10 March 2011

Europe moves toward a Robin Hood (Tobin) tax

In 1972, Nobel Laureate economist James Tobin suggested a currency transaction tax to be leveled on all spot conversions of one currency into another. He intended the tax to penalize currency flipping, thereby modifying currency volatility. In his words, "National economies and national governments are not capable of adjusting to massive movements of funds across the foreign exchanges, without real hardship and without significant sacrifice of the objectives of national economic policy with respect to employment, output, and inflation." In other words, currency speculation undermined the democratic process.

Since then, the idea of a Tobin tax has grown well beyond Tobin's original intention of "putting a brake on foreign exchange trafficking." The global justice movement promotes application of a tax on financial transactions as a means of generating revenue for the fight against global poverty and protection of the environment. A means, in other words, to allow governments, i.e. citizens, to reclaim part of the democratic space that global trade agreements have conceded to markets. Thus the Tobin tax becomes the Robin Hood tax. You can read much more about this at http://robinhoodtax.org/. The idea is that, due to the vast number of financial transactions in today's globalized world, a tiny tax on such transactions could generate large amounts of revenue for the public good.

The Robin Hood tax campaign has now received a boost from the European Union. Earlier this week, the European Parliament voted in support of a financial transactions tax on banks. They estimate the 0.05 per cent levy on financial transactions will raise  $270-billion a year. The Members want Europe to press ahead unilaterally with the tax to discourage speculative trading and to raise money to protect public services, fight global poverty and tackle climate change. The vote is not binding, so the challenge now is to get national governments on board. A number already are, including France who chairs the G20 this year. The German, Austrian and Spanish governments are also in support.

This bold move by the European Parliament has put paid to the argument that nothing can happen without global agreement and sets a global standard for pressing ahead with action on the banks. An idea, as they say, whose time has come.

No comments: