Loophole Capitalism: Theorizing the History of Tax Havens and the Offshore Economy

Abstract

This article develops and historicizes the concept of loophole capitalism to explain how tax havens and the offshore economy have become structural to global capitalism. We define loophole capitalism as a system in which multinational firms and professional services firms identify, expand and exploit regulatory and fiscal gaps within and between jurisdictions. The process follows a recurrent sequence: initial exploitation, emulation by peers, normalization as accepted practice and consolidation as a durable privilege for powerful actors. We trace the historical development of loophole capitalism from the post-war proliferation of tax havens in the 1950s and 1960s, to the explanation of offshore banking and financialization in the 1970s, the phase of onshore market state adaptation in the 1980s and 1990s and, finally, a post-2000s dual dynamic of growing political resistance alongside niche specialization and technological extension. We conclude by identifying the key characteristics of loophole capitalism resulting from interstitial, extractive and mimetic processes.