While trying to follow the recent Cypress events, I came across this quote from Nicholas Shaxson's book 'Treasure Islands':
"Having gone out of its way to welcome wealthy Arabs in the 1980s and rich Japanese and oil-rich Africans in the 1990s, the City has more recently, with the help of conduit havens like Cyprus, aggressively courted Russian oligarchs, providing them with bolt-holes beyond the reach of Russian law enforcement. By April 2008 a hundred companies from the former Soviet Union’s Commonwealth of Independent States (CIS) were listed on the London stock exchange…"
Here are some more excepts from the book http://www.thirdworldtraveler.com/Global_Secrets_Lies/Treasure_Islands.html
I am midway through the book and find it a fascinating account of globalization from around 1955, particularly the last thirty years.
Paul Krugman says in 'Treasure Island Trauma':
"A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.
One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began."
An excellent review of Shaxson; book 'Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens' and 'Winner-Take-All Politics: How Washington Made Rich Richer- and Turned Its Back on the Middle Class' by Jacob Hacher and Paul Pierson appeared in the London Review of Books last year. It is 'Did not they notice? Offshore' by David Runciman. Excerpts from Runciman's review:
"This is the web, but where is the spider? At the heart of Shaxson’s story lies the City of London, itself a kind of island within the British state. Again, the rise of the City as the favourite place for foreigners to park their money, no matter who they were or where it came from, is related to imperial decline. After the Second World War, sterling still financed much of global trade, but the British economy was no longer able to sustain the value of the pound against the dollar. In the aftermath of Suez, which caused a run on the pound, the government attempted to impose curbs on the overseas lending of London’s merchant banks. The response of the banks, with the connivance of the Bank of England, was to shift their international lending into dollars. The result was the creation of the so-called ‘Eurodollar market’ – which was effectively an offshore haven. Because the trade was happening in dollars, the British saw no need to tax or regulate it; because it was happening in London, the Americans had no means to tax or regulate it. ....US policy-makers were now in a dilemma. They could try to face down the threat of offshore, either with higher domestic interest rates, or with tighter controls on currency outflows and a tougher regulatory regime requiring US banks to share information about their overseas activities. Or they could copy London by creating an offshore world of their own closer to home: in other words, if you can’t beat them, join them. The second was the path of least resistance – among other things it was a useful way of reinforcing the dollar’s position as the global reserve currency – and over time it was the one they took. .......
There is more about the increasing inequality and damage to the developing countries in the book. My take away point is a quote of Keynes in Shaxson's book which is almost Gandhian:
"Let goods be homespun whenever it is reasonably and conveniently possible. Above all, let finance be primarily national'.
"Having gone out of its way to welcome wealthy Arabs in the 1980s and rich Japanese and oil-rich Africans in the 1990s, the City has more recently, with the help of conduit havens like Cyprus, aggressively courted Russian oligarchs, providing them with bolt-holes beyond the reach of Russian law enforcement. By April 2008 a hundred companies from the former Soviet Union’s Commonwealth of Independent States (CIS) were listed on the London stock exchange…"
Here are some more excepts from the book http://www.thirdworldtraveler.com/Global_Secrets_Lies/Treasure_Islands.html
I am midway through the book and find it a fascinating account of globalization from around 1955, particularly the last thirty years.
Paul Krugman says in 'Treasure Island Trauma':
"A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.
One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began."
An excellent review of Shaxson; book 'Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens' and 'Winner-Take-All Politics: How Washington Made Rich Richer- and Turned Its Back on the Middle Class' by Jacob Hacher and Paul Pierson appeared in the London Review of Books last year. It is 'Did not they notice? Offshore' by David Runciman. Excerpts from Runciman's review:
"This is the web, but where is the spider? At the heart of Shaxson’s story lies the City of London, itself a kind of island within the British state. Again, the rise of the City as the favourite place for foreigners to park their money, no matter who they were or where it came from, is related to imperial decline. After the Second World War, sterling still financed much of global trade, but the British economy was no longer able to sustain the value of the pound against the dollar. In the aftermath of Suez, which caused a run on the pound, the government attempted to impose curbs on the overseas lending of London’s merchant banks. The response of the banks, with the connivance of the Bank of England, was to shift their international lending into dollars. The result was the creation of the so-called ‘Eurodollar market’ – which was effectively an offshore haven. Because the trade was happening in dollars, the British saw no need to tax or regulate it; because it was happening in London, the Americans had no means to tax or regulate it. ....US policy-makers were now in a dilemma. They could try to face down the threat of offshore, either with higher domestic interest rates, or with tighter controls on currency outflows and a tougher regulatory regime requiring US banks to share information about their overseas activities. Or they could copy London by creating an offshore world of their own closer to home: in other words, if you can’t beat them, join them. The second was the path of least resistance – among other things it was a useful way of reinforcing the dollar’s position as the global reserve currency – and over time it was the one they took. .......
What happened to the representatives of all those people who don’t have lots of money to move around, who can’t relocate even if they wanted to, and who have an interest in a fair, open and broadly progressive tax system? Didn’t they notice what was going on?
This is the question that Jacob Hacker and Paul Pierson tackle in Winner-Take-All Politics. They don’t spend much time talking about offshore, but the story they tell has striking parallels with the one laid out by Shaxson. One of the ways you can identify an offshore environment, according to Shaxson, is that local politics gets captured by financial services. In that sense, Washington has gone offshore: its politics has been captured by the interests of a narrow group of very wealthy individuals, many of whom work in finance. For Hacker and Pierson this, more than anything else, explains why the rich have got so much richer over the last 30 years or so. And by the rich they don’t mean simply the generally wealthy; they mean the super-rich......
All this happened because the politicians followed the path of least resistance – as elected politicians invariably do – and the better organised and better-funded resistance came from the representatives of big business, not organised labour."
There is more about the increasing inequality and damage to the developing countries in the book. My take away point is a quote of Keynes in Shaxson's book which is almost Gandhian:
"Let goods be homespun whenever it is reasonably and conveniently possible. Above all, let finance be primarily national'.
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