ActionAid protesters in Copenhagen.
The Many Lives of the Tobin Tax
By Julio Godoy
The urgent need to confront climate change in a context of global financial crisis has given new life to the "Tobin tax", an initiative for fiscal action on speculative transactions.
BERLIN, Dec 14 (Tierramérica).- Ever since the Nobel laureate economist James Tobin (1918-2002) proposed in 1972 a tax against currency speculation, the idea has resurfaced and disappeared many times, according to the economic tides.
But the current global economic crisis that came out of real estate and stock speculation in the United States and other industrialized countries, and the need to pay for the high costs of fighting climate change, have created an ideal framework for implementing the tax.
In contrast with previous efforts by non-governmental organizations that adopted the idea of "throwing some sand in the well-greased wheels of speculation," as Tobin said in his initial proposal, this time it has the support of several governments of the industrialized North, including Britain, France, Germany and Russia.
On Dec. 7, during the United Nations session in New York, France's foreign minister, Bernard Kouchner, proposed that the Tobin Tax could be used to finance climate change mitigation and adaptation policies in developing countries.
Kouchner said the tax should be debated and approved at the 15th Conference of Parties (COP-15) to the United Nations Framework Convention on Climate Change, under way until Dec. 18 in Copenhagen.
"It would be of great benefit" if this measure were to be approved in the Danish capital, Kouchner said.
According to the original idea of Tobin, the tax, at a marginal rate, should be charged on currency exchanges, but only on short-term speculative transactions.
Kouchner's proposal would set the tax at 0.005 percent. "Nobody would suffer from that, because it would cost just five cents on a transaction of 1,000 dollars or euros," Kouchner said.
A study presented in October 2007 by the North-South Institute, based in Ottawa, estimated that a 0.005 percent tax on currency transactions would generate at least 35 billion dollars a year.
According to estimates by the Brazilian government, some 300 billion dollars would be needed annually to finance climate change adaptation and mitigation policies in developing countries. Another estimate, from the Framework Convention, puts the necessary funds at "more than 100 billion dollars annually," but in a breakdown it enumerates possible investments of some 170 billion dollars by 2030.
The Global Legislators Organization for a Balanced Environment (GLOBE) estimates the financial needs arising from climate change at between 28 and 67 billion dollars a year.
Although in the 1980s and 90s the Tobin proposal was occasionally discussed in academic circles, the creation of a tax on financial speculation was pulled from oblivion by the French monthly newspaper Le Monde Diplomatique in December 1997, as a reaction to the financial crisis of that time, and which particularly affected countries in Latin America and Asia, and Russia.
As a consequence of that proposal, in 1998 in Paris, the Association for the Taxation of Transactions for the Aid of Citizens (ATTAC) was founded in order to promote the Tobin Tax and to use the collected funds to finance development policies in the poorest countries.
The Tobin proposal came to the fore in 1998, thanks in large part to ATTAC actions, though it distanced itself in 2001. That year, the French parliament passed a 0.1 percent tax on speculation, which the French lawmakers said would collect up to 50 billion euros (about 73.5 billion dollars) a day.
In 2004, the Belgian parliament approved a similar measure. But both laws will only take effect in the context of a Europe-wide law on the issue.
In November 2004, British Prime Minister Gordon Brown also proposed a tax against speculation. During a meeting of the Group of 20 (G-20) most industrialized and emerging nations, Brown called for the introduction of a tax on global financial transactions that reflects the systemic risk inherent in them.
Officially, the German government also supports the tax, although some of its ministers stand opposed. Even the government of Russia, initially against the tax, announced in late November its willingness to introduce a tax on speculative transactions against the ruble.
The European Union announced it would propose that the International Monetary Fund introduce a tax on financial transactions.
The Tobin Tax also has the support of Brazil and Venezuela, and even of professional speculators like billionaire George Soros. But the U.S. government, whose top financial officials are former executives of investment funds or banks, does not look kindly on the tax.