Two Stage Proposal

The tax was originally proposed back in 1972, by James Tobin, Yale Professor of economics. Thereafter it was shelved, only to be periodically dusted down in the wake of some crisis or other, brought on by the financial markets or IMF.

The Tobin Tax idea runs completely counter to the UK / USA free market orthodoxy (what Patomaki terms the London-Wall St-Washington consensus) and so stands little to no chance of implementation. In its original form, Tobin suggested it would have to be international, and the purpose was to bring stability by acting as a damping mechanism. Interest in the tax revived in the wake of the 1997-8 Asian 'Tiger Economy' meltdown.

Patomaki advocates a two stage approach. In phase one, 30 states amounting to 20% of the global currency markets sign up to it. Patomaki suggests that these be drawn from the progressive Nordic countries, plus others like Argentina who have been burned by the markets / IMF etc. Canada and France have also expressed an interest in the proposal, various NGOs, charities, and ATTAC, a lobbying body, has been established. If the EU or Japan could be persuaded to sponsor it, this would be a big step forwards.

Sliding scale

Initially, in the first stage, the tax would be set at a low rate, but then, the heat on the lobster would gradually be increased. The intention is not to penalise holidaymakers or bona fide international trade, but short term currency speculators. These incur a higher rate of tax, on a sliding scale, and during crisis conditions, eg like George Soros' assault on the ERM, the rate becomes punitive. During the last phase, countries outside the 'Tobin Tax Zone' (TTZ) are invited to join, the assumption is that one by one, most of them will do so. In the first phase, the tax would essentially be on trial, to try to iron out the various loopholes.

Global Panopticon

Transparency in bank transactions is needed, which implies an extensive and total network of financial surveillance and licencing. Punitive rates will then be set against transactions involving tax havens and offshore centres, which will help leverage in non compliant countries. Once the idea gets critical mass, countries will eventually be forced to join the TTZ.

Patomaki describes a bi-cameral governing structure, with representatives of governments on one side, and representatives of NGOs on the other, chosen by lottery, the 'House of Democracy' side having limited capacities of veto. [p203] It is suggested that $1 -2B /yr be used to finance about half of the UN's activities, thereby setting it free from the 'one dollar - one vote' principle of American hegemony. Patomaki, rightly in my opinion, is critical of US, UN and IMF attempts to suppress discussion of the Tobin tax idea; the sacking of Boutros Ghali, suppression of a UNDP book on the tax, and also the Stiglitz, Ravi Kanbur cases. [pp 175-180] Ultimately, however, Patomaki believes that the UN is (probably) beyond reform, and that the TTO will ultimately become the new de facto world authority.

Moral Authority Undermined

What are we to make of all this? It is certain that the markets are responsible for a great deal of harm in the world. The gap between the rich and the poor is widening. The casino economy encourages short term speculation against long term investment.

Patomaki is doubtless correct that the IMF and World Bank institutions only make things worse, and impose their Thatcherite 'restructuring' packages on crisis racked Third World economies, to the detriment of the people, and bringing forwards the next crisis. The free market is certainly a mechanism for reinforcing US hegemony. Yes, something has got to be done about this, but is the Tobin Tax the right something? One of the unresolved paradoxes of this book is that Patomaki claims Tobin Tax increases national sovereignty, but, at the same time ties the nations more tightly into a binding, world-wide authority. It seems to me that the political structure proposed will suffer from similar problems to all such political structures - horse trading, power blocks, corruption, nepotism, megalomania, centralisation, excessive bureaucracy.

The increased capacities of surveillance and the essentially coercive character of its recruitment methods through blackmail do not auger well for the future of the Tobin Tax. The road to hell was ever paved with good intentions. The postmodern, non-judgemental moral relativism of the acceptance of corrupt and oppressive regimes into the fold is also a problem. [p202] Faced with the near impossibility of implementing the tax, the temptation is to encourage countries to join at any price, simply to get the numbers up, but this undermines the moral authority of the proposal.

Out of the Frying Pan ...

Though the markets undoubtedly deserve a good kicking, increasing the power of international authorities can never be a good idea. I can imagine a whole range of objectors queueing up with 'out of the frying pan into the fire' type arguments against the Tobin Tax. Patomaki even envisages a watered down version of the proposal being beneficial to the markets. More to the point, giving this sort of power to an untested and untried supra-national body is a recipe for disaster and will draw the corrupt and megalomaniacal to it like ants round the jam pot. There is also an element of anti US / UK thinking here, which is understandable. However, the alternative is also bad. Imagine the nightmare of a Tobin Tax Authority under EU control?

Tackling poverty through real action

Personally, I do not believe that international bodies can ever make a real difference. There are other possible measures though, which involve governments taking unilateral action to curb, decouple or isolate financial markets. It is really a matter of their gaining the courage to isolate America. Supplies of credit to the markets could be cut off, short term speculation could be regulated or made a criminal offence. The buying and selling of foreign currencies could be regulated or licenced. The casino must be shut down, yes, but we also need to change reality. Individual countries, or charities need to decide on real projects to attack poverty, and put real effort, resources and economic clout into clean water for example; feeding people, education, the aids crisis, human rights, fair trade, housing, malaria eradication, tsetse fly, river blindness elimination. The aggregate of thousands of such small projects would eventually change things for the better. This implies real effort on the part of those making them, a massive mobilization of people and resources.

The fact that states are incapable of this, while ready enough to wage pointless wars ad nauseam is part of the anarchist indictment of the state, of course. Practical projects are a direct matter, unlike the Tobin Tax proposal, which is a second order activity. The developed world needs to turn aside from the essential selfishness and insanity of the markets. This implies a massive change of culture. Everyone should read this book to inform themselves of the detail of the Tobin Tax. Ultimately though, I believe it is unconvincing. In my opinion, with its advocacy of a new global taxing authority, the Tobin Tax is essentially a well meaning, but deeply sinister proposal.

– Steve Booth

Green Anarchist: Front Page Current Articles First 10 Issues See: uk.indymedia.org for more on the university expansion.

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