Mar 29 2012

The United States, UK, hooked on offshore

Posted by: Nick Shaxson in: Thoughts

Somehow I missed this IMF Working Paper when it came out in 2010: the sexily named Bilateral Financial Linkages and Global Imbalances: a View on The Eve of the Financial Crisis.

I only have time now for a couple of pull-out quotes, related to ‘international financial centres’ which seems to be a catch-all term for what I might call tax havens or offshore jurisdictions:

“Financial and offshore centers are major players in the global financial system. We show that linkages between offshore centers and the United States and the United Kingdom are particularly strong.
. . .

A particularly noteworthy feature is the importance of international financial centers as “financial trading partners” for the United States. Collectively, the United Kingdom, Hong Kong S.A.R., Singapore, Switzerland, and offshore centers had external claims and liabilities vis-à-vis the U.S. exceeding 50 percent of U.S. GDP in 2007.
. . .
claims and liabilities of the United States vis- à-vis small offshore centers are close to 1⁄4 of U.S. GDP”

Few people have appreciated how deeply the United States is steeped in the offshore murk. Here’s a nice picture, that illustrates the importance again.

There is no general agreement on what constitutes ‘offshore’ but the IMF and others tend to take an overly restrictive view. Treasure Islands considers every one of these jurisdictions in this graph, except Germany and France, to be offshore centres: places that have made a business model of deliberately offering escape routes from the responsibilities of society – and for the offshore jurisdictions on this particular list, the prime offering is not escape from tax, but from various forms of financial regulation. (Take a look at the history of the Irish Financial Services Centre, for instance, to see the kind of thing I am talking about.)

Time has run out; I’ll write more on this in due course.

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