Saturday, 12 September 2009

Germans call for Tobin Tax

Paul Sweeney: The two earlier contributions on Progressive Economy on 27th and 30th August, were spot on in showing a growing trend, ignored by the Irish media. On Friday 12 Sept, the German Finance Minister called for a global tax on financial transactions in a effort to end “binge-drinking” on capital markets. Peer Steinbrueck, a critic of Ireland’s leading role in beggar-thy-neighbour corporate tax competition policy in the EU, said the revenue would pay for the cost to taxpayers of bailing out the banks, including fiscal stimuli.

He says “the cost of the crisis should not be borne alone by small taxpayers.” The Irish Government, our corporate elite and their professional storm troopers – financial sector economists, accountants and lawyers - should take note.

He would like a tax of 0.005% on all financial transaction of banks, insurance companies and investment funds. Steinbrueck’s call follows on from a similar call by the Chair of the UK’s Financial Services Authority, Lord Turner, to introduce such a tax.

The Chancellor, Steinbrueck’s boss, conservative Angela Merkel, said she would discuss the idea, but it had close to no chance of being agreed at the G20 summit in Pittsburgh on 24th and 25th September.

Why is the Irish media not covering this interesting debate? Could it possibly be that it is generally opposed by conservatives as an interference in the market? And is anybody in power here interested in this idea?

Interestingly, Poul Rasmussen - who was in Dublin over the weekend - is the architect of the EU’s plans for regulation of financial services in Europe. The former PM of Denmark, an economist of some note and leader of the PES, was fresh from addressing the leaders of the UK's financial services. The meeting in the Guildhall, in the heart of the City, was a fierce affair. The big boys in finance don’t want regulation and were harshly critical of Poul Rasmussen’s proposals. While agreeing to more consultation, he would not back down on the need for greater regulation of hedge funds and private equity and the financial sector in general.
More interference in the market!

And even more market interference may be threatened by Obama this week. In his speech on Wednesday last, he said “our predecessors understood that government could not and should not solve every problem,” but “they understood that the danger of too much government is matched by the perils of too little: that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.”


Anonymous said...

Jim Tobin's tax is a wonderful, Utopian idea. Unfortunately, it would involve such a diminuition of national sovereignty to be bound by the all country international agreement needed to enforce it that it doesn't have a snowball's chance in hell.

Anonymous said...

Don't be so pessimistic Anonymous. In actual fact a Tobin Tax would be very easy to implment and police - there are any number of models from which to choose.

What is a problem is the principle of the Tobin Tax and what it represents. The so-called "financial community" (conspiracy??) rightly fear it, as they realize full well that a successful Tobin Tax could prompt more far reaching measures; the absolute freedom of capital movement on a global scale is has proven to be disastrous on so many levels, bar the enrichment of a tiny group of capitalists.

So, the bankers fear any measures on the continuum of capital controls, such as the very meagre Tobin Tax.

Don't confuse feasibility with desirability. Though both apply with a Tobin Tax

paul sweeney said...

What makes the Tobin tax so Utopian is the powerful interests who oppose it, including Anom NO1 above!
The fact that people like Turner and Steinbrueck are seriously discussing it is very telling. As more countries move to greater protectionism after the near collapse of the world economy, I suspect that such a tax is preferable to some atlernatives.

Anonymous said...

Please see the following by Willem Buiter (who knew Tobin and was taught by him):

paul sweeney said...

I read Buiter a few weeks ago and indeed Martin Wolf came out against Tobin last week too in the FT. I think they make many valid points. The debate demonstrates that new ideas on curbing the over-reach of financial services are being considered internationally.

SlĂ­ Eile said...

The scale of parked financial holdings in this State is enormous. The equivalent of over 10 times our national income is held in assets or liabilities by foreign financial interests resident in the State. To what extent this activity is related to hedging and currency speculation is an interesting point. We don't know and the overall balance sheet is not transparent. More soon in a blog to this site.
Clearly, on this issue as well as corporate tax a coordinated international approach is needed. A strong case exists for cooperation at European level or within the ambit of UN agencies. A Tobin Tax could be related to development and measures to combat climate change and poverty.