In this short video made by Richard Curtis, actor Bill Nighy plays a complacent banker who squirms at suggestions banks should be asked to pay a ‘Tobin tax’ of less than 0.05% on certain types of transaction
It’s a commendable effort, and effectively launches the “Robin Hood Tax” campaign which is seeks to try to make members of our political elite recognise that this is an idea whose time has come.
A prominent group of 200 US economists including James K Galbraith recently came out in favour of such a tax — also called a Tobin tax and a Financial Transaction Tax (FTT) — stating that it would have the positive effect of curbing speculation on international financial markets at the same time as raising hundreds of billions to redistribute to the world’s poorer nations and to invest in things like renewable energy.
“The cost of trading financial assets has plummeted over the last three decades as a result of computerization. This has led to an enormous explosion in trading volume, with most trades having little economic or social value and redistributing disproportionate resources to the financial sector … A set of modest financial transactions taxes, which would just raise trading costs back to the level of two or three decades ago, would have very limited impact on trades that have real economic value. Such taxes could both reduce the volume of speculation in financial markets and provide substantial revenue for either important public purposes and/or deficit reduction.”
Letter from 200 economists in support of a Financial Transaction Tax or Tobin Tax
Predictably enough, there is no shortage of critics from the banking sector who are keen to smear Nighy and Curtis and trash the proposal. They are warning that, a Tobin tax, even one set as low as 0.05%, would be a danger to the capitalist system, push Libor up to 20% etc. Most of such claims — many of which are evident as comments on a recent blog post by Toby Young — are nonsense.The City has coped perfectly well with Stamp Duty on share transactions.
There could be practical reasons why imposing and collecting such a tax might prove difficult (see this document from the IMF) and IMF boss Dominic Strauss-Kahn apparently intends to hype up some of these difficulties to scare off the scheme’s proponents.
But in my view Gordon Brown — and Curtis and Nighy — are to be commended for lending their weight to this campaign, which as the video implies could raise $200bn a year.
Note: The reason it is called the Tobin tax is because it was first advocated by the neo-Keynesian American economist James Tobin (1918-2002). Tobin called for a transaction tax to be imposed on all spot conversions on the global foreign exchange (forex) markets, with a view to curbing speculation on the international currency markets, which he saw as dangerous and unproductive. As Tobin put it “my proposal is to throw some sand in the wheels of our excessively efficient international money markets.” Tobin suggested his currency transaction tax in 1972 in his Janeway Lectures at Princeton, shortly after the Bretton Woods system of monetary management came to an end in 1971.
In a roundtable interview in Prospect Magazine in August 2009, Lord Adair Turner supported the idea of new global taxes on financial transactions, warning that the “swollen” financial sector paying excessive salaries had grown too big for society. Lord Turner’s suggestion that a Tobin tax should be considered for financial transactions made headlines around the world.
This blog post published 10 February 2010 . To visit the homepage for the Robin Hood Tax campaign,