May 23 2013

The Finance curse – my new book

Posted by: Nick Shaxson in: Thoughts

This morning I have published a short new book entitled The Finance Curse: how oversized financial centres attack democracy and corrupt economies. Co-authored with John Christensen, the former economic adviser to the UK tax haven of Jersey and director of the Tax Justice Network (TJN), The Finance Curse combines elements of my two previous books, Treasure Islands and Poisoned Wells, and brings a raft of fresh analysis to our understanding of  financial centres.

This book is in a different style from Treasure Islands, and it’s much shorter. It’s available for free here, in pdf format. It is also available on the Kindle e-reader, for a nominal fee, here.

This book emerges from our long-running work on tax havens, and differs from much of the work that we’ve done in the past. Previously I have generally focused on the global impact of tax havens or secrecy jurisdictions: that is, the impact that one haven has on the citizens of other countries, elsewhere. The Finance Curse, by contrast, looks at the domestic impacts of hosting an oversized financial centre: for example, how Britain as a whole has fared as a result of hosting an oversized financial centre.

The book find that finance is (obviously) beneficial to an economy up to a point, but once it grows too large a range of harms start to emerge. Much of the damage, and the underlying processes at work, are similar to those found with a Resource Curse that afflicts many countries that are overly dependent on natural resources.

The graph below (click on it to enlarge it) provides a taster illustrating just one of many aspects of the problem. The press release is pasted below.

The Finance Curse

How oversized financial centres attack democracy and corrupt economies

A resource curse casts a shadow over certain mineral- and oil-rich nations damaging their economic growth and development.  Now a new e-book by Nicholas Shaxson, author of the acclaimed Treasure Islands, and John Christensen, Director of the Tax Justice Network, shows that countries with oversized financial services suffer similar fates.

As the resource curse stalks Nigeria, Angola and the Democratic Republic of Congo; so a finance curse has captured the UK, Cyprus and Jersey.

The new work argues oversized finance sectors harm their host countries by, among other things:

  • weakening long term growth and development;
  • acting like cuckoos crowding out productive, sustainable industrial sectors;
  • exaggerating and routinely overstating their economic contribution to gain distorting tax subsidies, lax financial regulation and influence crucial political decisions;
  • playing a key role in creating a “spider’s web” of tax havens;
  • capturing whole political systems, in some cases leading to authoritarianism; and
  • generating and extracting unproductive and harmful economic ‘rents’.

For decades, the expansion of a country’s financial sector was widely thought to benefit its economy. But The Finance Curse presents the first comprehensive analysis of the many harms that flow from hosting oversized financial centres.

Symptoms of the Finance Curse

Despite the trillions flowing into and through the City of London and Wall Street, Britain and the U.S. perform worse in inequality, infant mortality and poverty than Germany, Sweden, Canada and most of their rich peers.

Several new studies from the IMF and Bank for International Settlements show when finance gets too big – such as when credit to the private sector reaches 100% of GDP or more – growth suffers. The U.S Ireland, the UK, Spain and Portugal and Cyprus, all hit hard by the financial crisis, were all close to or above 200%.

Claims that the UK’s finance sector contributes over £63bn in tax annually are wildly exaggerated and disingenuous. The true figure policymakers should reflect on is at most £20bn, and could be as low as £2.7bn.

Likewise, policymakers must disregard claims the UK finance sector employs two million people. The relevant figure is a fraction of that. Against these smaller gross ‘contributions’ are a host of tax losses, not only from the bailouts. The true net tax ‘contribution’ of  finance in the UK is negative.

The near total ‘capture’ of politics in small island states lead to authoritarian tendencies that aggressively scapegoat dissenters. The British tax haven of Jersey, as one former minister puts it, is run by a “gangster regime” and a “crypto-feudal oligarchy captured by the international offshore banking industry.” In the UK, critics of the City establishment are subtly ostracised, and financial law enforcement is strongly discouraged.

Finance has severely worsened imbalances between regions in Britain, with the “metropolitanisation of gains and the nationalisation of losses.” The financial lobby’s insistence on new transport infrastructure focused on London means more money is spent lengthening platforms at one London train station than on all the upgrades to Manchester’s rail network and the all-important link to Liverpool.

In Jersey, where finance makes up over 50% of GDP, finance has decimated other industrial sectors and dramatically increased inequality. House prices grew by a stunning 29% annually in the 25 years to 2010. In Cyprus, well over 40% of all student enrolments feed its tax haven sector.

In larger jurisdictions like Britain or the U.S these issues are clouded by background noise from large, complex democracies. But in small financial centres and tax havens like Jersey or the Cayman islands, the Finance Curse is much easier to understand because finance is more dominant, and the issues are easier to spot. Tax havens therefore carry strong lessons – and warnings – for Britain and the United States in particular.

As the well-remunerated finance sector recruits ever more graduates, in technical disciplines in the United States, there has been a steep decline in science, mathematics, engineering and technology – and a reduction in “entrepreneurial intentions” among skilled workers.

The “financialisation” of large parts of the British economy has undermined business stability, productivity and employment prospects for large sections of the workforce, creating an ever-deepening economic trap that will be hard to escape.


John Christensen, director of the Tax Justice Network, said:

“The economic collapse in Cyprus highlighted how the Finance Curse hollows out the domestic economy of small islands and corrupts their entire political systems.  I’ve seen exactly the same processes at work in my former home of Jersey.

Alarmingly, the City of London is having similar effects on Britain. The Finance Curse presents a clear and present danger to social and economic development.”

Nicholas Shaxson, author of Treasure Islands, said:

“After spending 14 years living in and studying the Resource Curse in oil-rich countries in Africa, I was astonished to find the very same things happening in rich countries with big financial centres.

Having an oversized financial centre in your neighbourhood is a bit like striking oil. It may well bring lots of money. But it will bring huge problems. And the evidence is overwhelming: too much finance is bad for you. Britain, the United States and many other countries need to shrink their financial centres dramatically.

This goes way beyond the damage caused by the latest global financial and economic crisis. Once our politicians understand this, they will see that they can tax and regulate our financial sectors appropriately, with no loss of ‘competitiveness’ – even if other countries don’t.

When the financiers cry: ‘We will run away to Geneva or Hong Kong’ then that is to be welcomed. For if they do so, the financial sector will shrink and many benefits are likely to ensue.”

For further comments, please contact:

Nicholas Shaxson: +41 79 477 10 70 shaxson (at)

John Christensen: + 44 (0) 7979 868 302 john (at)

Nick Mathiason: +44 (0) 77 99 348 619 nmathiason (at)

For Online News Media – free standalone Finance Curse Podcast

Finance Curse Podcast available for easy download free and reposting to accompany your Finance Curse web coverage here. Produced by the Tax Justice Network’s @Naomi_Fowler

Podcast Summary

A big finance sector is good for an economy – isn’t it? Actually, no.

In this Tax Justice Network podcast we discuss the Finance Curse – how an oversized financial sector can weaken growth, slow the economy, erode democracy, foster corruption and increase inequality. Produced by @Naomi_Fowler

For monthly Taxcasts go to

Finance Curse Podcast

[i] Nicholas Shaxson is author of Poisoned Wells, a book about the Resource Curse based on 14 years’ research in West Africa; and also author of Treasure Islands, a book about tax havens and financial centres.

John Christensen is the former economic adviser to the British Crown Dependency of Jersey, a pre-eminent British tax haven. He is now the director of the Tax Justice Network.

20 comments so far

Angus 5rd May, 2013 6.49 am

I look forward to reading it. Just downloaded and noticed there is a typo on the Quotable Quotes page:
Juan Pablo Pérez Alfonzo – the year is listed as 19761

Nick Shaxson 5rd May, 2013 9.31 am

thanks a lot, will get that sorted soon. please let me know of any further typos! much appreciated

Angus 5rd May, 2013 11.03 am

p3, col1, para4: an *unprecdented* comprehensive body

p12, col1, para2: and the *oucomes* outlined

p15, box1: Achebe: “A normal sensible person will wait for his turn if he is sure that the shares will go round; if not, he
might start a scramble.
Should the close quote be at the end of this paragraph, rather than at the end of extract from Poisoned Wells since Achebe is referenced in the paragraph after this one?

p26, box2, section2, para1: and will not leave in *responser* to stronger financial regulation.

p26, box2, section2, para2: So when policy makers and regulators worry about the *‘competitivness’* of, say the local financial centre they
must consider only the mobile part to be at risk of relocation, – plus comma after say?

Nick Shaxson 5th May, 2013 7.53 am

Many thanks, much appreciated!

La Chupacabra 5rd May, 2013 3.07 pm

So the key take-away of this synopsis is that the world’s best place to live is Cuba, followed by Georgia.

