European leaders said they will crack down on tax havens as they seek to boost transparency and apply uniform rules governing financial markets to stem the global crisis. A seven-point plan agreed by European heads of state and government from the Group of 20 nations in Berlin today called for "sanctions" against "uncooperative jurisdictions." "We want to put a stop to tax havens," French President Nicolas Sarkozy told reporters after the meeting. "We want results on this, with a list of tax havens and a series of consequences." At a full G-20 summit in London in April, "Europe wants to see an overhaul of the system," he said. "A new system without sanctions would not have any meaning." The G-20 groups the main industrialized and developing countries, including China, Brazil and India. Europe's leaders are seeking to tighten rules governing offshore financial centers in response to the crisis that has forced governments to pledge $7 trillion to shore up banks worldwide. Even so, efforts to shut down tax havens are a diversion as governments seek ways to counter the financial crisis and the global recession that has ensued, Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said after the meeting. – Bloomberg
Dominant Social Theme: Tax havens need taming.
Free-Market Analysis: Despite the corruption of the EU, its leaders are confident that they have the key to what ails the Western world's finances. It involves global regulation, transparency and shutting down tax havens. Of course, as Erixon points out, the tax-haven issue is something of a "diversion." Here at the Bell, we would go a lot farther than that, arguing that the central issue of the economic subsidence is central banking, and that in addition to offering up diversions, the leaders of the West are averting their eyes to the real problem. Instead of dealing with the banking system, and its systemic crisis, the West's political leaders have chosen to aim considerable regulatory power at a series of tiny countries that offer a variety of services, some questionable, to the wealthy.
Perhaps it is the wealthy that hold the key to this business of stemming the "global crisis." The solutions that are being advanced include paring back the bonuses of financial types and cutting the salaries of corporate types. Hedge funds are to be regulated as well, and the rich among us are to be better supervised via more transparent tax havens. Indeed, it would seem that most regulatory fixes have a "leveling" effect. Vast fortunes accumulated via business and finance are to be curtailed, henceforth. Hedge fund moguls will be under considerable scrutiny. Taxation is to be enforced uniformly around the world.
The suspicion always is that the monetary elite itself jealously guards its privilege and that the current crisis is one more way to create a command and control economy that lessens opportunities at the same time as it ratchets up regulatory pressure. The solutions to the current crisis, as we regularly point out are simple: cut taxes, cut spending and return to some sort of asset-based money, preferably gold. Instead, the solutions being advanced involve cutting the salaries and bonuses of wealthy executives, nationalizing banks, cracking open tax havens, reducing hedge fund transparency and aggressively regulating finance worldwide. A disconnect between problem and solution? We think so. And we shall end with this, from one of our favorite books …
Too many farmers had assumed, without due enquiry, that on such a farm a spirit of licence and indiscipline would prevail. They had been nervous about the effects upon their own animals, or even upon their human employees. But all such doubts were now dispelled. Today he and his friends had visited Animal Farm and inspected every inch of it with their own eyes, and what did they find? Not only the most up-to-date methods, but a discipline and an orderliness which should be an example to all farmers everywhere. He believed that he was right in saying that the lower animals on Animal Farm did more work and received less food than any animals in the county. Indeed, he and his fellow-visitors today had observed many features which they intended to introduce on their own farms immediately. (Animal Farm)
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