Merry. But effective?

Submitted by martin on 31 March, 2010 - 3:16

After a dizzy moment in November-December 2009 when Gordon Brown and then a European Union summit endorsed the idea, the "Tobin Tax" has disappeared from the discourse of governments.

But it is a long-circulated idea - first proposed nearly 40 years ago by the liberal US economist James Tobin - and is now gaining new momentum in the labour movement.

A website advocating it under a new name, Robin Hood Tax, has been backed by the TUC, GMB, NUT, PCS, and Unison, as well as many NGOs: http://robinhoodtax.org.uk.

It advocates a tax "as low as 0.005 per cent... average 0.05 per cent... on the billions of pounds sloshing round the global finance system every day through transactions such as foreign exchange, derivatives trading and share deals...

"It can raise hundreds of billions of pounds every year. And while international agreement is best, it can start right now, right here in the UK.

"That can help stop cuts in crucial public services in the UK, and aid the fight against global poverty and climate change".

Tobin proposed the tax mainly as a device to "throw sand in the wheels" and drastically reduce the number of international financial transactions, a move which he thought would make capitalism less unstable.

Even on a reduced number of transactions, the tax would raise cash. The new campaign stresses the revenue-raising side of it.

As a "what if" exercise, exposing the squeals about the need to make "hard choices'' to cut benefits while vast cash-stashes circulate unscathed amongst the wealthy, the Robin Hood Tax proposal is excellent. As a practical proposal to focus our political campaigning, it has problems.

Agreement on such a tax between all the major centres - or potentially major centres - of financial dealing worldwide is unimaginable short of vast shifts in the balance of forces (and that is why Brown and the EU leaders felt safe about advocating it!)

If a national government imposes such a tax off its own bat, the main effect cannot but be to shift foreign-exchange dealing from that country to somewhere else.

The labour movement will get such a tax only when we are tough enough to overwhelm the great City financial interests who would fight to the death against the loss of London's gigantic foreign-exchange business, most of which would move off-shore in the event of a British Tobin tax.

When we are strong enough to wrestle the bankers to the floor, I trust we'll do more than say, "hand over 0.05%, then you can get up and resume profit making with the other 99.95%".

When labour internationalism is strong enough to force financiers and their paid-for governments to their knees world-wide - as it would need to be to get a world Tobin tax - then the strength must be used for more drastic measures than a 0.05% tax.

The Tobin tax is both too "minimal" to be an ultimate goal and too "maximal" to be a good immediate stepping stone.

Moreover, if we reckon on a world Tobin tax on world finance, then we should not reckon on Britain getting a huge share and leaving the poorest countries with pennies.

The Robin Hood/Tobin proposal is misleading, because it gives the impression that misery, poverty and cuts can be mended just by sucking up a little of the soup off the plates of the rich (just 0.05%). In fact, we will need to dispossess the wealthy much more drastically.

Comments

Submitted by stuartjordan on Wed, 02/11/2011 - 09:21

For any working-class militant, alarm bells should ring as soon as the archbishop of Canterbury joins the campaign. The proposals are entirely unworkable and fundamentally misunderstand the nature of finance capitalism.

Apart from the arguments above, there is a big question about whether the demand corresponds to reality. The tax was not originally proposed to be a way of punishing the bankers (as the archbishop and the unions seem to think) but rather to throw a few grains of sand into the high velocity world of global finance in order to bring some stability to the currency markets. John Grahl at the AWL's Ideas for Freedom this year, argued that the tax would not just "throw sand in the wheels" of financial markets but would "throw a spanner in the works". Unfortunately his article is not available online: Grahl, J. & Lysandrou, P. (2003) Sand in the wheels or spanner in the works? The Tobin Tax and global finance, Cambridge Journal of Economics, 27, pp. 597– 621 But his basic argument is that alot of "currency speculation and hedging" which the Tobin taxers believe causes instability, is actually essential to the operation of global capitalism.

As socialists we should not be advocating that we trick the bourgeoisie into destroying their own system. Neither do we want to create a world of self-sufficient national economies. Instead of messing around at the edges of the system, we should build a movement capable of taking control of the wealth that we created.

p.s. when this tax was first proposed in the 1970s it called for a 0.1% tax. they obviously dropped it to 0.05% in order to appeal in the moderate wing!

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