One of the first institutions to fail in this crisis was Northern Rock, a very British bank where supervisors appeared to overlook the niggling detail that funding long-term mortgages of more than 100 per cent of the value of homes in a mature boom, with short-term deposits and money market funds, is highly risky. A German savings institution, IKB, was next. Regulators did nothing about the exponential growth of mortgage-related financial derivatives, not because they were hidden in offshore financial centres – they had the discretionary powers to raise bank capital charges for any additional risks they perceived – but because they thought that this was an example of safe financial innovation that was banking the under-banked and diversifying risk.

Admitting that the crisis was a failure of domestic regulation implies that those in power were out to lunch as the largest financial crash was brewing. It is easier to blame tax-dodging foreigners. But let us be real. The largest centres of boastfully light regulation and light taxes for non-residents were London, Luxembourg, Dublin, the Channel Islands, Gibraltar, Monaco and many other locations in the European backyard. Yet some Group of Seven leaders would rather play to the gallery by stepping on small developing countries. You can see why international co-operation is struggling to secure legitimacy when some of the same countries that mucked up their own regulation, plunging the world into crisis, appoint themselves judge and jury of what is good, bad and ugly elsewhere.

There are at least two ways in which the current attack on offshore financial centres is illegitimate. First, it is inconsistent with the notion of tax sovereignty. Europeans prize this internally but do not want others to have it. Why should developing countries that have difficulties in administering direct taxes, and so rely more on land and consumption taxes, not have low income taxes? Remove tax competition and you remove one discipline on countries otherwise tempted to engage in expensive wars or over-generous government bail-outs.