Chapter OneOur Offshore World Happy does the sailor return to the bright streams From far off islands, where he has reaped- I too would like to return to my homeland again. Oh, how I have woefully reaped. Your lovely shores, which have raised me Oh grant me, you forests of my childhood, When I return, peace once more again. -HOLDERLIN, HOMELAND
Grand Cayman, May 2003
From the public beach off West Bay Road, you can see George Town, the capital, due south down the shoreline. I look and wait for the fireworks to start. The sun has set more than an hour ago, but there are a few people on the beach. A young couple kiss. A Honduran family, feet in the sea, eat dinner from a takeout bag. Then, a few minutes after eight, the fireworks start.
It is a night in May 2003, the eve of the five hundredth anniversary of the first sighting of the Cayman Islands by Columbus, on his fourth Atlantic crossing in 1503. A weekend of festivities has begun. Cayman is celebrating its birthday, its origins linked to the dawn of Western enlightenment, trade, and empire. Here is the prism through which our offshore world can be glimpsed.
The fireworks are over before they get started. Perhaps it's because I am too far up Seven Mile Beach to get the full effect. I expect more, a peaking crescendo of light over George Town, some gasp of excitement from the few people around me. It feels like something is being held back. There is an ambiguity to the fireworks; an outward moment of expression has been pulled back, contained, and controlled.
Back on West Bay Road, I start the drive toward George Town. The road runs down the side of Seven Mile Beach and is Cayman's most developed thoroughfare, linking the banks, offices, and law firms of the financial center with West Bay, a residential area with the islands' greatest concentration of black Caymanians. On the way you pass Wendy's, the Holiday Inn, Coutts Bank, the Governor's House, business centers, clubs, bars, and upscale condos. The massive Ritz-Carlton hotel apartment complex, yet to be finished, shoots concrete passageways over the road, stretching toward the sea. Dotted between the hotels and resorts is an occasional wooden cabin, neat and tidy, with a TV aerial and a large house number fixed to the door. No one is walking, just cars.
George Town is quiet. A few streetlamps on the main harbor road barely reveal the water to one side, and side roads on the other are merely tracks leading into the night. The glass structures of the banks that glint and gleam by day are in the shadows, their names-Barclays, Scotiabank, Butterfield-just visible in the moonlight.
The first signs of life are two policemen in white peaked caps, manning a temporary barrier. A few steps on, some Australians pass by in high spirits; then there's a sharp turn into Cardinal Avenue. Here several hundred people are crushed up together, moving to the sounds of Krosfyah, a reggae soca band from Barbados. The music is good and loud, with a full, sharp sound. A little carnival has landed in Cayman. Bodies wind and twist, following the bandleader Edwin's taut gyrations. It's black people's night. "Don't take no video," shouts Edwin, "you just gwan rob me wi' dat." Then he makes a crazy move, and the crowd start to cheer him wildly. "Now show me some grinding," urges Edwin, "real good grinding." He moves his hips round and round and up and down.
A little girl is pushed up onto the stage to take part in the grinding contest. The people roar their approval. "What's your name?" The girl whispers back, her chin pinned to her chest, hiding her face. "Dorrit!" repeats the bandleader, and then asks her age. "Seven years old!" The soca rhythm revs up. The bandleader starts to move. Dorrit starts to grind, body jerking up and down, bonding the revelers together into a single physical mass. But the girl's chin pushes harder into her chest, her eyes turned inward, hidden in shame and embarrassment, caught at once between expressive physical joy and the authority of her mental detachment from the dance. She tires, gives up, and is passed limply back into the hands of the crowd, her sacrifice complete.
Such events make headline news in Cayman. Only a week earlier, the daily newspaper, in its coverage of the Batabano, Cayman's annual carnival, had reminded readers that a group known as the Mudders, who were "renowned for lewd behaviour," had been banned from participating in the festivities. Nevertheless, the Caymanian Compass was sorry to report that "a small number of individuals were openly 'grinding,' with their mid-sections glued together in a highly suggestive manner as they danced to calypso songs." The paper wasn't sure if it was possible to ban grinding altogether, though that would be preferable, as modesty was "a characteristic of Cayman's conservative heritage."
Little Dorrit was caught between freedom and control, like Cayman itself between the global market economy and colonial dependency on the United Kingdom. With this thought we can begin, if we want to look hard enough, to glimpse the strange hidden space between capital and the state, the secret realm at the ambiguous heart of Western modernity, the ever-kept secret contradiction between the individual and the authority of the law.
