Ed Hadas of the FT on Greenspan's FT article

There have been a number of demolition jobs of Alan Greenspan's article in the Financial Times defending financial liberalisation: Naked Capitalism, Paul Krugman, and others. One that seems to have been overlooked is by Ed Hadas, editor of the FT's Lex column:

Responding to Greenspan's argument that the more complex a financial system gets, the more growth there is. There is, indeed, some evidence for this: poor countries, as they acquire more cash and capital, need more complex financial systems, certainly. Hadas comments:

"It is a very interesting argument, and not even a foolish argument, unlike much of that article which seems to be a peculiar defence of not doing anything. . . . There is a positive and close tie from a certain level of development up to maturity. After that point the question of whether there is too much becomes a more interesting thing.

He argues, of course, that things then starts to change direction. A lot of the instruments - the CDOs squared and so did a lot of damage.

The questioner responded: Go back to a simpler financial system, you can go back to a quieter period, and growth was much slower?

Hadas: In the 1950s and 1960s growth was very good. World growth was extremely good.
. . .
The ultimate question is whether finance in itself is a good thing on its own. If you think of it as a tax on the system, a cost that you have to have of growth is to have more finance . . . there is a good case to be made that finance is something to be controlled, measured and kept in proportion to the amount of good that it's doing, and financial complexity after a certain point no longer does that good.

Here is the point from a TJN point of view: tax havens, or secrecy jurisdictions have, almost by definition (indeed one IMF working paper used this definition, and found the UK, among others to be one) oversized financial sectors. And that's a pointer, at least, to where it's all gone wrong. Too much finance ain't good. And that's what tax havens are all about: too much finance.

OK, this, in itself is merely suggestive: it isn't a slam-dunk against tax havens. There's much, much more to be said on this subject. Read it here.