International Economics

Towards a European Tobin Tax?

0 21

Reports in the press this week suggested that German Chancellor, Angela Merkel, had been won over to the idea of introducing a tax on financial transactions at the European level.


BY THE CURRENT MOMENT | JANUARY 24, 2012

Sarkozy_615_300

This has been primarily a French idea so far, with Nicolas Sarkozy a convert to a policy he had previously dismissed as ridiculous. The Tobin tax idea had been taken up by the French anti-globalization movement at the end of the 1990s and early 2000s and was virulently opposed by most of France’s political class. Today, in a very different political climate, the idea has been given a new lease of life.

Whether or not a financial transaction tax is finally introduced remains uncertain. This week’s press also reported that Sarkozy – who faces an election in the coming months and has committed himself to this tax as a demonstration of his activism in regulating financial markets – might settle for a tax on share trading as a first step. This already exists in the UK in the form of stamp duty on stock exchange transactions. Keeping the UK on board with any new European regulations would be welcomed by other European leaders as lasting rifts and real isolation are anathema to the EU. Bringing Cameron back in from the cold would be attractive to all involved in last year’s falling-out between the UK and the EU. Such a tax would, however, leave unregulated all other kinds of financial trading like derivatives and high-frequency trades. These have been identified as the real targets but an initial tax on share trading might solve Sarkozy’s problem of having committed to introducing a financial transaction tax before the election.

Is a financial transaction tax really the solution to the current crisis? The main rationale for it today is that it would serve as an alternative source of revenue for bail-outs and other expensive public actions that have up until now been funded by the taxpayer. That such a tax could improve government balance sheets to the point of reducing the need for austerity seems rather fanciful. What it would challenge, however, is the idea that governments defer unconditionally to their financial sectors. Whilst governments routinely stand by and watch as industries relocate to the Far East and shed thousands of jobs, they seem unable to accept that any such “creative destruction” should operate in finance. To many, this smacks of double standards and a tax on financial transactions would demonstrate – at the very least – the exercise of some political muscle vis-a-vis banks and financial services.

This argument about the symbolic nature of such a tax is not a bad one. But it tends to miss the bigger picture. The reason why a Tobin-style tax has become a popular idea amongst European governments is that it is like the famous phrase of Tomasi di Lampudesa’s The Leopard: things must change so that they remain the same. There is nothing in a financial transaction tax that really challenges the relationships and interests that together have given us this debt-finance growth model of the last 40 years. Nor would the tax really reverse the striking rise in inequality that has come to characterise our societies. The theory of the present crisis of capitalism contained within the Tobin Tax idea is that responsibility lies in the financial sector and that whilst the economy is generally sound, a few bad financial apples are bringing us all down. By taxing them and redistributing the revenue according to priorities set by elected representatives, we can return to the status quo ante.

One argument we’ve been pushing at The Current Moment is that financialisation is as much about a change in the real economy as it is about the financial sector itself. Isolating finance from its place in the wider economy, as the idea of a financial transaction tax does, misses the nature of the problem. This idea is also naive in that it imagines that relationships between real people can be transformed via a state-levied tax. Societies, today as in the past, are based around relationships that can only be changed by real political struggle. There is no short-cut or easy way around the problem of either redistribution or of making European societies more productive. The financial transaction tax is a coward’s way out of tackling today’s economic and social crisis and will only entrench, rather than transform, existing inequalities.

 

This article first published at The Current Moment.

About the author / 

CESRAN Int.

Leave a reply

You must be logged in to post a comment.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

CESRAN Blog

  • 24th Issue is Online Now!

    Vol. VI | No. III – July-August-September 2020 To Download the Magazine Click Here… CONTENTS 05-14….. World News by Ebru Birinci 17-24….. Preparedness for an Uncertain Future “The Only Thing We Have to Fear is Fear Itself” by Professor Mark Meirowitz 25-39….. EU LAW vs UK LAW The Primacy of EU Law over National Law:…

  • IEPAS2020 is Going Virtual!

    Dear Friends and Colleagues, IEPAS2020 is Going Virtual! Due to the COVID19 pandemic, we are holding our entire conference virtually by streaming all of the live sessions. You may participate in all of our virtual networking events. In case of missing a session, you may get full access to the replays of every session since all…

  • The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now…

    The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now… Vol. 8 | No. 1 | 2020 Click here to Download the Entire Issue   TABLE OF CONTENTS Editor’s Note By David Curran Introduction By Nergis Canefe Research Articles Statelessness as a Permanent State: Challenges to the Human Security Paradigm By…

  • The 19th Issue of The Rest: Journal of Politics and Development is Out Now!

    The 19th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles Turkish AK Parti’s Posture towards the 2003 War in Iraq: The Impact of Religion amid Security Concerns By Alberto Gasparetto Nigeria and the Great Powers: The Impacts of the Boko Haram Terrorism on…

  • CESRAN International Named again amongst the Top Think Tanks in the World

    CESRAN International is pleased to announce that it has been named again amongst the world’s best think tanks. The 2019 Global Go To Think Tank Index ranked CESRAN International 141st among the World’s “Top Think Tanks in Western Europe” 75th among the World’s “Top Environment Policy Think Tanks” 153rd among the World’s “Top Foreign Policy…

  • THE 18TH ISSUE OF THE REST: JOURNAL OF POLITICS AND DEVELOPMENT IS OUT NOW.

    The 18th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles The Foreign Policy Decision Making Approaches and Their Applications Case Study: Bush, Obama and Trump’s Decision Making towards Afghanistan and the Region By Sharifullah Dorani Evaluating the Explanatory Power of Social Identity Theory,…

Newsletter