Sunday, March 29, 2009

New Banking Laws - Will It Make a Difference?

In the midst of a financial crisis, with the G20 summit just around the corner, the debate over "tax havens" and "banking secrecy" has been heating up. Indeed, things have been progressing at such a furious pace that The Observer newspaper today reported that "senior international regulators [believe] more has been achieved [in terms of regulating tax havens] in the last 13 weeks than in the previous 13 years put together." Exciting stuff. Earlier this month, Switzerland bowed to international pressure and agreed to sign up to OECD banking regulations. Could this be the end of the tax haven?

Let's not get carried away.

Take Switzerland, for example. Public opinion in Switzerland (where referenda are practically constitutionally guaranteed when it comes to controversial political decisions) seems to favour keeping banking secrecy intact. Of 1,004 Swiss citizens polled for a survey commissioned by the Swiss Banking Association, 78 per cent wanted to keep banking secrecy. On the other hand, a separate poll of 602 people for a Swiss weekly newspaper showed that just over half of people thought Switzerland's reputation as a tax haven was justified, and 56 per cent of people favoured Swiss banks co-operating more with international regulators to stop tax evasion.

Still, Swiss banks argue, nervous investors might pull their money out of the Swiss economy instead of running the risk of governments going through their accounts. The President of Switzerland, Hans-Rudolf Merz (who is, funnily enough, also the Swiss Finance Minister) was quoted in the Washington Post as saying "We have a tradition of privacy. I don't want the state to sniff into my bank accounts as long as I'm paying my taxes correctly."

The problem is, of course, how is the state supposed to know whether or not you are paying your taxes if it can't look at the books? I'm not suggesting a solution (I, too, feel uneasy about letting the state rummage through people's accounts) but it does seem to be a paradox.

Others have argued that the problem is being overstated. The President of the Swiss Bankers Association, Pierre Mirabaud, has angrily countered the idea that tax evasion is endemic amongst Swiss banks, saying "it is completely absurd to think that the Swiss private banking industry is based on tax evasion. This, I am sorry to say, is a very good story, but it is not the truth."

Again, the paradox arises: how can we know how much tax evasion there is if the system is secret and information isn't shared with regulators? Even after the adoption of the new regulations, Swiss banks can still refuse to hand over information unless concrete proof is presented demonstrating that tax evasion has occurred. This sort of proof is rare, unless, for example, an angry partner or spouse co-operates with the authorities.

Some critics of reform, though, have raised other potential problems. Dan Mitchell, co-founder of the right-wing Center for Freedom and Prosperity, has warned that, if banking secrecy was overturned, corrupt governments might sell information about the world's richest individuals and companies to criminals and terrorists. The suggestion being that kidnappings and assassinations would follow. This doesn't seem a particularly solid argument. Why would corrupt government officials sell information whilst corrupt bank officials wouldn't? For that matter, if terrorists wanted a global rich hit-list, why wouldn't they just open up a copy of Forbes?

Mitchell makes a better case when he argues that "tax competition leads to low tax rates and increased prosperity" and that "sovereign entities have the right to secure tax privileges. Even if the US government does not like it." The problem, however, is that banking secrecy is not a black and white issue. It contains (at best) some very legally grey areas. Yes, small countries have the right to set their own tax rates and regulations, but does that also give them the right to essentially assist in fraud, corruption and international crime?

An excellent report came out this month from the international NGO Global Witness about the link between banking secrecy and corruption in developing countries. The message throughout the report was that large-scale corruption in developing countries requires two sides - the corrupt official on the one hand, and a bank willing to deal with the money on the other. The report attacked the current system of regulation, arguing that it doesn't go nearly far enough.

There are now, for example, many ways to protect your identity that make the old system of numbered Swiss bank-accounts almost redundant. A friend of mine in the business community explained how it works:

"In most cases, the Swiss banks don't even know who the beneficial owner of the account is. A very typical configuration is a corporate account in the name of... a cayman company which, in turn is owned by many different companies which are loosely held by a trust. As long as the final owner is a trust, there is very little legal action possible - that is the purpose of it."

