Craig Boise and Andrew Morriss have produced a fascinating account of the emergence and role of the offshore financial sector with this case study of the Netherlands Antilles—once a powerhouse, now struggling to stay alive in the global economy. With places like the Antilles again in the political and media spotlight, cast in their now-familiar role as renegades in international society, I have long thought we were overdue for an account that carefully considers the view from these countries and provides the context we critically need to understand the dynamics between tax competition and economic development. This article may well be the most accessible account of the complicated history that shaped U.S. policy toward a growing number of tiny islands with tiny populations and limited opportunities for economic vitality.
It is certainly the most thorough and thoughtful analysis I have encountered on the topic of why “tax havens” exist. Boise and Morriss bring us on a lively tour through the history of the Antilles and its complicated relationship with the United States. They use first-hand accounts and historical research to build a narrative that is decidedly different than the story usually told by those who emphasize the need for crackdown when cooperation cannot yield a mutually beneficial result. For instance, it may surprise readers to learn that the rise of the Antilles as an offshore financial center occurred not as opportunistic banditry but as the result of a serendipitous confluence of factors, all of which served goals other than facilitating tax evasion. You will have to read the paper to find out how the Antilles met a dire need for asset protection during World War II, and how it facilitated American access to the Eurobond markets at a time when the United States depended heavily on foreign borrowing for its economic success. You will also need to read this paper to see why the crackdown on places like the Antilles will likely be as futile as it is harmful to the populations whose livelihood depends on their ability to facilitate transactions in the global economy. Continue reading "Tax Havens in Context"