The financial transaction tax is an idea whose time has come - yet still the Tories say no, writes The financial transaction tax, an idea whose time has come.
Deep in the fifth year of this financial crisis, according to the IMF, it has cost more than $10 trillion globally in government transfers to the banking sector.
Rather than thanking their saviours, financial markets have turned into vultures circling over one indebted country after another, as loan sharks, such as Wonga, circle over the most vulnerable in society.
As we enter another spiral, centred on Spain – who saw their credit rating reduced still further this week – we should be asking all politicians how long will we let the speculators off the hook?
Wealth is increasingly concentrating in fewer and fewer hands. The richest ½% of global adults now own more than one third of the world’s wealth. In Sweden, considered one of the most cohesive EU countries, the average of the top 50 incomes is 46 times higher than the average industrial worker’s pay (equivalent to a full working life).
This has created a vast pool of footloose global capital looking for the quickest returns – a factor behind the explosive growth of financial markets, securitisation, and speculative trading over recent decades.
In 2011, according to the Bank for International Settlements, more than 90% of financial transactions were purely speculative. That’s speculation on food and fuel prices, speculation on national debt, speculation on the chances of economic recovery – that ultimately is speculation on our futures at our cost.
Today, the speculators are playing a game of chicken with governments, pushing us all to the brink of a much larger economic crisis.
Meeting in Tokyo, in the past few days, for the annual meetings of the World Bank and International Monetary Fund – collectively known as the International Finance Institutions (IFIs) – finance ministers have been forced to face the reality austerity measures are not working. On the contrary, they are making the situation increasingly more dangerous.
Christine Lagard, director of the IMF, has broken ranks. The IM’’s change of tune on the speed of budget cuts stems from research, contained in its latest ‘World Economic Outlook’, released last week, showing aggressive austerity is knocking any attempt to revive economic growth more sharply than previously thought.
Trade unions have warned of this since mid-2010 when austerity became vogue in Europe. We have called for an alternative to austerity. An alternative based on fair taxation, action on tax evasion and the abolition of tax havens. People are in the streets across Europe demanding this alternative comes sooner rather than waiting for the consequences outlined by the IMF in their stark warnings this week.
Chancellors of the Exchequer from around the world should have used the opportunity in Japan to face down the financial market speculators and to collectively identify alternative proposals to austerity. They could have used the opportunity to join the 11 European governments who announced last week they will push ahead with the creation of a financial transaction tax.
It is a simple idea: a small tax of 0.05% on all financial transactions:
• A small tax that could raise billions of pounds;
• A small tax that would contribute to longer-term economic thinking;
• A small tax that hits high-frequency trading, performed by computers not people;
• A small tax targeting speculation, putting ‘grains of sand in its cogs’ as James Tobin proposed a quarter of a century ago;
• A means to finance job-intensive recovery projects and public services, development goals and climate-finance commitments.
A global Robin Hood Tax could raise £250 billion every year, including tens of billions in the UK.
The UK government leads the opposition to this small tax at home and abroad. It’s a British government that is actively defending the interests of speculators over those of ordinary people and economic sense.
Together with the TUC, many will be in the streets of London on October 20th calling for A Future that Works. A financial transaction tax is part of that future. It is a tax whose time has come. Move out of the way, Mr Osborne!