Friday, March 21, 2008

Big trouble on treasure island

Does being a tax haven make you rich? We have already blogged about this. But don't ask us. Jon Henley of Britain's Guardian newspaper has been there recently, and written a long and thoughtful article about what it really means to live in a tax haven.

He quotes one anonymous Jerseyman:

The island has been sold into prostitution. The financial services guys are like the pimps." Like many, he prefers not to be named; there is a "nasty climate here of attacking dissent and insulting critics. If you're not with Jersey plc, you're against it - you're the enemy. It can get very personal, and it's not pretty.

And the article contains some comments and statistics which are reminiscent of oil-dependent countries troubled by the so-called "Resource Curse" (whereby huge inflows of money to an economy can cause misery for many people who don't get access to the windfall)

"There is a vast gap between the rich and the poor on Jersey. Twenty-five per cent of the workforce are employed in the financial services industry, which generates more than £100,000 profit per employee per year. That has dragged the average wage up to a level significantly higher than on the mainland. But it hides real poverty. A lot of people find it hard to make ends meet."
. . .
Jersey's cost of living is now one of the highest in the world, while wages for semi-skilled and unskilled workers are terrible (adjusted for cost of living, its minimum wage is the lowest of all 27 EU member states).

The article also liberally quotes TJN's John Christensen, himself a son of Jersey (and a former economic adviser to the state,) who says, among other things, this:

Some on the island feel that day may be drawing nearer. "Jersey is what we call a captured state," says Christensen, who returned to the island in his 30s after working for Oxfam and a range of development agencies but left again, disillusioned, in 1998. He argues that as the financial services money has flooded in and costs have climbed, other industries have simply been squeezed out for lack of resources. "The dominant industry had long been tourism, but that's now fallen to 3% of gross national income," he says.

"Dozens of hotels have closed, simply because their owners could make a lot more selling up to banks and developers who will turn their premises into luxury apartments for finance workers. Agriculture is now down to just 1% of the economic base. Financial services are completely dominant, and that affects everything. Jersey is like a living experiment in conspicuous consumption, an island nine miles by five miles with a maximum speed limit of 40mph, but just try counting the Porsches and the Aston Martins. And, of course, that dominance affects government attitudes. The big players can simply go to see selected politicians and say what they'd like in the way of legislation."

The article is highly recommended. Read it.


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