Creating Spaces. The Political Economy of Island Offshore Finance Centres : the Case of Jersey

Abstract

This article discusses Offshore Finance Centres (OFCs) in islands using Jersey as its case study. Jersey has become an increasingly important conduit for the global circulation of capital, both for Transnational Corporations and wealthy individuals. The OFC dominates Jersey's economy, contributing an estimated 54 per cent of GDP; 20 per cent of employment and a major part of government revenue. Per capita GDP was £18,400 ($27,600) in 1994 making it one of the world's wealthiest small territories. Jersey's apparent success raises the question whether other small islands can also host OFCs. The emergence of Jersey as an OFC in the 1960s is examined, introducing the concept of four 'spaces' that international financial capital could exploit: regulatory space; fiscal space; secrecy space; and political space. Lessons for other islands are then discussed including positive economic impacts such as employment and government revenue generation, before turning to other impacts, particularly issues of external dependence, the ethics of offshore finance, the potential for corruption and whether OFCs are a form of "new piracy". Hosting OFCs may prove to be economically beneficial to some small islands, but not without incurring some costs. In the long-run island OFCs may prove to be one more example of small islands needing to be flexible and highly adaptive in a world of larger economic and political forces.

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