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.