This is an article I wrote for the Tax Justice Network. It looks at why market power (or, put more crudely, monopolies) is a bigger problem for Europe than most people think; where the connections are between monopolies and tax havens, and why Europe needs to build an antimonopoly movement to rival what’s going on in the United States — and which builds on the successes of bodies like the Tax Justice Network.
Updated: Oct 30, 2019
The IMF’s September 2019 issue of Finance & Development is about dark money, money laundering, and all that stuff. It features an article of mine, about how to tackle tax havens. Now The Guardian has an article looking at the City of London’s role as a global centre for tax haven activity, with a similar but shorter set of recommendation.
The core premise goes the heart of the Finance Curse: shrink the City of London (in smart ways): this will not only curb the tax haven racket – but it will increase Britain’s prosperity. The classic win-win.
The IMF article goes far beyond the UK. Here’s (maybe) the most arresting sentence:
We are now at the start of the most significant period of change to the international corporate tax system in a century
For the avoidance of doubt, the IMF editors let me say what the hell I wanted to say. So I’m quite proud of my latest.
With a whole lot of new US material that isn’t in the UK edition, spread across several chapters, plus a full new chapter on the financialisation (sorry, financialization) of hogs in Iowa, which has turned out to be a classic, extraordinary, finance-curse story.
The cover text is here. It’s due out in early November.
There will also be Japanese, Finnish and Taiwanese editions.
With, hopefully, more to come.
And it’s going to be made into a film. Early days, though.
Updated: this new Scottish analysis complements the blog nicely.
I’ve just co-written a submission to a UK parliamentary inquiry on Britain’s regional economic imbanances. The submission looks at at how financialisation is contributing to the staggeringly large divide between wealthy parts of London (and associated areas,) and the rest.
The widely-believed story is that London is the financial-centre engine of the British economy, showering jobs and tax revenues on the entire country. In the words of Boris Johnson, then Mayor of London, now Prime Minister,
“A pound spent in Croydon is of far more value to the country than a pound spent in Strathclyde. You will generate jobs in Strathclyde far more effectively if you invest in parts of London.”
(Seriously, he said that.)
(Cross-posted from the Tax Justice Network.)
The Finance Curse is a concept first developed by the Tax Justice Network. It is a relatively simple idea — and also an original and powerful multi-level critique of the modern global economy.
Here we frame it in a number of simple ways.
1. Shrink Finance
We all need good finance. A financial sector has a useful core surrounded by a toxic, predatory part. This should be entirely uncontroversial, especially following the global financial crisis.
It seems sensible, then, to shrink finance down to its useful core. A fast-growing strand of academic research, known as Too Much Finance, backs this up.
Here’s a startling picture from the real world, illustrating the excess bloat (source.)Continue reading
One of the symptoms (and causes) of the finance curse is the ‘brain drain’ out of other sectors – industry, tourism, agriculture, government, etc. – into overpaid financial jobs. As one academic paper summarises:
“Finance literally bids rocket scientists away from the satellite industry. The result is that erstwhile scientists, people who in another age dreamt of curing cancer or flying to Mars, today dream of becoming hedge fund managers.”
The attached graph from the same paper shows one finance-cursed result: this brain drain is bad for the economy. Now the Financial Times has just written an article entitled ‘The best reader comments and contributions of 2018,” which contains a contribution almost exactly confirming this analysis, but on a personal level: Continue reading
The City of London publishes regular reports showing the sector’s “contribution” to the British economy, in terms of taxes paid and jobs created. The Finance Curse analysis shows these numbers to be useless — for the simple fact that they show a gross contribution, airbrushing out the costs, instead of what policy-makers need: the net contribution, after the costs of oversized have been taken into account.
The first systematic attempt to put a number to the net figure was by Andrew Baker, Gerald Epstein and Juan Montecino. They came up with a negative number: oversized finance has cost the UK economy a cumulative $4.3 trillion over 20 years.
And there’s another question here: are the gross figures put forward by the City of London even correct? Continue reading
Update: several great new reviews since this was written, including Martin Wolf’s selection among Financial Times best books of 2018:
A splendid polemic against modern finance . . . hard-hitting, well written and informative.
I’ve got an article in the Financial Times, entitled Brexit offers London’s rivals a poisoned chalice. It argues that France and Germany are slavering at the thought of luring British bankers after Brexit, and warns them to be careful what they wish for, because of, well, the finance curse. (It’s been out for a couple of weeks, but I was in Iowa when it came out and constantly travelling since then.)
Underneath the articles there are (of course) a number of angry comments, and I’ve now set up a page on this site in the FAQ section to respond to those, and also to an article about the Finance Curse in the Schumpeter column in the Economist, by a correspondent who I’m convinced cannot have read the book. This page is a work in progress.
(Please feel free to cross-post this, as long as you attribute it to here.)
Alongside the launch of The Finance Curse, and my Guardian article, there’s a new study by Andrew Baker of the University of Sheffield, Gerald Epstein of the University of Massachusetts Amherst, and Juan Montecino of Columbia University, estimating that the UK has suffered a cumulative £4.5 trillion hit to its GDP from 1995-2015, due to its financial sector being too large and having turned away from its proper traditional functions towards more harmful and predatory ones. That is equivalent to 250 percent of GDP – or £170,000 per UK household.