Offshore Capitalism and the Current Crisis

In 1988, economists Harrison Bennett and Barry Bluestone warn against what they call a "casino society," in which stock market speculation and outsourcing lead to declining labor standards and precarious economic prosperity. In a recent column in the UK's Guardian, describes how changing business practices since the 1970s resulted in less corporate taxation (link to article).

It was in the 1970s that this form of capitalism began, from the margins, to make itself known in the wider world. Multinationals and banks began as a matter of course to expand and grow through tax havens. Financial whizzkids - much like those experimenting with micro-computers at the time - developed instruments that "financialised" everyday assets and commodities and turned them into derivatives, to be traded on their own markets.

The new offshore wizardry soon had an impact on the wider world. Up until this time, nation-states had complete control over their economies and finances. That changed. Offshore tax havens put enormous pressure on domestic banking systems to deregulate and liberalise. In turn, onshore banks and monetary authorities tried desperately to control and regulate the new international capital markets that were based offshore. But it was an unequal struggle; governments across the industrialised west eventually repealed their own regulations and let offshore finance wash up and make a home onshore.