Global IssuesCLIMATE CHANGE: The Many Lives of the Tobin Tax
In the decades since 1972, when Nobel laureate economist James Tobin (1918-2002) first proposed it, the idea of a tax on currency speculation has resurfaced and disappeared many times, according to the economic tides.
Now, the global economic crisis that resulted from real estate and stock speculation in the United States and other industrialised countries, and the need to pay for the high costs of fighting climate change, have created an ideal context for implementing the tax.
In contrast with previous efforts by non-governmental organisations that took up 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 industrialised North, including Britain, France, Germany and Russia.
On Dec. 7, France's foreign minister Bernard Kouchner presented United Nations Secretary-General Ban Ki-moon in New York with a proposal for a Tobin Tax on financial transactions to 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, a marginal tax 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 Canada-based North-South Institute 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 on Climate Change, puts the necessary funds at 'more than 100 billion dollars annually,' but in a breakdown it enumerates the potential need for some 170 billion dollars by 2030.
The Global Legislators Organisation 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 1990s the Tobin proposal was occasionally discussed in academic circles, the creation of a tax on financial speculation was pulled out of oblivion by the French monthly newspaper Le Monde Diplomatique in December 1997, as a reaction to the financial crisis of that time, which hit countries in Latin America and Asia, and Russia, particularly hard.
As a result of that proposal, the Association for the Taxation of Transactions for the Aid of Citizens (ATTAC) was founded in Paris in 1998 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 enter into force 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 (G20) most industrialised 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 rouble.
The European Union has 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.
(*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.)
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service