The Rhythm of the Day
Throughout the weekday mornings, huge ocean cruisers with names like Imagination park just outside George Town's harbor. These twelve-deck monsters, though offshore, dwarf any structure on the island. They jump out at you in the gaps between the beachside hotels when you stroll down West Bay Road, and your sudden thought is that the entire island is itself being towed away and moored elsewhere more convenient.
The cruise-ship tourists are harmless creatures nonetheless. Mostly Americans, earnestly taking in an island that is geographically close to them but foreign enough, with its British Empire-era post office and library, to make it a necessary stop-off point for a wander around the duty-free shops of George Town, picking up Rolexes and Baccarat crystal at Kirk Freeport on Cardinal Avenue.
Several thousand tourists will come onshore off the liners, and by midday George Town will be thronging. By early afternoon, with the liners gone, George Town is quiet and empty. Local people go about doing their business, have a snack outside KFC, set off back home with a few provisions. By the seafront, near the harbor, the town returns to its fishing-village roots. Fish are cut and cleaned on a concrete slab under the shade of an umbrella, a three-man operation performed with exact precision. Around a tree nearby, old-timers and shirtless young men gather close to chat and joke.
When Bill Walker first came to Cayman, in 1963, a lawyer from Guyana, he remembered that "there were cows wandering through George Town, only one bank, only one paved road, and no telephones." Barclays, the bank, had opened in 1953 in a couple of rooms on Harbour Road. Cayman was then a seagoing society, with a strong church and one daily paper, The Gospel of the Kingdom. The entire population was barely 8,000. Now it is approaching 40,000. Now there is an airport with international links and a modern communications infrastructure; some 580 bank and trust companies; and 65,000 companies registered on the island, one and a half times more than the current human population. Now Cayman could boast, in truth, that it is one of the world's biggest financial centers.
Behind the tourist front line of the harbor and duty-free shops, only seconds away from where the old men take shade, is the banking and finance center. By late afternoon, all is hush. The last BMW has left for South Sand, George Town's lush suburb.
Here are congregated the offices of all but a few of the major global banks. Large modern buildings-the newer ones, like Barclays House-are in what might be called the South Florida style: pastel colors, palm trees, pediments, and columns. The offices of the Royal Bank of Canada, HSBC, UBS, and Cayman National Bank follow suit. The Bank of Butterfield and Scotiabank are in older white slab-and-glass blocks, and Dresdner Bank and others are functional tinted glass and concrete.
Each is like an ocean liner that has come across the sea and landed on the island, flying the emblem of its brand. These are the proud monuments of Cayman. Thirty years ago the Legislative Assembly Building burned to the ground, and the banks saved it in their own image, replacing it with an impenetrable glass edifice. Revenue from the banks financed the courthouse, the police headquarters, and the offices of civil bureaucracy. All these structures combine to form what has become a national aesthetic, the bonding of the will of capital and state.
Forty years ago the Cayman Islands were on the verge of economic extinction. There was no room in the modern world for an island that made rope and caught turtles and whose wetlands prevented any agriculture. Today the standard of living is the highest in the Caribbean, surpassing the United States and Britain. There is virtually no unemployment. Only the beautiful alliance of capital and state has made this possible.
It is well known in financial circles that the Cayman Islands is the fifth-largest banking center in the world, holding external assets of more than 700 billion U.S. dollars. In terms of the capital that moves across its shores, Cayman is in a league with New York, London, and Hong Kong. Most of the banking business is institutional, not private, and consists of vast overnight checking accounts for banks and corporations gaining tax-free interest on capital, a million-dollar-a-day advantage that would be impossible at home. But there are no vast reserves stashed away in George Town safes: money is "booked" in Cayman, having merely a virtual presence, similar to the tourists who pass through the island like daylight ghosts.
Cayman's role in mobilizing global capital and turning it offshore goes back to the creation of the Eurodollar market in the 1960s. At that time, the United States had a barrage of regulations and restrictions placed on the export of the dollar, policies designed to keep the U.S. external trade deficit from overheating. But this did not stop foreign, particularly European, demand for the dollar, and it led to the currency being hotly traded outside the United States. Thus the Eurodollar market was born, with dollars going offshore, where they could be bought, sold, lent, and deposited, free from U.S. regulations.
