Canaries in the Coal Mine: Tax Havens, the Decline of the West and the Rise of the Rest
Tax havens represent a crucial, but neglected, test of deep trends in the international political economy. Over the last decade, and again after the onset of the financial crisis, tax havens have come under sustained pressure from powerful developed states and the international organisations they dominate. Despite their diminutive geographic and power profile, the havens have shown a puzzling resilience. Although like other economies havens have suffered from the financial crisis, they have nevertheless confounded predictions of decline premised on their purported vulnerability to discriminatory financial regulations imposed from onshore. This article explains the continued growth in offshore finance by the rise of new developing country markets. More broadly, the increasing availability of alternative markets means that G7 states are losing the crucial leverage they previously enjoyed by threatening to close their markets. The fortunes of tax havens are thus indicative of a tectonic shift: the rise of developing economies is producing a relative decline in the ability of core G7 states to dominate global economic governance.
New Political Economy