The Global Witness report highlights this as one of the biggest problems facing the current system of banking regulation. A bank is not required, legally, to know who the eventual beneficiaries of a trust actually are before it allows them to open an account. So, even though the current Swiss reforms grab a lot of headlines, they don't necessarily make a lot of difference.

Because of all this, although the twin issues of tax havens and banking secrecy will definitely be on the agenda at the upcoming G20 summit, it remains to be seen how effective any new regulation will be.

[UPDATE: I was sent a report (LINK) on this issue by Allen & Overy, a law firm investigating various financial issues in the run up to the G20 meeting. I haven't read it yet, but will update when I have.]

Monday, March 16, 2009

Swiss Devalue: More Currencies to Follow?

[IMAGE: Eat Money, 2007, waɪ.tiː, Attribution-Noncommercial-No Derivative Works 2.0 Generic]

Switzerland has been in the news a bit recently. It has devalued its currency; something which has a lot of economist-types raising eyebrows.

In the UK, there was a lot of furor recently when the pound collapsed against the euro. Elle and I, personally, saw the value of our savings affected. It's an emotive issue, especially for UK businesses that import from the EU, overseas students (like me!), and British tourists abroad. Philip Hammond, of the Conservative Party, was quick to attack the government for failing British holiday-makers: "Hundreds of thousands of Britons find themselves grounded as the pound falls below one euro in value."

Hammond, as shadow Chief Secretary to the Treasury, must have been aware that what he was saying, whilst technically accurate and resonating strongly with the public, wasn't the whole picture. Just as Gordon Brown knew he wasn't being entirely accurate when, as shadow Chancellor in the 1990's, he attacked the Conservative government by saying "a weak currency is a sign of a weak economy, which is the sign of a weak government."

Both men know that a weak currency is often advantageous to an economy, especially in the long-term. If your currency is weak it harms your import industries, whilst at the same time it strengthens your export industries (and if you have a relatively weak export sector, like the UK, it encourages export industries to develop). It now costs people in the UK more to buy European products, but it also costs Europeans less to buy British products, making British producers more competitive than their European counterparts. Traditionally, an emphasis on exports is seen as a good thing for an economy, as it means there is more money flowing in and less flowing out.

This is why there is some concern over the Swiss devaluation. There is a fear that this could spark a "currency war," as other economies all scramble to devalue and retain their competitive advantage. This happened during the Great Depression, when the international economy got caught in a spiral of devaluations, with each country engaged in a race to the bottom. It was one of the things the Bretton Woods institutions were designed to prevent.

The Russians have already devalued the ruble, and worried economists are now eyeing the Japanese yen (although analysts are also arguing that it is impossible for Japan to devalue the yen without negatively affect trade relations with the rest of the world).

This is certainly something to keep an eye on.

In other economic news, Professor Kevin O'Rourke of Trinity College, Dublin, has published a convincing article arguing why no national government is currently seriously considering leaving the euro as an option. The more I read about this, the more I'm being pursuaded that no member-states will voluntarily leave the Euro, and that EcoFin will not be ejecting member-states. This is obviously an issue of high interest, because this blog has been getting a lot of traffic from people curious about the possibility of eurozone break-up.

Finally, one other titbit: Switzerland is relaxing its banking secrecy rules. This deserves its own blog post, so I'm busy working on one and will upload soon.

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Tuesday, March 10, 2009

Electra (1962)

[Image: Electra at the Tomb of Agamemnon,
Frederic Leighton, c. 1868, Public Domain]

So far in my European cultural odyssey, I've been focusing pretty much exclusively on ancient Greek history. I do want to try to broaden out a bit (eventually!) but Greek history has been the natural starting point. So much of modern European language, identity, culture and history has been shaped by the Greeks (and later, to an even greater extent, by the Romans) that it's easy to forget about everything the Greek's borrowed from other cultures. This is a mistake, and it's something which cinema in particular has often had problems with.

