Lord Adair Turner, chair of the banking regulator the Financial Services Authority (FSA), shocked the establishment last week by backing the idea of a “Tobin tax”.
The Tobin tax is sometimes called the “Robin Hood Tax” or the “global solidarity tax”. It is a proposal to levy a small tax – between 0.1 and 0.25 percent – on every international currency exchange transaction, all over the world.
Turner told Prospect magazine that he is “happy to consider tax on financial transactions – Tobin taxes.
“Such taxes have long been the dream of development economists and those who care about climate change – a nice sensible revenue source for funding global public goods,” he continued.
The US economist James Tobin originally proposed the Tobin tax in the 1970s, after financial speculation caused the collapse of the Bretton Woods system that had regulated the international financial system since the 1940s.
Tobin said he wanted to put “sand in the wheels” of the market.
Thirty years on, French mass movement Attac – the Association for the Taxation of Financial Transactions for the Aid of Citizens – took up the idea.
Attac’s supporters wanted to use the hundreds of billions that would be raised by a Tobin tax to end global poverty and fix the world’s problems.
For the Tobin tax to be taken up by Turner, a bastion of the British establishment – in the same breath as he lambasts the banks for being “swollen” and “socially useless” – shows the scale of the ideological shift that has taken place since the economic crisis hit.
For all the talk of so-called “green shoots” of recovery, mainstream economics is still in utter disarray. They do not know how to fix their system. It is still the case, for example, that no one knows whether the billions of pounds handed over to the banks have had any significant impact.
In this situation a minority of the ruling class, like Turner, are casting around for more radical solutions.
The response from the rest of the elite has been swift – they don’t like it one bit.
The reaction of Howard Wheeldon of BGC Capital Partners was typical. He said, “Quite honestly I am appalled, disgusted, ashamed and hugely embarrassed that I should have lived to see the effective head of the British regulatory regime making such damaging and damning remarks.”
Turner was also quickly rebuked by the government and by the FSA itself for speaking out of turn.
But some of the more radical capitalists – mega-billionaire George Soros, for example – have long backed the Tobin tax.
Turner’s use of the idea is closer to Tobin’s original intentions. Tobin disowned the anti-capitalist activists’ calls for the tax.
“They’ve hijacked my name”, he said, stressing that his proposal had simply been aimed at reducing currency speculation, not raising money for social projects.
While the anti-capitalists wanted to make the world a better place, Tobin simply wanted to save capitalism from itself.
But both were looking for a cure-all solution that, despite the rhetoric, didn’t really pose a fundamental challenge to the system.
Those who push the idea of the Tobin tax believe that speculation is the cause of capitalist crisis – and so better regulation could stop it.
The truth is that crisis is an inherent part of this chaotic system. The relentless drive for profit pushes capitalists to build up bubbles and try to hide the problems.
Speculation may have been the trigger for the latest catastrophe and the fuel to its fire, but the underlying problem has always been there.
Drives to regulate and reform the system can only mitigate the worst effects of the crisis and may slightly delay the next collapse.
If we want to build a better world then the solution is simple – don’t fiddle with capitalism, organise to overthrow it.