draining development.pdf - Khazar University

346 Draining Development?By combining measures of secrecy and measures of the importance toglobal offshore finance, the index presents a picture that is different fromthe one commonly envisaged. First, many of the usual suspects do notfeature as significantly as they do in policy discussions. For example,Guernsey does not make the top 20, while Monaco ranks only 67th.Among developing countries, many oft-named Caribbean jurisdictionsalso rank low; thus, for example, Antigua and Barbuda ranks 58th, andGrenada 61st.At the same time, many other usual suspects do feature at the top ofthe index; for example, Switzerland, Cayman Islands, and Luxembourgoccupy the top three places, in that order. However, the top five alsoinclude the United States, despite powerful statements in recent yearsabout the damage done by financial opacity. The United Kingdom andthe United States each account for around a fifth of the global total offinancial service provision to nonresidents, but the United Kingdomranks only 13th because of a substantially better secrecy score.It seems uncontroversial that a measure of the global damage causedby financial secrecy would include measures equivalent to both thesecrecy score and the global scale weight. Less likely, however, is agreementon the relative importance of the two in establishing a final ranking.The value of the FSI resides less in providing a categorical finalranking than in focusing the attention of policy makers on the two elements,instead of on the opacity measures alone, which has historicallysupported a perhaps unjustified concentration on smaller, less economicallyand politically powerful jurisdictions. From the global perspective,strong opacity in a major player may do more damage than completesecrecy in a tiny one.A particular concern is that the FSI may exclude the possibility thatno jurisdictions legitimately offer high-quality banking, accounting, andlegal services, but also rely on a transparent regulatory framework. TheUnited Kingdom is often cited by those who have such concerns becauseit is said to have a genuine comparative advantage that does not dependon lax regulation. This chapter does not offer the space to explore thisissue in detail, but the role of the United Kingdom’s network of taxhavens in the development of London as a key financial center is certainlyworth considering (Shaxson 2011). 10 Establishing appropriatecounterfactuals about the development of financial centers, absent opac-