant actors ensure their anonymity and impunity by developing complex and often impossible-to-track networks of entities (like corporations, trusts, and foundations). Across these different chapters, Hoang manages to show both the rationality of most of these practices (how they are pragmatic responses to specific conditions) and their dynamism—how they evolve or change according to the actors involved and the stage of the investment.
The last two chapters provide, in the author’s words, a look into “the soul” (p. 169) of the phenomena discussed throughout the book. In Chapter 6, Hoang discusses the moral dilemmas that those “playing in the gray” (p. 169) continuously face and the justifications they develop to cope with the demands of the work. Supported by the kind of deep, emphatic insight that only ethnography can provide, Hoang gives us a framework to understand how people in the spiderweb make sense of their actions according to the specific contexts in which they are embedded. In Chapter 7, the author similarly takes on the perspective of the individuals to explain how investors usually exit markets through one of two extreme scenarios: feast (large profits) or famine (colossal losses).
The book is an important contribution to the study of wealth inequality, corruption, tax evasion, and offshore vehicles. Hoang’s account of how these phenomena take place and are linked together is powerful because it challenges and discards the dichotomies traditionally employed to make sense of them—“legal/illegal . . . democratic states/predatory states,” “First/Third World, developed/underdeveloped, or clean/corrupt” (pp. 8–9)—and because it offers an understanding of these issues grounded in people’s actions, meanings, roles, and relationships. The book is not written for organization scholars, nor does it directly involve organization theory. Yet, it offers inspiration for how to study and think about phenomena that are key to business, financial, and state organizations but take place across organizational boundaries. Hoang “marries ethnographic approaches with network approaches” (p. 10) and provides “a model for investigating field sites that are not always ‘grounded’” (p. 11).
In my view, Spiderweb Capitalism is an invitation for organization scholars to look beyond the boundaries of the organization, and even the state, particularly when researching complex phenomena like organizational misconduct or wrongdoing, corruption, and regulation. Hoang’s research shows that high-quality ethnographic work can cross borders and address phenomena as complex and global as capitalism in a deep and nuanced way.
