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A Tobin Tax: A good idea?

November 2, 2011

The most recent demand – or just idea to be considered – coming out of the Occupation movement and others is the notion of a Tobin Tax, sometimes called a Robin Hood Tax, on international financial transactions. The idea is to charge a fee, probably of around 0.5% on international currency transactions, discouraging speculative transactions on foreign currency, which can damage a country economically,: it would also raise funds for more important things. According to some estimates, it could raise ten times the amount of money required to meet the Millennium Development Goals. Is it really a good idea?

I’ve been a quiet supporter of a Tobin Tax for many years. It protects vulnerable, usually developing economies. The Indian Rupee is a closed currency at least partly to protect it from the ravages of speculators, as are the Moroccan Dirham and Tunisian Dinar. It provides useful resources for more important things, like development, disaster aid and ecological protection. It’s a great way of redistributing resources to those who need it most. David Cameron, Boris Johnson and the banks oppose it.

If they don’t like it, as a rule of thumb, it’s probably a good idea!

Actually, they say they oppose it unless it’s adopted globally. If we’re going to introduce a Tobin Tax, that’s fine by me.

A Tobin Tax would go a long way towards imposing stability on international markets, preventing the problems of high interest rates that accompany the capital flight that is a consequence of large-scale financial trading.

Within the framework of the current economic system, I agree a Tobin Tax is desirable.

That’s my problem: “within the framework of the current economic system”. As I observed in my last blog entry, the whole system is not fit for purpose. A Tobin Tax sticks a plaster over the running sore that is our financial system, allowing it to continue to suppurate. To mix metaphors, it’s a red herring!

If our answer is to reform the current system, then a Tobin Tax will help. If our answer is to develop a whole new system, a Tobin Tax may well be irrelevant.

With that, I’m not sure whether to support a Tobin Tax or not. Supporting it provides a partial answer to some of the more obvious problems, providing valuable money for important expenditure (expenditure we should be making already, rather than blowing the money on fighting each other and bailing out private investors). Supporting it also allows some people to go home happy they’ve achieved something, when they’ve actually achieved very little. We’ll be back out on the streets in a couple of years if this happens.

Opposing it means we can move towards more meaningful, long-term answers to the problem. Whether there is a simple long-term solution to a problem in an evolving system is uncertain. Whether a Tobin Tax will be part of that solution remains to be seen.

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