James Tobin
“Does the world need a global Tobin tax? asks Financial Times columnist Gillian Tett in a recent column. A Tobin tax is a levy on international finance, specifically foreign exchange transactions. The idea is to put “sand in the wheels” of international finance — to slow things down a bit to discourage destabilizing speculation.
The idea of Tobin tax (named for Nobel-winning economist James Tobin) has been around the years and reappears after every major international crisis. It isn’t a very good idea, but desperate times sometimes call for desperate measures.
The problems with the Tobin tax are both practical (a global tax? we would need global financial governance or at least a very high level of cooperation to enforce and collect it) and theoretical (it assumes that all that is needed to make markets stable and efficient is to slow them down a bit).
It is certainly the case that a Tobin tax alone would not solve our problems if only because domestic financial instability is just as important as international capital flows and the Tobin tax doesn’t address domestic policy. But it might be a useful element of a more comprehensive reform package.
Ms. Tett writes that what is needed is a complete reconsideration of the ideas that government financial markets and financial regulation. Time to get past the Financial Globaloney is write about in Globaloney 2.0. I think she’s exactly right. Let’s hope the Tobin tax debate leads to a broader discussion of financial reform.
One of the “myths” of globalization that I examine in both Globaloney and the forthcoming Globaloney 2.0 is the idea that local practices, culture and knowledge are always and everywhere “trumped” by global forces. I call this “Grassroots Globaloney” because I think that people down at the grassroots frequently are able to resist globalization, shape it to suit their needs and sometimes to use globalizion’s tools to fight globalization’s negative effects.
