The Duck of Minerva

The Duck Quacks at Twilight

The Robin Hood Tax

April 14, 2010

Since we in the US are thinking of taxes today….
A tax on currency transactions was proposed in 1972 by economist James Tobin (hence, it is often referred to as a Tobin tax). Wait, don’t roll your eyes at a post on tax and finance! This gets better. Tobin argued that imposing this tax would slow down the speed of financial flows, discourage speculators, and cushion small bankers, which would help them adjust. After multiple financial crises, the idea has been revived–along with a popular campaign featuring a much more catchy label and a YouTube video with Bill Nighy that you really must watch! But, what is the likelihood that a global tax on financial transactions is adopted? Zilch!

The campaigners basically argue that we can kill two birds with one stone: prevent financial crises, and fund all sorts of programs addressing poverty, climate change, and health and education. As their website proclaims, “Turning a crisis for the banks into an opportunity for the world!”

In theory, it sounds perfectly reasonable to me. But politically? The campaigners, based in the UK, argue that the British government should pass such a tax on financial transactions. But of course, that would simply shift most financial activity out of Britain and into other financial centers. The same would be true of the entire EU passed such a tax. The ideal would be to impose a global tax on financial transactions, of course. Who would administer this tax? Who would distribute the funds collected? The UN? Well, I think we all know that the likelihood of sovereign states handing over an independent source of income to the UN, or any other international organization, is anathema to most policymakers!

But, in a related development– ok, it’s only somewhat related, it’s still on finance– the Triple Crisis blog has been talking about how the IMF is shifting its position on capital controls. In other words, the Washington consensus is truly dead. The size and scope of financial crises had to get this big before the IMF finally considered that at times it is reasonable policy to impose capital controls to slow down or prevent speculative finance.

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Virginia Haufler is Associate Professor in the Department of Government and Politics at the University of Maryland, College Park and is affiliated with the Center for International Development and Conflict Management. Her research focuses on the changing nature of governance in the global political economy, especially the role of transnational corporations and corporate social responsibility. Her current research examines how transnational regulation of the private sector addresses issues of conflict and corruption.

She is also Director of the Global Communities Living-Learning Program, which introduces freshmen to scholarship and experiences that explore globalization, global issues and intercultural understanding. She has been a visiting scholar at University College London, University of California-Irvine, the University of Southern California, and the Carnegie Endowment for International Peace. She has pressented her work at conferences, workshops and talks in more than a dozen countries. She has served on the boards of non-profit organizations, including Women in International Security, the Peace Research Institute Frankfurt, and the OEF Foundation, and has advised the Principles for Responsible Investment and the Business4Peace Platform of the UN Global Compact. She has a M.A./Ph.D from Cornell University and dual B.A. from Pennsylvania State University.