It's also something I'm going to have to bear in mind. As an absolute beginner when it comes to Greek history, one of the ways I've been getting acquainted with it is by watching old movies. I like old movies. They've given me an easy "way in" to Greek mythology. But it's a risky approach. Watching the films before I'm familiar with the original history and mythology may very well be colouring my perceptions of the ancient Greek world.

In particular, the influence of "non-Western" cultures is something rarely highlighted in films. Greek (especially Athenian) culture is always contrasted sharply with, for example, Persian and Egyptian culture. There is no overlap between the different Mediterranean civilisations. The more I read, the more this seems like poppycock. Balderdash. Piffle, even.

The problem may be this: so far, I've almost exclusively been watching Hollywood movies; Jason and the Argonauts, Clash of the Titans, The 300 Spartans, and so on. All very accessible to me as a modern Western viewer, all with standard tropes and stereotypes, but I may as well be watching Disney's Hercules in terms of how much they're going to teach me about day-to-day life in ancient Greece.

So, for a change, I recently hunted down a non-Hollywood movie by a Greek director called Michael Cacoyannis. The movie is Electra (1962) and, much like Lars von Trier's brilliant Medea, it's based on a play by Euripides. (As a side note, I'm starting to really like this Euripides chap; he was ahead of his time. Women, for example, are usually at the centre of his plays.)

The thing most immediately obvious about Electra (beyond the fact that it's in black and white) is that the dialogue is entirely in Greek. It might sound like a small point, but having watched all these Hollywood movies, it's easy to forget that the ancient Greeks didn't have American accents (or booming, Shakespearean stage-accents with excellent timbre). Greek sounds alien. Foreign. In fact, it sounds (to my untrained ear) closer to Arabic or Persian.

On the other hand, Hollywood's Greek (i.e. English) would have sounded equally strange to the ancient Greeks. To them, all foreigners sounded strange. Foreigners sounded like they were babbling a meaningless stream of noise: "bar, bar, bar, bar" - from which we get the word "barbarian." Foreign languages were "all Greek" to the Greeks and foreigners were just babbling. I suppose a modern take on the word barbarian might be a "babble-arian."

Anyway, I wouldn't say that Greek sounds barbaric (with all the connotations that word entails) but it certainly sounds a lot like "bar, bar, bar, bar." The point is: the language of the birthplace of Western thought sounds almost... Eastern.

Even more important than the language, though, is the costume design. With the exception of Electra (who, following the death of her father, cuts her hair short and wanders about with her head shamelessly exposed) all of the women in the movie are veiled. This is dramatic, and immediately distorts the familiar Greek stereotypes. The veil is something more commonly associated with the Middle East, and to see it being used in the birthplace of the "democratic Western tradition" is striking. Yet, according to an excellent book I'm currently reading on the subject, the women of ancient Greece did go veiled. Almost all of the women in the ancient Mediterranean and Near East went veiled.

Electra, then, is a fantastic antidote to the Hollywoodised version of ancient Greece. To cap it off, there's a hypnotic performance by Irene Papas as Electra, and the artistic use of veiled female bodies (white faces against black cloth) is stunning.

Well worth it.

Rating: 9 out of 10
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Sunday, March 8, 2009

Shut the Shops and Sit in the Corner

[Image: "Open/Closed", 2007, nchenga, Attribution-Noncommercial 2.0 Generic]

One of the most frustrating things about Italy (for me) is the siesta.

Between twelve and three o'clock, Trento dies. Yes, the bars and restaurants buzz with activity - but if you go to shops, bakeries, banks or offices and try to open the door, it will resist. A little sign will be in the window saying "chiuso" (closed). Perhaps people inside the building will see you pushing at the locked door, and they will laugh at you. You will be a figure of fun in the streets. For you have forgotten about siesta.

More than once I've taken a jaunty stroll to the local shop to buy some goodies for lunch and found it chiuso. Not so jaunty my return home. The idea of nipping out during your lunch-break to do a bit of shopping (or even a spot of banking) just doesn't exist in Italy.

