Tuesday, December 07, 2010

Number crunching on the City

We've just written about some taxwash in the City of London. Now, on a slightly different tack, we bring a couple of graphs. First, a look at how financial services in the UK have grown in the past decade and more, up to the Financial Crisis (hat tip: The Economist.)

Now look at how the UK has been slipping down the human development tables (hat tip: Open Democracy.) As finance has risen, the UK has seen its relative performance wither. And that's in the supposedly golden period before the crash.

OK, this is a bit of a cheap shot: just because one trend went hand in hand with another trend doesn't mean one caused the other. And the timescales don't quite match either. Still, we have good reason to believe that there is a whole lot of causation at work here. Not least because of what we like to call the Jersey Disease, whereby financial inflows from the financial sector tend to crowd out and tilt the exchange rate against other sectors. For a much more detailed look at some of these issues, take a look at this, which notes, among many other things:
"In Jersey the cost of technical, managerial, and professional labor (and the high cost of its housing) is comparable to the most expensive parts of southeast England (Kemeny and Llewellyn-Wilson 1998). High costs crowd out the scope for the development of other sectors apart from those servic- ing the downstream needs of either the OFC or the public sector, such as information services. As this process of crowding out develops, tour- ism finds itself unable to compete within the labor market for increasingly scarce human resources, and is forced to retrench, as Jersey’s recent history demonstrates."
Or, for something more investigative, take a look at this. And we will bring you more -- much more -- in January. We'd also love to see more independent - and we mean truly independent - research in this area.

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