Financial RESPONSIBILITY should be on the top of the agenda in Europe.

From financial meltdown to financial responsibility, can a Financial Transaction Tax (FTT) be achieved?

James Tobin

With financial meltdown comes opportunity. The deregulation of the Banks is one leading candidate as the cause of our most recent economic crash. But what if there had been a security fund in place sponsored by the Banks own reckless speculation? Nobel laureate, James Tobin came up with a solution or rather a method of prevention back in the 1970s. It was a response to the collapse of the botched system the Bretton Woods institutions had provided us with. Tobin suggested that we could pull the economic cart uphill rather than letting it run away downhill. What he wanted was to end short-term currency speculation as that kind of behaviour made it difficult for currencies to develop independently.  He believed it would slow this reckless process down without halting the benefits to it altogether.

The Anti-globalisation movement first grabbed the idea after the Asian financial meltdown however it has never taken to mainstream western economic thought until recently. Four of the EU’s largest economies Germany, France, Italy, and Spain are all in favour of an EU Financial Transaction Tax (EU-FTT). During 2012 The EU commission estimated that a 0.1% FTT within the EU would raise between €73.3 and €433.9 billion. The French President Francois Hollande puts special emphasis on the creation of an FTT when he stated it was important for financial regulation to be reattempted “in particular the creation of a financial transaction tax”. Mr Hollande’s intentions appear to be a welfare system for the finance industry across the EU which is a step in the right direction.

For the UK it would be a missed opportunity if Mr Osborne did not make some sort of a move. He appears to be reluctant, fearing the loss of London as an epicentre for financial activity and is perhaps waiting out to see if mainland Europe loses out on business after an FTT is passed. Of course then London would be there to welcome business from Frankfurt with open arms, however this would do nothing but create a further dependency on the financial markets, something the UK cannot afford to do. A possible option for Osborne would be to relocate the funds secured by an FTT to reinvigorate the British economy to create more jobs in the technology industry or even to make ‘green energy’ more lucrative. Either way the window of opportunity to rein in the leash on financial transactions will eventually close.

Thomas Pogge

All of this talk of securing the economies of the EU does seem to be ignoring one rather big problem: global poverty. As the World Bank change the boundaries to make it appear that poverty is on a steeper decline than is actually true, we are encouraged to forget about the failings of the development agenda. Thomas Pogge is a man who does not allow us to forget such an issue. He suggests that a 1% tax on all resources that a nation sells could generate $300 billion US a year. This he calls a Global Resource Dividend (GRD). What he pushes forward here is that the resource land grab that has taken place over the years has contributed massively to the impoverishment of many of the less fortunate human beings. This is something he claims that is an obligation not an act of charity. A duty of mankind is to right the wrongs of the selfish pursuit of profit and security at the cost of others.

The EU’s steps toward an FTT can be seen to suggest that there is an attempt to create international cooperation on financial responsibility. Many will hope that it is also a step towards writing the wrongs of uncontrolled capitalism.