Finance

At last a tax you’ll be in favour of!

Feb 10th, 2010 1:23 PM UTC
By Joseph Powell

Ever thought it was time the banks gave something back to society? Or even just help repair some of the mess they caused around the world? Well then it’s time to join the movement for a Robin Hood Tax, which has launched today in the UK.

The Robin Hood Tax is a simple idea to raise billions of pounds for public services at home, and for climate change and international development abroad. A tiny tax of around 0.05% would be placed on all transactions that don’t involve your everyday high street business – currency speculation, futures trading, derivatives and the like. Even at conservative estimates this could raise £250 billion a year if applied globally.

Years ago such a tax wouldn’t have been possible but the computerisation of trading has actually made it relatively easy to know how much money is winging its way around the world. On the political side momentum has been building around the idea with Gordon Brown, Nicolas Sarkozy and Angela Merkel all speaking out in favour. The Head of the UK Financial Services Authority, Adair Turner, has also suggested that an end to some of the banks “socially useless” behaviour would be a good thing.

This is an idea whose time has come. We hope you’ll join us in helping to turn a crisis for the banks into an opportunity for the world.

Visit the Robin Hood Tax campaign website and join the band of merry men and women today!

Stiglitz: AIG bailout would cover US Africa spend for a quarter of a century

Feb 9th, 2010 2:42 PM UTC
By Joseph Powell

Development economists don’t come much more revered than Joseph Stiglitz. Once Chief Economist at the World Bank, Stiglitz has made his name arguing for reforms to the global financial system that would allow more countries to benefit from globalisation, particularly in Africa. He has attacked the special corporate interests that dominate the formation of policy and regulation of the financial sector, and called for a more equitable growth model.

Last night at the London School of Economics, Stiglitz compared the huge bailouts for the financial sector to the relatively modest sums governments spend in overseas development assistance (ODA). “The $180 billion the US Government spent on [the insurance company] AIG would finance all the country’s ODA to Africa for a quarter of a century” he told a packed lecture hall. It is worth remembering those sums the next time a Western government fails to meet its commitments to Africa due to ‘tight budgets’.

However, Stiglitz has broader prescriptions for African development. In a January speech to the African Development Bank he called for Africa to abandon the ‘Washington Consensus’ of financial liberalisation and ultra-free markets, and instead move towards a more developmental state based on investment in manufacturing and clear industrial policy to move away from commodity dependency. This, he argues, would allow Africa to better hold its own in the global economy.

Stiglitz’s analysis also lends weight to the calls for the financial sector to contribute to the damage the recent crisis has caused. It is estimated that in Africa a combination of declining trade, overseas bank lending, foreign direct investment, remittances and portfolio flows has left the region with a $130bn shortfall. And yet not a single bank went bust in Africa due to reckless lending or irresponsible speculative behaviour. That makes it only fair that as the IMF and G20 leaders consider how to ensure that the sector makes a fair and substantial contribution to the costs of the downturn, Africa is included. Stiglitz would certainly agree.

Growing support for a Tobin tax

Oct 19th, 2009 10:28 AM UTC
By Joseph Powell

Over the past few weeks proposals for a small tax on international financial transactions, such as currency trades, have gained support from European politicians. The idea, known as the Tobin tax, originated from the Nobel laureate economist James Tobin, who in 1971 proposed a currency transfer tax to curb speculators who were causing dangerous levels of volatility in exchange rates. In recent years campaigners have suggested using the revenue generated from such a tax to fund global public goods. Suggestions have ranged from helping pay for the UN, covering some of the climate change adaptation costs to support for developing country health spending.

The current interest in the tax was arguably sparked by UK Financial Services Authority chief Adair Turner, who commented that the UK banking sector had become bloated and was engaged in too much “socially useless activity”. He suggested a tax on financial transactions could be used to rein in the City and simultaneously create a revenue source for development. Other European government figures have joined the debate, including French Foreign Minister Bernard Kouchner and German Finance Minister Peer Steinbrück. All have been more or less supportive of a tax, but made different proposals on what level it would be set at, its scope and how the money would be used. For example Kouchner called for a voluntary contribution of 0.005% on all currency transactions, which he believes can raise $44.1 billion a year.

The increased political activity has been followed by a reference in the recent Pittsburgh G20 communiqué to finding new ways of making the financial sector contribute to stabilising the global economy. The IMF is now mandated to assess schemes which will include a financial transactions tax.

Taken together these moves represent an opportunity for campaigners to argue for innovative sources of financing for development objectives. Concerns over technical feasibility remain, but could probably be overcome if world leaders agree on the principle of a transactions tax. If agreement is reached anti-poverty groups should be ready to push the case for using at least part of the revenue for international development.

-    Joe Powell