Tobin Tax on speculation is again on Europe's agenda

Tue, Sep 11, 2001, 01:00

Lionel Jospin loves it, central bankers hate it and Gerhard Schr÷der is having a think about it. Some say it is a good idea that cannot work and others believe it is a remedy for world poverty, but everyone in Europe is suddenly talking about the Tobin Tax.

The American economist, James Tobin, first proposed levying a small tax on international financial transactions almost 30 years ago.

Prof Tobin thought the tax could help to discourage the kind of currency speculation that precipitated economic crises in South-East Asia, Russia and Brazil in the late 1990s.

Anti-poverty campaigners have long seen the Tobin Tax as an opportunity to distribute wealth to the world's poor, arguing that the proceeds from the tax should be spent on developing countries.

Many of the demonstrators who were at Seattle in 1999, in Prague last year and in Gothenburg and Genoa this summer - often misleadingly called anti-globalisation protestors - were campaigning for the tax. The French group Attac, which has chapters throughout Europe, has the Tobin Tax at the centre of its agenda.

Mr Jospin said last month that he wants the EU to take the international initiative on the tax, which most observers agree can only work if all major financial markets agree to levy it. EU Finance Ministers will discuss the issue in Liege later this month and Mr Schr÷der called last week for France and Germany to lead Europe in thinking about how to regulate financial markets more successfully.

The Minister for Foreign Affairs, Mr Cowen, observed cattily this week that Mr Jospin, who is expected to run for his country's presidency next year, tends to be more keenly aware of the virtues of the Tobin Tax when an election is in the offing.

Attac activists have long been welcome in the office of Sweden's Prime Minister, Mr Goran Persson, and even Italy's new right-wing government wants a committee of experts to look into the feasibility of the tax.

Even if the EU agrees to back the tax, there is little likelihood that the US would agree to implement it.

But the new-found enthusiasm for the measure on the part of Europe's leading politicians may be significant none the less.

It represents an acknowledgement that the concerns expressed by the new political protest movements are shared by millions of voters throughout Europe. Many Europeans believe that, although markets should be free, this freedom should be regulated by governments and international bodies to protect the common good.

The process of globalisation has thrown into ever starker relief the chasm between rich and poor in the world and reinforced the appeal of calls for a fairer deal for developing countries.

The Green MEP, Mr Daniel Cohn-Bendit, who was one of the most prominent figures in the student revolts of 1968, has described the new political movements as the most significant for a generation.

And although some European politicians have attempted to taint all protesters by association with a violent few, others see the protests as an opportunity to enthuse a new generation with the spirit of international co-operation that lies at the basis of the EU.

The EU Trade Commissioner, Mr Pascal Lamy, who is sceptical about the Tobin Tax, last week advanced a powerful argument in favour of the protestors making common cause with the EU.

"We in Europe have done what is now being talked about for the whole world: we liberalised trade. Then we faced the question: what environmental and social standards should apply?

"We then resolved these questions through the European institutions. We also, by the way, have a strong system of redistribution in the European Union.

"Thirty to 40 billion euros flow from the richer countries to the poorer each year. That is a good example of supranational intervention in the market," he said. Reflecting on Ireland's debate about Europe this week, Mr Cowen said it was necessary to revive the enthusiasm for European integration that Irish people felt in the early years of our membership.

Making European institutions more democratic and transparent forms a key element in any move to end the sense of alienation many citizens feel towards the EU. But if a new generation is to embrace the project of European integration, the EU must trumpet more loudly its role as a moderating force on the wilder consequences of economic globalisation.