The well-known hell holes of Singapore, Luxembourg or even (closer to home) Trinidad are, well, hellish.

I will read the book, but at least my expectations are well managed.

Nick Shaxson 5th May, 2013 7.21 am

I think you’ll see that that’s not what that particular graph is saying. but your comments on the full book, snarky though they will undoubtedly be, will still be welcome.

Trystan Morris-Dafydd 5th May, 2013 11.31 pm

Excellent, I look forward very much to reading it! Any chance of an EPUB version being made available?

Nick Shaxson 5th May, 2013 2.47 pm

I’ll ask and let you know. I’m not doing that side of things . . .

Nick Shaxson 5th May, 2013 11.06 am

looks like one will be made available in the next few days

perry 6rd June, 2013 4.54 pm

Nick, please forgive me if you’ve already shed light on this, but I must ask these questions while they’re fresh in mind. I haven’t read your latest missive yet, but will, very soon!

Is there a financial crisis? … only for the unwashed masses. Is there a crisis of democracy? … for the same, unequivocally. But democracy is only a word, it really doesn’t exist, in any sense, even close to it’s definition. It’s a propaganda concept, allowed, to ensure the population believe they have some power to influence their lot/future/destiny – like religion. Like the ‘the customer is always right’ kind of concept. If they get too tight a grasp on democracy, than war must ensue to rein the power back in. (see, e.g. history of socialism; liberalism)

The more important question to me is- What are the goals of the all powerful elite? What world order or changes to the current world order do they intend? Are we going to be set to building new pyramids? …or picking cotton?

You’ve had some exposure to this lot – perhaps once removed exposure as I don’t think you’ve been considered an insider – so perhaps you can enlighten us as to you’re thoughts in this. I’d like to know, what this whole show, is all about, before it’s out!


I’m a fan living in hope and fear for your wellbeing.

[...] Today’s blog looks at research from Dr. Mike Berry, lecturer at the University of Cardiff. It focuses on one small but influential part of the BBC – its flagship Today Programme on BBC Radio 4. I think it’s fair to say that my colleagues and I have always been under the impression – hard to prove but still a strong impression — that the Today Programme is substantially ‘captured’ by the City of London, the UK’s Financial Services industry. (For what ‘capture’ means, see this.) [...]

[...] we said in our Finance Curse document, this is the Captured State in action. Delaware, Jersey, Cyprus, Ireland, Cayman: they are [...]

[...] Today’s blog looks at research from Dr. Mike Berry, lecturer at the University of Cardiff. It focuses on one small but influential part of the BBC – its flagship Today Programme on BBC Radio 4. I think it’s fair to say that my colleagues and I have always been under the impression – hard to prove but still a strong impression — that the Today Programme is substantially ‘captured’ by the City of London, the UK’s Financial Services industry. (And for what ‘capture’ means here, see this.) [...]

[...] City of London, the UK’s Financial Services industry. (And for what ‘capture’ means here, see this.) The article is called The Today programme and the banking crisis, and it meticulously researches [...]

[...] sees financial services grow above its optimal size. It tallies extremely closely with our Finance Curse [...]

[...] a short section from the book, which effectively restates one of the key components of our recent Finance Curse analysis, in a way that connects our analysis with some foundational economics [...]

[...] observations resonate with broader points raised in Nick Shaxson’s new book called ‘The Finance curse’: How oversized financial centres attack democracy and corrupt economies. Here’s an extract from the press [...]

[...] his latest book the Finance Curse, Nick Shaxson shows how the financial services industry – often led by the big 4 accounting [...]

[...] The Finance Curse can be downloaded here (To link: [...]

Le Dingue 4th April, 2014 7.01 pm

You said you like typos…;-)

Near the top of this page: “The book find that finance is (obviously) beneficial…” (finds)

Below the graph: “As the resource curse stalks Nigeria, Angola and the Democratic Republic of Congo; so a finance curse…” (a comma not a semi-colon)

Bullet points: “overstating their economic contribution to gain distorting tax subsidies, lax financial regulation and influence crucial political decisions” (and to influence)

Just under “Symptoms”: “The U.S Ireland, the UK, Spain” (The U.S., or US,)

Just before “Quotes”: “larger jurisdictions like Britain or the U.S” (U.S. or US – unless U.S is an accepted form I’m unaware of)

Leave a comment