Why does Britain feel poorer, more unequal and less productive than it should be?
In this Funding the Future podcast, I speak with John Christensen, co-founder of the Tax Justice Network, about the finance curse, which occurs when banking and financial services grow beyond any socially useful scale.
Drawing on John's work in Jersey and decades of UK experience, we explain how finance crowds out real economic activity, drives up housing costs, drains talent, captures politics and ultimately undermines democracy. We also discuss new research showing the staggering cost of this failure to every household in Britain, and what can be done to reverse it.
This is the audio version:
There is no transcript of this as it would be far too long, but this is a summary instead:
The finance curse: how Britain was hollowed out
I recently recorded another Funding the Future podcast with my long-standing friend and collaborator John Christensen, with whom I co-founded the Tax Justice Network almost a quarter of a century ago. This conversation followed on from an earlier discussion about what has become known as the finance curse. This is an idea John has spent much of his working life developing, and one which I believe is central to understanding why the UK economy is in such deep difficulty today.
The finance curse describes what happens when a financial services sector grows beyond any socially useful scale and begins actively to damage the economy and the political system that hosts it. John's insights into this emerged originally from his work as economic adviser to the government of Jersey, where he was formally tasked with maintaining a balanced and diversified economy, and where he instead watched, in real time, as finance crowded out almost everything else.
From the “Jersey disease” to the finance curse
John explained how the idea first emerged from observing Jersey's transformation in the 1980s and 1990s. What had once been an economy based on agriculture, horticulture, tourism and small-scale enterprise was rapidly overwhelmed by banks, law firms and accounting firms serving offshore finance. This process was so destructive that John and an academic colleague initially labelled it the “Jersey disease”.
Over time, however, it became clear that what was happening in Jersey closely mirrored the better-known resource curse, where countries rich in oil or minerals experience economic distortion, political corruption and weakened democracy. In the financial case, it is not oil or gas but banking and financial services that behave like a cuckoo in the nest, by squeezing out other sectors and capturing political power.
John stressed that the harms of the finance curse are not static. They evolve over time, affecting currency values, labour markets, democracy, inequality and investment. Crucially, they impose real and measurable costs on households — costs which we now know amount to tens of thousands of pounds per person in the UK.
Seeing the damage with our own eyes
I reflected on how stark this transformation has been in physical as well as economic terms. The Channel Islands I visited as a child, places shaped by farming, fishing and tourism, are unrecognisable today. The harbour areas and town centres now resemble anonymous financial districts that could be anywhere in the world.
The same is true of London. The City I entered in 1979, when manufacturing and productive enterprise still dominated the corporate landscape, has been replaced by an economy centred on finance, rent extraction and speculation. This matters because the UK, unlike larger economies such as the US, has allowed finance to become overwhelmingly dominant, hollowing out its industrial base in the process.
Six ways finance destroys economies
John then set out six core mechanisms through which the finance curse operates. These mechanisms not only apply to Jersey, but to the UK as a whole.
First, there is a form of Dutch disease. Finance drives up asset prices, wages and land values, making other sectors uncompetitive. In Jersey, this was visible in house prices rising at twice the UK rate for a decade, making it impossible for workers outside finance to live there. In Britain, the same process has priced entire generations out of housing, particularly in London and the South East.
Second, the labour market is distorted. Highly educated and talented people are drawn into finance by inflated pay, draining skills from engineering, manufacturing and research. This brain drain undermines innovation and long-term productivity, leaving the real economy weaker as finance grows stronger.
Third, financialisation accelerates wealth extraction. Private equity and hedge funds acquire viable businesses, load them with debt, strip assets, suppress wages and extract rents. John and I both noted how this process destroys productive capacity while generating paper profits often routed offshore.
Fourth, finance concentrates geographically. Wealth, talent and political attention are sucked into financial hubs, and above all, London, while the rest of the country is starved of investment. This deepens regional inequality and fuels misleading narratives that places like Scotland and Wales do not create value, when in reality their value is extracted and booked elsewhere.
Fifth, everyday life becomes more expensive. Rents rise, small businesses are priced out, high streets hollow out and social mobility collapses. The free-for-all in mortgage lending since the 1970s has left millions burdened with unsustainable debt, reversing decades of post-war progress.
Sixth, and most dangerously, finance captures politics. Because financial capital is highly mobile, it can threaten to relocate unless it gets tax cuts, deregulation and political deference. This gives banks and financial institutions enormous leverage over governments, political parties and the media — undermining democracy itself.
The staggering cost of the finance curse
We then turned to the evidence on cost. Research commissioned by the Tax Justice Network, from the University of Sheffield and the University of Massachusetts, estimated that between 1995 and 2015, the finance curse cost each person in the UK around £67,500, or more than £3,000 per year. In total, the losses amount to around £4.5 trillion.
