Tobin tax attracts some heavyweights

A global financial transactions tax, a Robin Hood tax, a Tobin tax ... call it what you will, it's day may finally be dawning. In 1972, American economist James Tobin proposed a tax designed to reduce speculation in the international currency markets which he saw as dangerous and unproductive. He suggested using the proceeds of the tax to fund projects for the benefit of Third World countries, or to support the United Nations.

Now, 350 prominent economists from around the world have written to the leaders of the G20 calling on them to implement a 0.05% tax on all speculative financial transactions "as a matter of urgency." The economists include Nobel prize winner Joseph Stiglitz as well as Jeffrey Sachs, George Soros and Warren Buffet.

Their letter reads in part: 

This tax is an idea that has come of age. The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken. It is time to fix this link and for the financial sector to give something back to society.

This money is urgently needed. The crises of poverty and of climate change require an historic transfer of billions of dollars from the rich world to the poor world, and this tax would offer a clear way to help fund this.

Trading in foreign currencies, stocks, bonds and their derivatives is now over $3,260-trillion a year, about 60 times the world's GDP, powerfully facilitated by networked computers. The result has been described as turning the financial market into an "electronic pinball," with billions ricocheting blindly across continents in split seconds in pursuit of instant profits. Regulating the pinball is in itself necessary for financial stability, and using the regulation for good works, as the economists suggest, is the icing on the cake. Alleviating poverty and fighting climate change are international responsibilities so an international tax is perfectly appropriate.

The G20 will probably reject the idea at this summer's meeting, but the consensus in favour is growing. And it is attracting some very prestigious champions.