Would the FT stop being incoherent, please?
Earlier today we blogged about recent articles in the Financial Times concerning secrecy jurisdictions. We noted, in particular, comment pieces by Martin Wolf and Avinash Persaud, neither of whom seem to understand how these places function in a world of globalised financial markets and globalised trade.
Now the FT has published an editorial which hints at exactly what we have been banging on about these past years. For convenience, I've highlighted the key points:
"Every first-year economics student learns the conditions for an unregulated market, in theory, to function efficiently. The most important are full information, enforceable property rights and contracts, and the absence of “externalities” – effects of economic transactions on third parties. These conditions are never fulfilled, but many markets come close enough that participants’ self-interested actions achieve good outcomes for all.
When these conditions are absent, markets malfunction; the way they do so is one of the great topics of economic theory. It tells those who care to listen that when a market is too opaque, or when the effects of market transactions are too inter-dependent, the pursuit of self-interest can make everyone worse off, or unfairly land some with the losses caused by others, or – in extremis – make markets disappear altogether. Nowhere are these problems greater than in financial markets."
Now just in case you're not getting the message, here, let's spell it out in plain English. Markets need transparency. Secrecy jurisdictions impede transparency. Not just on tax matters, but on all sorts of other issues, including beneficial ownership and hidden liabilities. They cause confusion about where transactions actually take place; they cause confusion about which regulatory authority is responsible for which transaction; they host off-balance sheet entities; they enable non-disclosure of conflicts of interest; they enable insider dealing on an industrial scale; they fail to require disclosure of material financial and legal information. We could go on.
And for those of you who still don't get it, all of this happens because of the climate of secrecy / non-transparency / opacity (select your preferred term) which they foster.
Has the penny dropped yet? Lack of transparency has contributed to the biggest market failure in the history of capitalism. And with Humpty-Dumpty well and truly toppled, the only way forward must involve extraordinary measures to make markets more transparent. And for the really obtuse amongst you, that means acting now against all the secrecy spaces (the bank accounts, the offshore companies, the SPVs and SIVs, the trusts, the foundations, and so on) which create the opaque environment we refer to as the offshore financial system.
QED. Even a first year under-grad should be able to follow this line of reasoning.
Its over to you now Messrs Wolf and Persaud. Either you accept first year economic theory, and agree with us, or you don't: the choice is yours.
Now the FT has published an editorial which hints at exactly what we have been banging on about these past years. For convenience, I've highlighted the key points:
"Every first-year economics student learns the conditions for an unregulated market, in theory, to function efficiently. The most important are full information, enforceable property rights and contracts, and the absence of “externalities” – effects of economic transactions on third parties. These conditions are never fulfilled, but many markets come close enough that participants’ self-interested actions achieve good outcomes for all.
When these conditions are absent, markets malfunction; the way they do so is one of the great topics of economic theory. It tells those who care to listen that when a market is too opaque, or when the effects of market transactions are too inter-dependent, the pursuit of self-interest can make everyone worse off, or unfairly land some with the losses caused by others, or – in extremis – make markets disappear altogether. Nowhere are these problems greater than in financial markets."
Now just in case you're not getting the message, here, let's spell it out in plain English. Markets need transparency. Secrecy jurisdictions impede transparency. Not just on tax matters, but on all sorts of other issues, including beneficial ownership and hidden liabilities. They cause confusion about where transactions actually take place; they cause confusion about which regulatory authority is responsible for which transaction; they host off-balance sheet entities; they enable non-disclosure of conflicts of interest; they enable insider dealing on an industrial scale; they fail to require disclosure of material financial and legal information. We could go on.
And for those of you who still don't get it, all of this happens because of the climate of secrecy / non-transparency / opacity (select your preferred term) which they foster.
Has the penny dropped yet? Lack of transparency has contributed to the biggest market failure in the history of capitalism. And with Humpty-Dumpty well and truly toppled, the only way forward must involve extraordinary measures to make markets more transparent. And for the really obtuse amongst you, that means acting now against all the secrecy spaces (the bank accounts, the offshore companies, the SPVs and SIVs, the trusts, the foundations, and so on) which create the opaque environment we refer to as the offshore financial system.
QED. Even a first year under-grad should be able to follow this line of reasoning.
Its over to you now Messrs Wolf and Persaud. Either you accept first year economic theory, and agree with us, or you don't: the choice is yours.
posted by TJN at 10:19 am
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