Commentaries
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“Tobin tax” gaining ground in Europe
No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.
European Union leaders could not agree to put it on the agenda of this week’s G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept.
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Old idea, new thinking
The comments by Adair Turner, chairman of Britain’s Financial Services Authority, have reignited a debate over a Tobin tax on financial transactions. A number of commentators including our own Matthew Goldstein have advocated one, but the fact that a financial regulator is publicly floating the idea adds some substantial heft to the discussion.
The tax was proposed by Yale economist James Tobin in 1972, as the fixed exchange-rate system was falling apart, to discourage destabilizing short-term currency speculation.
Turner is right to take on swollen banks
So the watchdog can bark after all. Adair Turner, chairman of Britain’s Financial Services Authority, says the financial sector has “swollen beyond its socially useful size”. That is a striking statement for any financial regulator, particularly one that counts promoting London’s financial centre as one of its goals. Identifying the problem, however, is the easy bit. Reversing decades of financial expansion will require global agreement on tough new rules, and the determination to make sure they are consistently enforced.
Turner’s comments, in a debate hosted by Prospect magazine, underscore the extent to which the crisis has upended the received wisdom among policymakers. For years they assumed markets were self-correcting, that financial innovation brought lasting economic benefits, and that regulators should think twice before getting in the way.
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The Wall
