We can always get to Utopia - even from here

 

WORLD VIEW:Once-radical proposals, such as a tax on global financial transactions, are now mainstream, writes PAUL GILLESPIE

'A MAP of the world that does not include Utopia is not even worth glancing at, for it leaves out the one country at which Humanity is always landing. And when Humanity lands there, it looks out, and seeing a better country, sets sail. Progress is the realisation of Utopias."

Oscar Wilde's inspiring observation is worth recalling during the Copenhagen climate change summit, as governments face up to the enormous costs involved in preventing global warming and seek new ways to finance them. Since the ecological crisis coincides with the economic and financial one, common solutions look attractive. And since a simple return to untrammelled capitalist growth would be environmentally ruinous we have more and more need for alternative ideas, including utopian ones.

Among them the idea of a tax on currency and other exchange transactions has come from the radical margins to the centre of international politics. Yesterday's call by the European Council on the International Monetary Fund to examine it is a dramatic confirmation of Wilde's dictum. In his essay The Soul of Man under Socialismhe said machinery must be organised by communities to do useful things such as supplying heat, light or motion to every household. Humanity now faces the gargantuan task of supplying carbon-free energy.

A transaction tax on currency trading to minimise speculation and volatility was originally advocated by the Yale economist James Tobin in the 1970s (drawing on a broader proposal by Keynes in the 1930s), after the US moved off the gold standard. He spoke of a possible rate of 0.1-0.25 per cent, yielding potentially billions of dollars.

The revolution in international financial transactions since the currency and market deregulation of the 1980s radically changed the arithmetic. Cross-border purchasing of goods and services now makes up only

1 or 2 per cent of the daily $2 trillion international trade in currency, hedging funds and derivatives. Annualised, that is 50-60 times the world's economic output.

Last August no less a figure than Adair Turner, chairman of the UK's Financial Services Authority, described much of this activity as "socially useless". He went on to say a Tobin-style tax would be "a nice, sensible revenue source for funding global public goods". The idea was then taken up by Gordon Brown at the G20 meeting in Edinburgh, gathering support from Nicolas Sarkozy and Angela Merkel. It is now part of the mainstream debate on international development, financial retrenchment and ecological change.

Reference in yesterday's EU summit conclusions to "the importance of renewing the economic and social contract between financial institutions and the society they serve and of ensuring that the public benefits in good times and is protected from risk" illustrates well the issues involved. Political leaders need to recoup legitimacy after expensive bank rescues and must find new ways to fund the Keynesian stimulus packages which fended off depression. Tobin-style taxes might fulfil these requirements.

Tobin's proposal was taken up in December 1997 by the French monthly Le Monde Diplomatiquein a strong editorial attacking the then Washington consensus on efficient markets, privatisation, deregulation, open capital markets, and the view that governments should balance budgets, fight inflation and do almost nothing else. It went on to advocate a tax on speculative exchange transactions as a useful counter-mobilising demand for anti-globalisation activists.

The resulting organisation Attac (Action for a Tobin Tax to Assist the Citizen) gathered immediate mass support, first in France and then internationally as the various left-wing elements which made up the world social movement in the early years of this decade came together. The capital transaction tax became a central part of their political repertoire when the harmful social, financial and environmental effects of such a US-dominated globalisation became more apparent.

But despite its appeal to French leaders, it failed to find mainstream support elsewhere, being resisted on technical or political grounds. It would not work unless adopted universally, and in any case would impede market efficiency which delivered financial prosperity. After the huge economic turmoil of the last year these arguments are suddenly less convincing. In fact such a tax would be easy to impose, since most such transactions are centralised through London. A regional bloc such as the EU would give it a crucial initial momentum. And even at a rate of 0.005 per cent it could yield $30-60 billion, or more than $1 trillion at Tobin's suggested rates. That is serious money in a more challenged and interdependent world. French leaders are now pressing for a direct link between transaction taxes and climate change, as are environmental campaigners. These would supplement maritime and aviation fuel levies to raise the $60-100 billion a year calculated by the Project Catalyst study group required to fund carbon reduction from 2010-20.

Having landed here we should expect the activists to look out and set sail for a better country now that the Tobin tax demand has come so much closer to being realised. A similar thought was expressed by Le Corbusier: "It is good to remember that utopia is nothing but the reality of tomorrow and that today's reality is yesterday's utopia."