An international levy on financial speculation need no longer be a mere pipedream.
Approximately $1 trillion is traded daily on currency markets – with speculators able to smash jobs and ruin lives on a whim and for a fast buck, whatever the real strengths of the economy in question.
A way of tackling this was advanced in the early 1970s by James Tobin, an American mainstream economist and later Nobel Laureate. The scale of speculation was much smaller then and Tobin only sought to “throw sand in the wheels of global finance” with the aim of reducing short-term speculative trading.
While this idea was embraced by War on Want and others in the 1990s with an added emphasis on revenue, it was often dismissed as marginal. Its credibility has now been given an unexpected boost by Adair Turner, the chairman of the Financial Services Authority, and could reinvigorate the campaign for a global tax.
This could call on the intellectual resources of those who have spent years finessing the concept. They include the Stamp Out Poverty coalition, which has published economist Rodney Schmidt’s case for a currency transaction tax of 0.005 per cent designed to raise about £20 billion a year.
The issue often appears on the parliamentary agenda. The most recent sighting was a House of Commons motion in April proposed by Labour MP Dave Anderson and backed by 50 MPs from five different parties.
The motion says it is an anomaly that currency transactions are exempt from taxation, because all other parts of the financial market have attracted transaction duties in recent years. Such precedents can be built on if campaigners can persuade people that this is a practical proposition for international agreement.
The usual argument against a levy is that international agreement would not be forthcoming and traders would simply move their operations to other countries. But the motion argues that there is little scope for avoidance, since this market is fully electronic.
Avinash Persaud, chairman of Intelligent Capital, the chairman of the Warwick Commission and a former banker, argues that: “Financial transaction taxes are not only commonplace, but have become easier to enforce”. Therefore, the real question is not one of feasibility but desirability.
Persaud says: “It is hard to argue that anything is not feasible today after governments have engaged in wholesale bank nationalisation and credit guarantees, pushed budget deficits into double figures, become the buyer of last resort of assets they would not normally touch with a barge pole and threatened to legislate against private sector pay. Where there is a will, there is a way.”
Respected economists Will Hutton and Larry Elliott have also weighed in to support the concept. Influential Labour MP Jon Cruddas included the notion of transaction taxes in his recent keynote speech seeking to tackle defeatism in the party’s ranks
Campaigners should link up with think-tanks and unions to work out how to turn this into a new campaign that could, linked with other iconic issues, lift the morale of the labour movement before the next general election.
A global levy could both increase the stability of markets and raise revenues for good causes. It is vital that global markets provide some of the tax base for global social democracy. And it’s a potential vote-winner.
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