Do tax havens make the financial rich meaner?
Bloomberg is running a story by Matthew Lynn entitled Ultra-Rich in Finance Are Meaner Than Rest of Us, which draws from some comments by the head of Barclays Wealth Management’s private-banking unit about people who are very rich indeed.
"One problem, he noted, of the exceedingly rich, is "demanding and often unreasonable” requests from them, which may create “impossible demands on the organization."
Poor Barclays Wealth Management, poor little diddums.
So far, so mundane - but there's more. First of all:
"There is an increasing amount of evidence that the rich are a vicious tribe of people. One study last year from the University of California, Berkeley, found that the rich are ruder than others. Another piece of research, conducted at the same institution, concluded they were less likely to give to charity than poorer people were. A third study, carried out at the Humboldt University in Berlin, concluded they were “nastier,” in the sense of being keener to punish others."
Lynn noted that the wealthy aren't always like that. Look at Bill Gates and his charitable endeavours. Or Henry Ford doubling his workers’ average pay to $5 a day in 1913 and shortened their working hours. And here is a big point.
"In the past, most fortunes were built in association with ordinary people. Factory owners were aware of the shop-floor workers on whom their wealth depended, and that shaped the view of themselves. . . That made them more human.
The growth of the financial-services industry and the bonus culture has changed that. The investment bankers and hedge-fund managers who make up most of the new rich elite don’t have much contact with ordinary people. They assume their wealth is entirely the result of their own brilliance. And they cut themselves off from normal life. It is an industry that mints billionaires and also breeds arrogance, selfishness and snobbishness."
We would agree with this characterisation of financial services. But we'd add something else: something we have been mulling over for a while, and which we will write about in more detail soon. The secrecy jurisdictions are the locations where these world views of nastiness have most actively been able to incubate and grow, and rebound back into our mainstream nation states. These offshore places offer one thing above all: escape. Escape from taxes, financial regulations, criminal laws, disclosure rules, and any number of other trappings of the democratic state and the social contract.
It is not hard to see where we are leading with this.
This offshore escape chimes with Lynn's observation about separation from society and real people being at the heart of the rise of nastiness. The secrecy jurisdiction (or tax haven, as some people call them) ethic is something that TJN members and officials have felt, palpably, for many years. John Christensen, TJN's former Economic Adviser for Jersey, remembers encountering this astonishing born-to-rule arrogance in the tiny British secrecy jurisdiction almost everywhere he went (though see update on this below), as early as the 1980s: a contempt for the idea of society; opposition to equal rights for women and gays; opinions that "the blacks were much better off under apartheid," or inequality was virtuous because it incentivised the poor to work harder (see this recent blog for just one example of how that kind of view continues to prevail.)
You get these opinions everywhere, of course -- and Jersey contains many thoroughly honourable decent people too - but he was struck by how Jersey, and particularly those involved in its financial services industries, hosted rather pure cultural concentrations of nastiness, which were unchecked by local social or political opposition - because the finance industry had captured the apparatus of power and had, through any number of schemes, eviscerated democratic opposition from large sections of Jersey society.
If we see these attitudes of hate are becoming prevalent in our own supposedly "onshore" societies (which they most definitely are)- then we believe that the tax havens are one of the most important reasons, if not the most important reason, why the nasty attitudes have come about. As just mentioned, we will be writing about all of this in great detail in the coming months.
Update: a commenter rightly pointed out that the "almost everywhere he went" is overdoing it - "regularly" would be a more appropriate word. We have toned down this blog slightly from its original version, in response.
"One problem, he noted, of the exceedingly rich, is "demanding and often unreasonable” requests from them, which may create “impossible demands on the organization."
Poor Barclays Wealth Management, poor little diddums.
So far, so mundane - but there's more. First of all:
"There is an increasing amount of evidence that the rich are a vicious tribe of people. One study last year from the University of California, Berkeley, found that the rich are ruder than others. Another piece of research, conducted at the same institution, concluded they were less likely to give to charity than poorer people were. A third study, carried out at the Humboldt University in Berlin, concluded they were “nastier,” in the sense of being keener to punish others."
Lynn noted that the wealthy aren't always like that. Look at Bill Gates and his charitable endeavours. Or Henry Ford doubling his workers’ average pay to $5 a day in 1913 and shortened their working hours. And here is a big point.
"In the past, most fortunes were built in association with ordinary people. Factory owners were aware of the shop-floor workers on whom their wealth depended, and that shaped the view of themselves. . . That made them more human.
The growth of the financial-services industry and the bonus culture has changed that. The investment bankers and hedge-fund managers who make up most of the new rich elite don’t have much contact with ordinary people. They assume their wealth is entirely the result of their own brilliance. And they cut themselves off from normal life. It is an industry that mints billionaires and also breeds arrogance, selfishness and snobbishness."
We would agree with this characterisation of financial services. But we'd add something else: something we have been mulling over for a while, and which we will write about in more detail soon. The secrecy jurisdictions are the locations where these world views of nastiness have most actively been able to incubate and grow, and rebound back into our mainstream nation states. These offshore places offer one thing above all: escape. Escape from taxes, financial regulations, criminal laws, disclosure rules, and any number of other trappings of the democratic state and the social contract.
It is not hard to see where we are leading with this.
This offshore escape chimes with Lynn's observation about separation from society and real people being at the heart of the rise of nastiness. The secrecy jurisdiction (or tax haven, as some people call them) ethic is something that TJN members and officials have felt, palpably, for many years. John Christensen, TJN's former Economic Adviser for Jersey, remembers encountering this astonishing born-to-rule arrogance in the tiny British secrecy jurisdiction almost everywhere he went (though see update on this below), as early as the 1980s: a contempt for the idea of society; opposition to equal rights for women and gays; opinions that "the blacks were much better off under apartheid," or inequality was virtuous because it incentivised the poor to work harder (see this recent blog for just one example of how that kind of view continues to prevail.)
You get these opinions everywhere, of course -- and Jersey contains many thoroughly honourable decent people too - but he was struck by how Jersey, and particularly those involved in its financial services industries, hosted rather pure cultural concentrations of nastiness, which were unchecked by local social or political opposition - because the finance industry had captured the apparatus of power and had, through any number of schemes, eviscerated democratic opposition from large sections of Jersey society.
If we see these attitudes of hate are becoming prevalent in our own supposedly "onshore" societies (which they most definitely are)- then we believe that the tax havens are one of the most important reasons, if not the most important reason, why the nasty attitudes have come about. As just mentioned, we will be writing about all of this in great detail in the coming months.
Update: a commenter rightly pointed out that the "almost everywhere he went" is overdoing it - "regularly" would be a more appropriate word. We have toned down this blog slightly from its original version, in response.
posted by TJN at 12:53 am
2 Comments:
Mr Christensen's comment about meeting nastiness virtually everywhere in Jersey is neither fair nor true.
Jersey is a community with several layers which tend not to mix. The financial services layer is large and visible: the "old Jersey" layer is harder to perceive, let alone penetrate - but in that layer of the community the nastiness described is very far from the norm.
The real issue in Jersey ties to the old saying that for evil to prevail, all that is needed is for good people to do nothing. Jersey has let the money folk infiltrate its government: unless it picks up the gauntlet, it will never get them out - and there will never be reform.
Thanks for that, James. We do accept your comment about the many layers, and of course there are many, many thoroughly decent people out there, even in the financial services sector. Perhaps this blogger was too broad-brush in his characterisation of Christensen's comments (which were many-layered.) Financial services tend to have a dynamic of their own - and it fully captured Jersey's government long ago.
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