The Nationwide newspaper in Scotland has been working what I believe to be a vital sequence on the threats posed by freeports throughout the course of this week.
I’ve made my very own contribution to this sequence in an article through which I describe freeports as having all of the traits of tax havens. My argument is multifaceted, however does within the first occasion tackle the financial fallacies that underpin the argument for freeports, saying:
The narratives that the proponents of [freeports] use is all the time alluring. They’re, nevertheless, all the time based mostly upon the concept freedom from regulation and taxation is the inspiration for prosperity. That is complete nonsense.
It isn’t likelihood that probably the most taxed and controlled international locations on this planet are all additionally probably the most affluent, however that’s all the time the case, most particularly if we take the extra apparent tax havens like Luxembourg, Eire, the Netherlands, and the Cayman Islands out of consideration.
Additionally it is very clearly true, on the idea of even probably the most superficial commentary, that these international locations with low ranges of taxation and regulation are virtually all the time related to excessive ranges of crime, low ranges of earnings for the inhabitants as an entire, unstable authorities, and corruption.
Regulation and the taxation that helps it are vital. With out them, world commerce competes with out guidelines, and mayhem outcomes.
A sporting analogy helps right here. As everyone knows, each sport relies upon guidelines and rules. Sporting competitors solely exists as a result of there are umpires, referees, and others to watch compliance with these guidelines.
Markets are the identical. They, too, require regulation, however the entire logic of freeports is to fake in any other case. They attempt to create synthetic benefits for one staff over all others as in case your favorite staff may all the time play with 12 folks on the pitch when opponents have been restricted to 11. Rigging the principles doesn’t assist competitors. It destroys it.
One of many commonalities that I’ve all the time discovered current amongst those that have superior tax haven exercise is that, with out exception, they are saying they wish to promote free market exercise while on the identical time searching for to the undermine compliance with all of the situations that should apply if free market exercise is to be useful to society as an entire, based mostly upon the theories to which they are saying they subscribe.
The entire foundation of a real perception within the advantage of markets relies upon these markets not being rigged, and upon the principles that they impose being complied with. Even in his extra excessive moments, Milton Friedman all the time made this level.
The trendy proponents of freeports and tax havens, and all different types of regulatory abuse, have little interest in following Friedman’s suggestion. That’s as a result of they aren’t within the slightest method entrepreneurial, and have little or no understanding of what it actually means to be free market operators. They’re as a substitute solely fascinated with methods through which they will manipulate rules to extract earnings from markets at price to society at giant. That’s the single motive for the existence of freeports and exactly why all governments ought to reject their existence since they characterize a menace to their populations as an entire.
