The Financial Times reports that the Tobin tax is increasingly being seen as a real policy option. Japanese Vice-Finance Minister Naoki Minezaki believes a tax should be levied on financial transactions to curb market volatility and prevent it from threatening economic growth.
“We’re seeing speculative funds flowing carelessly around the world – one day in stocks and real estate, other times in oil and grains – and this is destroying the lives of ordinary people,” Minezaki wrote in an e-mail to supporters and reporters on February 15. “We have to implement the Tobin tax as part of international solidarity,” he said, adding that the levy could also boost revenue, Bloomberg reported.
The Financial Times reports that for years, taxes on capital flows were seen as a barbarous relic of the 70s, on a par with Demis Roussos and Baked Alaska. No friend of free markets dared support the idea of US economist James Tobin, dreamed up to curb currency volatility after Bretton Woods collapsed. That’s changing. Since Lord Turner, Chairman of the FSA, started stirring interest in taxing financial transactions last year, politicians in Germany, France and Australia have voiced tentative approval. Now Japan, through the musings of Vice-Finance Minister Naoki Minezaki, might just be falling in line.
The discussion deserves a wider airing. As Brazil seems to have demonstrated recently, Tobinesque taxes need not be a tithe on growth. Since the country imposed a 2 per cent charge on foreign portfolio investments on October 20th to cool “hot money” inflows, the real has steadily fallen – it is the fourth worst-performing emerging market currency since then – while volatility has slightly ebbed. Stocks have, meanwhile, beaten the FTSE World index by 5 per cent and reserves have kept climbing. UK premier Gordon Brown says he wants some kind of International Monetary Fund-backed deal to present to the G20 summit in Canada in June. Of all the vague ideas seeking a global consensus, support for this one appears to be strengthening.
© Financial Times
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