New York versus London

The respected economic commentator Will Hutton has a fine piece in The Observer, looking back from a British perspective on how we got to this appalling panic that is sweeping across world financial markets.

This crisis, he notes, has been 30 years in the making (we'd say longer still.) We'll draw attention to just a few bits of this history. Such as this one:

The regulations that inhibited London's development were progressively eliminated. 'Big Bang' in 1986 allowed the brokers and jobbers on London's stock market to be bought up by American, European and Japanese investment banks so they could do in London what was outlawed in New York by Roosevelt's Glass-Steagall Act, introduced in the aftermath of the credit crunch that caused the Great Depression. They could manage huge investment funds, trade in any kind of financial security both on their own account and for clients, advise on deals and act as large banks - all under the same roof despite the conflicts of interest that were prohibited in New York. London began to rise in the league tables of international finance.

Well said. This is exactly what we have been talking about - competition between jurisdictions on tax and regulation in a race to the bottom. Our network has been dedicated, from its inception, to opposing this very thing -- these harmful international competitive processes, and the malign actors involved in these process -- indeed fighting these things has always been what has made our network tick. This is what we are about. We should note that Hutton focuses here mostly only on New York and London; we look at a much wider cast of characters. He goes on:

"In 1999, Bill Clinton abolished Glass-Steagall; it was pointless given what was happening in London. New York and London were in an unseemly race to regulate less. And if regulators raised an eyebrow they were told not to worry.

The securitised bonds - this packaged income - could always be sold to raise cash; and on top banks took out insurance against the risk of default. Nor should regulators worry if banks directed the investment funds under their management to buy any unsold bonds which might look like a fraudulent conflict of interest; one day they would rise in value.

So confident did bank directors become that they authorised their managers to run hidden portfolios of securitised assets offshore in secret tax havens; thus would profits be boosted at no risk."

And, crucially, Hutton noted that there were no tanks on the lawn backing up those like us who were crying foul.

"There was no effective opposition. The left and organised labour collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, 'securitised' capitalism existed, or any political muscle to support it even if there were."

Leader writers of right-wing newspapers could dub the high priests of finance 'wealth generators' without demur - and if any regulator tried to limit their operations, the world would fall on their head. . . . The only way New Labour could win and govern was to accept the Thatcherite settlement, and try to promote social justice within those constraints. And so the madnesses became rocket-propelled.

Well, in the blink of an eye, all that has changed. We have already shown that tax havens are at the heart of the conditions that created this economic crisis, and we will continue to do so. Many sensible people in the rest of the world are getting there very fast too.

A warning to the tax havens - the tanks are now filing out onto the lawns, and their guns are pointed in your direction. There's not much point our saying "we told you so" since everyone is waking up to this now - but . . . . well, we told you so.