Great article by John Kay under the above title in the FT today. He makes the point havens only exist because we tolerate them:
People are willing to make agreements under the laws of Bermuda, not just because they know that the laws of Bermuda are not very different from the laws of England, but also because they also know that the consequences of agreements made under the laws of Bermuda will be enforced by the courts of England. Such formal recognition is the essential difference between dealing with a haven and dealing with smugglers, and a difference that exists because we choose to facilitate it.
That needs to end, not least because:
When the haven falls into disrepute – as recently in the Turks and Caicos Islands – it falls to the British government to sort it out.
If you operate in the penumbra of legality, as havens do, it is easy to slip outside the bonds of legality altogether. Where there is legal avoidance of tax and regulation, illegal avoidance of tax and regulation is rarely far behind, and often hard to distinguish: where there is secrecy the motive is frequently impropriety; where there is impropriety, criminality is rarely far behind, and hard to distinguish. To turn a blind eye to avoidance of the law is to undermine all law.
Today’s political outrage is humbug. Havens exist only because larger states allow them to exist, and larger states allow them to exist because the customers of havens are the rich and powerful. In the 1860s, the typical client of a haven was a patron of Blanc’s casino: in the years after 2000, the typical client of a haven was a hedge fund registered in Grand Cayman. Plus ?ßa change, plus c’est la m?™me chose.
We’re seeing it in the EU protecting its own.
But let’s be unambiguous: this is the political elite protecting the financial elite in pursuit of reward.
This is corruption at the heart of the system.
My concern is a simple one. Can the system survive with this degree of corruption within it? If it can’t then mayhem and worse will ensue.
It’s not at all clear that our politicians understand that.
That’s what really worries me about the back-tracking going on right now.