Yesterday I had coffee with a financial expert in Zurich, who is in the process of setting up a new financial product. The expert said to me:
“I have had laws changed to accomodate this proposition.”
Me: “Where have these laws been changed.?”
This reminded me straight away of a short section in a chapter of Treasure Islands.
” ‘Someone comes up with a new idea, but onshore regulation blocks it,’ said Robert Kirkby, technical director for Jersey Finance, echoing what Delaware’s insiders had boasted of. ‘You can lobby onshore, but there are lots of stakeholders, you have to get past them all, and it takes a long time. In Jersey, you can bash this thing through fast. We got the leading edge years ago. We can change our company laws and our regulations so much faster than you can in, say, the UK, France or Germany.’ “
It all sounds so ‘efficient,’ doesn’t it. The analogy is of grit in the machine, with tax havens as the oil that makes the machine run more smoothly. But hang on a second. What, exactly, is that ‘grit’? That grit is a small matter called ‘stakeholders.’ It is tax, it is financial regulation, it is disclosure rules, and so on.
All of those things are put in place for good reason. Adapting something I wrote elsewhere a little while ago:
“Jersey’s secrecy, or its tax or financial loopholes, are designed to attract money not from locals, but from foreigners. ‘Elsewhere:’ hence the term ‘offshore.’ Offshore lawmakers are always separated from those affected by the laws they write, so there is never proper democratic consultation when these laws are written. This is not only deliberate – it is the whole point. These are laws by insiders, for insiders, without democratic accountability: they are private law-making machines. Offshore is, almost by definition, a smoke-filled room. The implications for the last financial crisis, and for the next ones, should be quite clear.
It’s a point I can’t stress strongly enough.
P.S. the rest of my conversation over coffee, just a few metres away from the grand old UBS headquarters (though my coffee companion was not from UBS), was fascinating too.