Wednesday, December 2, 2009

The Idea That Just Won't Die: Tobin Tax

The French Foreign Minister, Bernard Kouchner, who also happens to be the founder of Doctors Without Borders, and the French Finance Minister, Christine Lagarde, had an Op-Ed in Le Monde yesterday arguing in favor of a global tax on financial transactions and institutions, aka a Tobin Tax:
Une taxe de 5 centimes sur 1 000 euros serait indolore, mais pas sans conséquences pour le monde en développement : car même à un seuil aussi peu significatif, les recettes escomptées pourraient représenter jusqu'à 35 milliards d'euros !

Cet argent doit contribuer à la satisfaction des besoins primaires : l'eau, la sécurité alimentaire, l'éducation, la santé. C'est là l'urgence, alors qu'un milliard de personnes n'ont pas accès à l'eau potable, qu'un milliard de personnes souffrent de la faim, que l'emprise de la pauvreté éloigne les enfants des écoles et ne leur permet pas de réaliser leur potentiel, qu'un million de personnes meurt chaque année du paludisme... Ces fonds pourraient également contribuer à financer des actions d'adaptation au changement climatique et d'accès à l'énergie.

A tax of 5 cents per 1,000 euros would be painless, but not without consequences for the developing world : because even an amount of such little significance may generate revenue of up to 35 billion euros.

This money must contribute to the satisfaction of basic needs : water, adequate food, education, health. That's the urgency there, while a billion people don't have access to clear water, a billion people suffer from hunger, poverty prevents children from attending school, and a million people die from malaria a year...These funds may even be able to contribute also to finance actions to adapt to climate change and access energy.

Not to sound like a negative Nelly here, but I have a few issues. Fighting malaria and hunger, providing clean water, etc, are all extremely noble goals. My question is why a global tax on financial transactions has to do with it besides it's a way to generate revenue and perhaps giving the money to help poor people makes it more palatable?

I also question who and where and how the money will be distributed, collected, audited, and whatever else. A multinational tax generating lots of revenue to be distributed in the third world just reeks of corruption potential. Plus, as has been mentioned on other blogs, financial transactions can take place pretty much anywhere. If New York, London, Paris, etc place a tax, they will move to the Caymans or wherever. Ergo, I have serious doubts about the realism of effectively administering this type of scheme.

Lastly, I know it's cynical, but I can't get over the idea that the French simply want to get a toe-hold somewhere in the global economy to hinder "le neoliberalisme Anglo-Saxon." Best way to do that is to hold it up as a way to help the poorest segments of the world's population.

So, for right now, I'm against it. I might always be against it. But I'd certainly want to see more details of how they envision this working, and not just vague summit-esque language about global cooperation.

UPDATE: M. Sarkozy gives credence to my concerns:
In a speech in the south of France, Mr Sarkozy said the appointment of Michel Barnier was a victory for European economic modelling.

Mr Sarkozy blamed the “free-wheeling Anglo-Saxon” model, favoured by Britain and the United States, for the global economic downturn while praising European thinking which “had nothing to do with excesses of financial capitalism”.

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