Tina was wrong: globalisation without tax havens
Not surprisingly, there is a huge focus on financial markets, regulatory capture, tax avoidance and tax havens. These issues have become mainstream in ways that seemed inconceivable even two years ago. Former World Bank chief economic adviser Joseph Stiglitz sets the scene in his introductory section:
We will not be able to restore confidence in our financial markets unless we change their behaviour through regulation. Regulation must be comprehensive. Regulatory institutions too have to be reformed: too often, the regulatory process has been captured by those who were supposed to be regulated.
Regulatory capture has become a major problem, and small island tax havens pose a particular problem because their political arrangements are just so weak: an issue which Mark Hampton and our own John Christensen were writing about over a decade ago.
The voice of those injured as a result of inadequate regulation – pensioners who lose their life savings, homeowners who lose their homes, workers who lose their jobs – has to be paramount.
Who can disagree with this? Well apparently the British Chancellor of the Exchequer and the cast of boardroom retreads he summonsed to write the appalling report on the future of financial services in the UK, blogged here. Under the leadership of a former chairman of one of the largest failures in all history, Citigroup, this study singularly fails to take account of the views of any of these stakeholders: no pensioner representatives, no homeowner associations, no trade unions. The fox remains in charge of the hen-coop.
Such regulation could encourage real innovation, not the kind focusing on regulatory, accounting and tax arbitrage that has marked . . financial markets in recent years, or the derivatives that were supposed to manage risk but instead created it.
Here we get to the nub of the issue. In their constant quest to increase profits by circumventing or degrading regulation, taxation and accounting standards, the "innovators" of the past few decades have created a system which undermines genuine wealth creation and enterprise. It also destroys the environment, creates grotesque social inequality, rewards failure and confuses liberty for licence.
We detect alarming trends in the current discourse. Radio and television journalists, apparently bored with covering the financial market crisis, have moved on to other issues. Meantime the silken-tongued public relations teams of the financial services industry are re-emerging from the shadows to re-assert the need for light touch regulation. One such spokesman, a professor from the London Business School, talking on BBC's Radio 4 Today programme this morning, was warning that any attempt to strengthen regulation of the derivatives markets would drive the business elsewhere, presumably to wholly unregulated centres in the Channel Islands or Caribbean. This is the counsel of despair. What is needed is better regulation. Tougher regulation. And no gaps which allow operators to shift to dodgy places with captive regulators.
Re-defining the Global Economy gives an interesting overview of how a set of different voices, including those from developing countries and representing workers and consumers, would set about restructuring globalisation in the public interest. It is an important antidote to those voices of the past who continue to insist that THERE IS NO ALTERNATIVE (TINA) to unbridled laissez faire capitalism.