Is the Tobin Tax enough?

Posted on November 4, 2011

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As the Greek parliament is deciding whether or not to retain confidence in George Papandreou, others around the globe are campaigning for a tax on financial trading.  The so-called Robin Hood Tax, it is a big part of the answer for some in redistributing wealth and in addressing much of the imbalances in the global economy. While it has popular support amongst many, it is not so popular in the finance sector, particularly in London where some traders believe it will simply drive business offshore.

Regardless of whether the traders are right or wrong, is a Robin Hood Tax the whole story?  Surely the systemic problems in the international economy and in finance markets are not solely down to the lack of cash for the less well off, but rather the excessive and concentrated wealth produced irresponsibly by the system for a very few.  The structure of markets have become so complex that no-one really knows who or what goes on it seems, or at least this was how it was in 2007 when the sovereign debt crisis hit.  And then there are the seemingly endless ways in which traders can gamble with money on seemingly irrelevant or even damaging outcomes.  Some for example argue that the crisis in food prices is in large part driven by the introduction of trading (read gambling) on the future prices of food.  Will a transaction tax really put a dampener on this behaviour?

And while we have Directors in the UK receiving 50% pay increases last year, it is clear that this corporate behaviour flies in the face of the the wellbeing of the global economy.  Rewards are not matching performance – or at least performance for greater economic benefit.  So, if corporate behaviour isn’t necessarily in the interests of the broader economy, and the structure of the markets allow for the interests of the real economy to be undermined by what amounts to gambling, and the governance of the markets can’t really tell us when things are out of control or not….surely we have a problem of much bigger proportions than can be solved by a transaction tax?

If the Tobin Tax is part of the answer, then what about the rest?  How can we demand and get real change in the way corporations are run, in their level of accountability for their actions (lifting the cloak of commercial confidentiality when it is necessary), and how can we begin to break the stranglehold of the markets on the world economy.  The very idea that a giant marketplace results in rational decisions is slightly bizarre in my book, but when real money goes up in smoke because people decide to bet on two flies crawling up a wall, we have a problem.

How do we as ordinary citizens engage with all of this murk?  The Robin Hood Tax might make us feel good, but will it make a difference – or at least – enough of a difference? I wonder whether some are supporting the tax in the hope that global demands for systemic change will go away the day it is brought in, full in the knowledge that it will do little to change the system, but do a lot for altering public perceptions about the value of the markets.

So, while it sounds like a great idea, I for one want to see deeper challenge to the markets.  I want to see real challenge to corporate behaviour, and a much greater  system of rewards for deep investment in public and environmental good.  I want to see a challenge to the endless chinese walls corporations throw up which make it nigh on impossible for their activities to be monitored across their entire ownership structure.  And I want to see the same type of rules applied to stealing bankers as stealing 16 year olds.

Time for a bonox!

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