U.S. banks met the huge international demand for dollars by opening up in countries that permitted trade in Eurodollars. The City of London became a prime location and soon dominated the trade in dollars cut loose from U.S. control, turning the city into the world's largest finance center. The banks also found a welcome in the tax havens of Cayman, the Bahamas, the Netherlands Antilles, and Panama. The proximity of these countries to the United States, along with tax advantages that discounted Eurodollar deals, ease of incorporation, and the low overheads of a brass-plate operation-not much more than a telex machine and a desk in George Town or elsewhere-led to a dramatic growth in the level of deposits offshore. By the end of the 1970s, 385 billion Eurodollars were booked offshore in total, with $30 billion of that booked through tiny Cayman.
Banks today in Cayman are dealing with an amount nearly double the total offshore assets of two decades ago. This is what pushes the Cayman Islands into the premier league and sets it apart from other tax havens. Cayman is at the forefront of global capital-not marginal, but central to its all-embracing but often hidden power.
But this is not enough to survive. Cayman has to be at the cutting edge of what can be done with capital if it wants to keep on top. So it invents. It sells new financial products, offers new services that become the radical instruments of capital: mutual funds, venture capital funds, fixed-income medical receivables, structured finance, special purpose vehicles. Cayman is not merely a depository for global capital, but a business-backed state with a mission to increase the flow of capital toward its shores. It is a seller of novelties on the financial market, a sweetshop for capitalism, developing new flavors and recipes for increased returns.
Close collaboration between the private sector and government in Cayman is paramount. In committees hosted by the islands' financial secretary, bankers and financiers pitch bold ideas for attracting finance to Cayman. New laws are quickly drafted, and no one gets in the way, for business knows what it wants, and the government is heavily dependent on business for revenue. The islands' financial associations play a key role, dining and socializing with government officials and legislative members. "It's a great business situation-it's who you know," confirmed Mike Gibbs, chairman of the captive insurers association, whose members have seen a boom in the underwriting of terrorist risk in Cayman since the attacks on New York and Washington in September 2001.
There is an evangelical spirit to capitalism in Cayman, an evocation that only here, on these small islands, can the real thing be found. The spokesman for the chamber of commerce makes it plain: "Capital comes to Cayman because onshore jurisdictions don't meet the needs of entrepreneurs. They have too many regulations and restrictions. We have the instruments to raise and maximize capital, do deals, and take risks. Business wants control-and freedom-and that's why it comes to Cayman."
The Law of the Land
George Town Public Library, on dusty Edward Street, is just a step away from the radiator-grill-style facade of CIBC Bank and Trust Company Limited. The old stone library is a good retreat from the heat, and inside, young Caymanians, preparing for exams, coach each other in whispers.
On two short shelves in the library's reference section is the complete body of Cayman law, filed into twenty small folders. Like the wooden vaulted ceiling above, Cayman law is straightforward, rigid, and uncompromising. Its statutes have provided for the perfect marriage of an ultraconservative society to a radical liberal economy, and have been the foundation of Cayman's success as an offshore finance center. The Poor Persons Law, the Public Order Law, and the Education Law are all short, sharp, and authoritative, with no more than a dozen sections each. Children shall go to school: if they don't, parents will be fined. Children shall behave: if they don't, they will be beaten. People shall not demonstrate without permission: if they do, they will be sent to prison. There are no opt-outs or exceptions for special cases. The death penalty for murder is still in force, but the last time two men were sentenced to the gallows, the United Kingdom stopped the hanging at the last hour. Cayman was not pleased. They had spent $300,000 and three months' work designing the gallows.
Company and business law takes up the bulk of Cayman legislation. There are eleven Companies Laws, and it is the only area of law where there are numerous amendments. But compared with the volumes of bankruptcy and insolvency law in the United States, there are just a few pages in Cayman. Again by comparison, labor and trade-union law is virtually nonexistent.
Henry Harford, of Maples and Calder law firm in George Town, explained that Cayman law was stuck in a kind of time warp. "It's as if the clock was stopped on English law some time in the nineteenth century-certainly before the dawn of the welfare state. Cayman law is simple and clear-what might be called a classical liberal body of law." Indeed, there is little difference between the law today and that watched over by an English colonial administrator in the mid-nineteenth century.
"There's no expectation that someone else is going to take the strain," said Harford. "In Cayman it's sink or swim. There's no consumer law, no social welfare, no endless reams of employment law. You're responsible for yourself. In business, contract law rules. You shake hands and keep your word. If something goes wrong, you are either right or wrong in law. It's there in black and white."