You ask why, if there’s an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It’s in the interests of some of the moneyed interests to allow this to occur. It’s not an accident; it could have been shut down at any time. If you said the U.S., the UK, the major G-7 banks will not deal with offshore bank centers that don’t comply with G-7 bank regulations, these banks could not exist. They only exist because they can engage in transactions with standard banks.It's a political malfunction, not an economic inevitability. It's therefore a feature, not a bug.
I would argue that the US and UK in particular are the MAJOR tax havens. Places like the usual suspects of the Cayman Islands, Bermuda, to a lesser extent Ireland simply act as appendages to the UK and US. Bermuda and the Cayman Islands are still constitutionally part of the United Kingdom you can debate how much autonomy they have from the UK but under international law they are part of the United Kingdom. I do think the crux of the manner and the dirty secret of both the islands and the UK political establishment is that they cannot actual force Bermuda to become an independent country. They could eliminate or curb Bermuda's independent autonomy from the UK but that would only entitle the people of Bermuda's under international traditional to the same types of government service as those living in the UK get(NHS etc) which would cost an absolute fortune for the UK to provide(look at how much money they spend in the Falklands). Thus the present circumstances becomes essentially the worst of both worlds.
The other thing I'll mention is unlike the 1950s and 1960s the world's remaining dependent territories i.e. Puerto Rico, Cayman Islands, Bermuda, Northern Marianas have come to realize independence doesn't "pay" economically and its best to force the mother country to pay up and provide services. In Puerto Rico this occurs through large transfers payments and labor migration to the mainland US. In the Caymans this occurs indirectly through "tax leakage" from London and its OECD allies which London could do something about as Stiglitz points out but refuses to do realizing the financial implications of direct Puerto Rico style transfer payments(The fact that on a proportional basis the Caymans damages to tax the tax base of the UK's allies more than the UK itself is probably quite appealing to the number crunchers at HM Treasury similar to the UK Swiss and UK Liechtensteinian Rubrik agreements). What perhaps this really shows is the UK really doesn't give a s*** about its OECD allies its all about them. Which perhaps is a really good reasons to simply abolish the OECD(or at least the part that deals with tax policy) once and for all.ReplyDelete