These costs arise from:
- misallocated investment,
- excessive mergers and acquisitions,
- underinvestment in innovation,
- labour misallocation,
- bank bailouts and
- vast bonus payments.
The idea that private banks allocate capital efficiently, John argued, is simply false. The evidence shows the opposite.
What can be done?
The obvious conclusion is that the City of London is not the “jewel in the crown” it is so often claimed to be. It has been a drag on the UK economy for decades. Reining it in will require stronger regulation, public control over capital allocation, regional and national investment banks, and serious competition policy.
John also argued for confronting the ideological roots of the problem, which he explores in his forthcoming film The Finance Curse. These include the shareholder revolution, the dismantling of antitrust law, and the race-to-the-bottom ideology of national “competitiveness” promoted by global elites.
The task ahead is not simple, but continuing to allow finance to dominate unchecked would lead to economic stagnation, social division, and democratic decay. If we want an economy that works for people rather than against them, confronting the finance curse is unavoidable.
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I think that point six needs fleshing out with the obvious problems of political donations which essentially help to distort policies in favour of finance?
On other words, taxes not paid find themselves being used to buy democracy. This is what a liberalism aware of human weakness would seek to address.
Otherwise John’s analysis works for me. He’s a good man.
Thanks
We are recording again, tomorrow.
I am recording with a differemt guest today.
I think it may have been said before, but the financial sector and the markets that we have seem to have become deracinated from the rest of society – uprooted, offshore, separate etc., not really serving any use to society, but enabling society to be ‘hollowed out’ by a minority interest.
Finance, markets and indeed politics are working in a totally obtuse and abstract way. This is what the RF book and the Labour party have not understood – the Lib Dems too I think.
Maybe they do not understand because they are in on it – they are funded by the outcomes of this deracination. Everything looks fine from where they are. And of course, it would, wouldn’t it?
I think that the financial sector and markets need to be planted back into society and grown from there. And that is the job of politics.
Agreed
Even Polly Toynbee and Gordon Brown are ‘almost’ calling for large political donations to be banned, and for 2nd jobs and revolving door jobs and corrupt lobbying and bribery for honours to be curtailed. It probably wont happen – but if Labour brought in an emergency ‘clean up politics’ bill it would go down well with the public, who all polls show think politicians are mainly ‘in it for themselves’.
That would mean it would be much less easy for the finance sector to buy up politics. We can but dream
Agreed
yes indeed
As posted yesterday , Donations to Reform are more than to Labour and Liberal Democrats combined. 66% go to Reform and Conservatives.
Reported donations in 2025
Reform £13m
Conservatives £12m
Labour £7m
Lib Dems £3m
….
Green Party £136k
https://donation.watch/en/unitedkingdom/2025/overview
Richard, I am unclear how financial capital is supposedly highly mobile. For example, a Gilt – surely even if I sold a Gilt to an American for dollars, the American would be getting the same amount of Sterling in interest and the same amount of Sterling when the Gilt’s term has finished. Any property is of course not mobile at all. All the other things you list in your glossary entry are also all denominated in Sterling so can’t really be converted into another currency, just swapped with someone else.
I think we need to call their bluff!
Sterling can be sold…
It is sold
Capital flight is possible as a result.
And the ownershipo can also be reorded outside the UK, and so outside regulation and tax in many cases.
Perhaps the mainstream is taking note:
“Rethinking Economics, the movement changing how the subject is taught”
The Guardian, 10 Feb 2026
https://www.theguardian.com/environment/2026/feb/10/rethinking-economics-student-academic-organisation-changing-education
Maybe…
But the real impact in unverities is small, just as we are seeing with Accounting Streams. The instiutional resistance to such thinking is enormous.
Thank you, Richard.
Unfortunately, I’m running around today and can’t write more, but hope you will revisit.
May I just add that most of Labour’s engagement before the election and since has been and is with Big Finance, as much Wall Street as the City, if not more so.
My former trade body colleagues talk about “how much of their shopping list was adopted” by Labour in government and “how pleasantly surprised that the unprecedented level of engagement in opposition continues in government”.
Labour can’t, or more accurately is paid not to, understand that Big Finance is not the same as industry and Wall Street is not Main Street.
Who can be surprised that Britain remains mired in seemingly unstoppable decline and Labour is at a loss to work out why?
A great deal to agree with.
We are revisitng this.
Thank you, Richard.
With regard to the landscape, it’s the same in Buckinghamshire. My parents and I often talk about the factories that dotted the area.
For older readers, that included the firm that printed airline tickets, Aeroprint.
As the rain is not easing, nor global warming, we have been in Buckinghamshire for decades and know well the flood plains where houses are going up, but that’s another discussion.
[…] By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future […]
Point 6: What are the sort of war game scenarios of finance using their leverage?
