Brian Semple
Will Sarkozy convince fellow leaders to adopt a Tobin tax?
It appears that Nicolas Sarkozy has taken a leaf out of Prospect’s book. Following last month’s interview with FSA chief Adair Turner, in which he described the City as “socially useless” and called for the introduction of a Tobin tax, there are now reports that Nicolas Sarkozy will urge fellow world leaders at next month’s G20 meeting in Paris to consider a Tobin tax on all financial transactions.
Speaking exclusively to Prospect for the September issue, Turner argued that reforms in the financial sector should be focused on excessive profits rather than excessive bonuses:
“If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit. Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits. And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions—Tobin taxes, after the economist James Tobin. Such taxes have long been the dream of the development economists and those who care about climate change—a nice sensible revenue source for funding global public goods. The problem is that getting global agreement will be very difficult…”
Indeed, while French foreign minister Bernard Kouchner has claimed that David Miliband is similarly in favour of a tax, it seems that others are less enthusiastic: Gordon Brown and Angela Merkel have voiced concerns about its practicality, and senior EU officials have described chances of international co-operation as “less than minimal.”
So can Turner’s idea work, or will reaching global agreement on this prove impossible? Read the interview and let us know your thoughts here.
Mary Fitzgerald
Heavy-handed police: but should the G20 leaders have been bolder?
While the Met’s cack-handed policing of the G20 protests earlier this month grabbed the headlines, less attention was trained on the concrete outcomes of the summit. In an article free to read online this week, Will Straw responds to Gerald Holtham’s argument, in our April issue, about what the G20’s key priorities should have been.
According to many press reports, and indeed Holtham’s own criteria, the London summit was a success, writes Straw, but Holtham passed over two critical components on which the summit fared poorly: measures to address climate change and a clear statement concerning the G20’s own future. The G20 should be using the global economic crisis to recast the world economy on a more stable and fair footing, but without addressing these key issues, it will not be able to do so, argues Staw.
“It is a travesty,” he says, “that no new money was made available for grants and aid given the risk that 200m people will fall back into the $1 a day definition of poverty as a result of the economic crisis.”
Weigh in with your thoughts here.
David Killen
Tony Benn, Big Ben: national monuments both?
Listening to last Thursday’s Today Programme covering the G20 protests, I experienced two waves of unwelcome nostalgia. The first was when, amidst futile attempts to rendezvous with the Brockley Anarchists—or some other such implausibly-named group—the reporter stumbled across an elderly woman selling the Morning Star. She seemed sweetly eccentric at first, but her tone soon modulated into a beleaguered righteousness that I found all too familiar. In the early 1980s, having fled the Labour Party to escape the rising tide of Trotskyism, I became a member of the Communist Party of Great Britain. It’s difficult now to recall my motives for joining. I had a hopeful conviction that, since Marx’s analysis of history was so compelling, the Marxist prescription for the future was probably the best we had. But I also had a romantic notion about commitment to an enduring cause. All my heroes seemed at one time or another to have been party members and somehow, in the absence of an “International Brigade,” this seemed the next best thing.
I sold the Morning Star at rallies and marches, and campaigned for candidates who had no hope of being elected. There was no Spanish Civil War to fight but there were real causes to support, and soon we had found the biggest cause of all: for this was the time of the miners’ strike. I supported the miners—how could I not? These brave and admirable men had stepped into the breach: they were taking the stand we all longed to take. But my genuine commitment was tinged with a sense of hopelessness. This was the wrong fight, at the wrong time, over the wrong issue, against an adversary who had chosen and prepared the ground and was willing to go to almost any lengths to win. It was doomed from the start and most of us realised that from very early on. The BBC’s daily count of returning strikers felt like a grim toll of our mounting battle losses. But the battle united a largely unwilling left in one last heroic march into oblivion: banners flying, cornets blaring, CND badges glinting in the sun. Read more »
James Crabtree
Economic man: fallen from laurels to funeral wreaths…
This edition continues Prospect’s ongoing dissection of the causes and consequences of the financial meltdown. In addition to Geoff Mulgan’s cover story, “After Capitalism,” we have two big pieces on economics: one from Anatole Kaletsky on the failure of economic models (not to mention the economic modellers who built them) and another from Gerry Holtham on what the G20 must do next.
Kaletsky’s piece picks over two economic theories in particular—theories which, although seemingly discredited, still hold great sway over our business schools and investment banks. These are the rational expectations theory, and the efficient markets hypothesis. These theories may not have gone unchallenged in the past in Ivy League seminar rooms and central bank boardrooms, but they formed important building blocks in the theoretical understanding of the global economy which lead to policy mistakes contributing to the current crisis. Equally importantly, they were taught in all graduate level macroeconomics classes. Kaletsky charts their influence, and lays the blame for the crisis squarely on the shoulders of academic economists who promoted them. In response, only an economist’s reformation will do.
But what of the future? In our lead Opinion pice this month, Gerry Holtham isn’t much cheerier on the economic understanding of the current moment leading up to the G20. The problem? No one has yet grasped the type of global coordinated fiscal stimulus needed to put the world economy back on its feet. Uncomfortably, this mean certain countries—especially those prudent nations not as at risk of having their currency sink (i.e. not Britain)—shouldering much more of the burden of reflation. Equally, it means a much greater effort to reform the IMF, with less power for Europe and the US, reflecting their relatively smaller role in the current international set-up. How to mark this change? Holtham thinks moving the IMF itself would help. If the EU would act as its largest member, it could, within the rules, claim its HQ. Bratislava, he thinks, would work nicely.
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