Normally, a big international conference achieves nothing at all. So it’s really quite extraordinary that the G-20 meeting appears to have produced several significant achievements. One of them, as Mark Kleiman points out, is the success of France and Germany in pushing an agreement on tax havens:
I have no idea whether there’s any meaning behind the pronouncement from the G-20 summit that the era of banking secrecy and tax havens is over. But if there is, that’s extraordinarily big, and extraordinarily good, news. The ease with which the wealthy can evade taxes on unearned income as long as Switzerland and the Caymans and Macao are there to help puts a limit on the extent to which redistribution via taxation is feasible.
Back in November I was the beneficiary of a very generous junket to Switzerland during which time I was able to more fully familiarize myself with this issue. And while I’m pretty sure I was supposed to come away more sympathetic to the Swiss position, and am even willing to consider reversing my position on this in exchange for more business class plane tickets and another week at the Mandarin Oriental in Geneva, the Swiss position is totally wrong. I mean, it makes great sense for Switzerland. But there’s no good reason for the rest of the world to put up with it.
As for how consequential the announcement it, my understanding is that a fair amount of this could pretty easily be curbed purely through EU action unless some outside power were to lean on the EU on behalf of the tax havens, so that even if the other major powers are only nominally on board Switzerland’s party may be over. The tax havens that aren’t Switzerland or Luxembourg are in better shape even in the wake of this announcement, but I believe the Obama administration is also serious about this issue which will spell trouble for Western Hemisphere havens. The main dispute between Obama and Sarkozy/Merkel was that the Americans were taking the accurate view that this really has nothing to do with resolving the economic crisis, whereas France and Germany seemed a little bit oddly fixated on it.
But either way, a crackdown would be a good thing. And it’s worth observing that even though there are valid criticisms to be made of the policies Obama has pursued domestically, as well as equally valid—though different—problems with the policies of the major European governments, the overall caliber of the global policy response has been pretty good. Most countries are mostly doing the right thing. Cooperation is falling short of what one would want, but there’s a definite trend toward net cooperation rather than “beggar thy neighbor” stuff. The less cuddly global powers such as China, Russia, and Saudi Arabia are all working constructively. And the key western leaders—Obama, Merkel, Sarkozy, and Brown—are doing a good job of focusing on areas of overlapping potential agreement rather than posturing over disagreements.