Let’s say we grow a backbone and stand up to finance, but then they in turn start to make good on their threats… What does that mean realistically? Obviously we could still afford to do things, we have people and we have the BOE. So I guess what I’m asking is:
– What is finance likely to do if they don’t get their way?
– What could the government do to counter?
Good questions.
I will adrrtess them. Not right now, though. Sorry.
An excellent analysis of the problems created by the finance industry. The question now is who will deal it? I cannot see the main parties doing anything at all, they will continue to praise the sector, indeed give it more resources and blame others for their problems. The impact is similar to the impact of oil on the economy pushing up the value of the £ together with other stupid policies which led to other sectors becoming less competitive with closures and job losses. A lot of businesses in Cornwall suffered because of that. It also provided the tourist sector with the excuse to grow with serious impacts on the environment, housing and earnings.
How do we tackle it?
First, we talk about it. Nothing happens until we do. Hence this podcast.
The UK Government has chosen to live in, and condemn us all to, a constitutional monarchy twice over. Once with the actual Crown, and again with the Crown of Finance. In both cases democratic power formally exists to control and contain them but the Government and Parliament have decided not to do so, or to offer us any democratic choice. So right now we can clearly see the results as far as the Royal family is concerned, and we can see absurd and frankly wicked levels of control over us being exercised by, for example, the bond market. Recognising this may be the essential first stage toward a more balanced and purposeful economy and society.
What is painful as someone born there is that the Govt. of the island has ways of silencing critics using the law. Some of this has come to light e.g. ` BBC documentary. But, some years ago, one American journalist who had written on the Children’s home scandal, returned to visit again but was arrested at Heathrow and detained without informing her embassy. This could only have happened I suggest with the complicity of the London govt.
Agreed
I was investigated by its police on trumped up allegations.
On the topic of factory closures mentioned by Colonel Smithers, last night Reach PLC announced the closure of its news printing plant in Glasgow, with its big-selling Scottish papers, The Daily Record and the Sunday Mail, being transferred to Oldham. c100 Glasgow employees will lose their jobs and, if that’s not bad enough, all their “Scottish” papers will have to driven up to Scotland for daily distribution, so no regard for saving the planet either. Both the Daily Record and the Sunday Mail are vehemently pro-Union in content, with gross misrepresentation of events and facts in relation to the SNP and the whole independence movement, Whether their departure to Oldham will impact their circulation in Scotland remains to be seen, but they won’t be missed by most Scots.
I see that your post has been picked up at the naked capitalism blog courtesy of Colonel Smithers
https://www.nakedcapitalism.com/2026/02/the-finance-curse-is-killing-britain.html
Keep up the good work!
I had noted. Thanks to all involved.
This provides a very clear explanation of the dangers of over reliance on the financial sector. Unlike MMT, which is quite a difficult concept to understand and flies in the face of the average person’s thinking about budgeting, using Jersey as an example of what can happen when an economy becomes over reliant on the finance sector is easy to understand. A documentary outlining the problem using Jersey as an illustration then pointing out the similarities with the UK would be very worthwhile. Maybe even pull in a high profile presenter to generate more interest, Louis Theroux’s documentary ‘The Settlers’, about the Israeli expropriation of the West Bank for instance, got a lot of publicity. Time to be more populist perhaps?
Noted
I must agree with all Richard has written.
A simple point, but I suspect that a major problem is the lack of a broadly based media view that there is a problem here.
The voting general public need to understand the true situation in this country. There needs to be a way in which those who are voted into office (national and local) allow their views on these issues to be known, and we need to understand what they will do to correct the situation.
Silence on these issues should be taken to mean that they support the financial community.
My concern is also that many, across the whole country, feel that something is wrong, somewhere. Yet they no not where the problems lie. At present, it seems that the blame will be heaped on many who are themselves suffering from an over-financialised economy.
We can start the conversation here and elsewhere, but the word needs to be spread by …..??
How many media outlets covering the whole country are there that would promulgated the views as Richard has done?
Answer: very few.
But note this as well: traffic here is well down today because I have hit heavy issues in detail. It seems people are not interested beyond what is superficial. That is slightly depressing.
When I was at college, I was told that when you don’t like reality, Change It.
The trouble is that my current conception of our present reality is not a place I want to be. I have no idea of where I’d sooner start from because ‘yes’ it is depressing how many will just accept the superficial. I’d like to think there was a chance of influencing the future. So, it just occurs to me, a name change, (please forgive me, I couldn’t resist)
FUNDING THE FUTURE TO INFLUENCE THE FUTURE
🙂
Is the film in conjunction with Nicholas Shaxton? (whose book on the Finance Curse is very good)
I gather not, or at least not very much. John collaborated heavily on that book, as he did on Treasure Islands, as I also did.