Why does this frustrate me so? Because there's no flexibility in it. I have to carefully plot my day around the opening hours of shops and restaurants. After three o'clock, for example, all of the restaurants close down and the shops open up again. If I want to buy my lunch from a shop at two? Not possible. If I want lunch at a restaurant at three? Non è possibile. A couple of times now, Elle and I have rushed around major Italian cities looking for a restaurant still serving food for a late lunch.

Compounding this is the fact that almost everything shuts down on a Sunday. In fact, some shops even shut down at one o'clock on a Saturday and won't open again until Monday. If you don't have food in the house by noon on a Saturday, you're screwed. Even restaurants are generally shut on Sundays, so the skinny shadow of starvation looms large.

Some of this is because Trento is a small town. In Rome or Milan, shops and restaurants are more flexible. Still, in general, flexible opening hours are something I really miss about England.

If you do somehow manage to find a restaurant open in Italy, of course, then it's bloody well worth it!

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Sunday, March 1, 2009

The 300 Spartans (1962)

Film poster for The 300 Spartans - Copyright 1...Image via Wikipedia

I've just finished watching The 300 Spartans [DVD] [1962], a movie about the battle of Thermopylae. It has a fantastic tagline: "Thermopylae... Mighty battle epic of a handful of men forming the invincible "flying wedge" against a killer horde five million strong!"


I can imagine Frank Miller watching this as a child and zooming about the room pretending to be an invincible "flying wedge." Miller, who would later go on to write the comic 300, was apparently heavily influenced by this movie.

It's a classic "good" versus "evil" epic - with not-so-subtle Cold War undertones (there's a lot of talk, for example, of the Spartans fighting for "freedom" from King Xerxes's Eastern "slave empire.")

The movie sees brave Spartan King Leonidas lead his band of 300 Spartan warriors up into the narrow pass at Thermopylae, where wicked King Xerxes throws wave after wave of Persian barbarians at them, all promptly cut down by noble Spartans like the dogs they are.

Goateed King Xerxes becomes a cartoon villain, then - and I have a sneaky suspicion that the film-makers invented atrocities to make him seem even more despicable. At one point in the movie, he orders all of the prostitutes in his camp to be "destroyed," because then the Persians will fight even harder in order to get at the Greek women. I had a poke around the Googles and the internets, and I couldn't find any reference to the real King Xerxes having done this (please correct me at if you can find any information on this).

Meanwhile, the Spartans become complete paragons of virtue. No mention is made of the apalling helot system of slavery upon which Spartan society was based. But then, it might have befuddled the poor audience if Leonidas had given a rousing speech calling on the Spartiates to fight for "Freedom! For the freedom to keep our slaves and beat them into submission! SPAARTAAA!!!"

We shouldn't be surprised at all this. The battle of Thermopylae must be one of the founding myths of Western Civilization. Furthermore, this was a film made by Hollywood in 1962, the year of the Cuban Missile Crisis, when the Ruskies were busy sipping rum and cokes in Havana. The 300 Spartans was hardly going to portray the Persian Wars as anything but an epic tussle between good and evil.

Once you get past this, there is a fun movie underneath. There are some cracking performances by British stage actors David Farrar as Xerxes and Ralph Richardson as crafty Athenian politician Themistocles. The action is a bit hit and miss (if you'll excuse me) but the scenes of hundreds of Persian soldiers marching into battle are nicely done.

There are some wonderfully anachronistic lines ("they fight like machines!" gasps one Persian general as he watches his men cut down by the unstoppable Spartan terminators). Despite its problems, it's not a bad movie. True: it's not a fair representation of the Persians (nor of the Spartans, for that matter) but it's action-packed enough, and well made. And I did like the "flying wedge" at the end (although it was more of a "floating square," drifting unsteadily towards the worried-looking Persian King).

Not bad.

Rating: 7 out of 10
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