The call for a Tobin tax - a tax on financial transactions - is not
"anti-capitalist", as some in the "anti-globalisation movement" seem to

It is all very well being against something but if this is to be
anything more than permanently protesting against some never-ending
problem you've got to be for something too. Most of those who organise
the "anti-capitalist" and "anti-globalisation" protest demonstrations
don't seem to have thought it through this far, and those that have
show themselves not to be against capitalism. 

What they are against is what some of them call "neo-liberalism"  by
which they mean the return of laissez-faire economic policies. What
they are for is to go back to a more regulated capitalism. They merely
want states to intervene to try to control capitalism, to make it more
human, to suppress what they see as its worst excesses.

A case in point is the French-based organisation, with branches in many
other countries, ATTAC whose vice-president is Susan George, author of
such readable and informative books as How The Other Half Dies and A
Fate Worse Than Debt. Their hobby horse is a call for the so-called
"Tobin Tax", as is reflected in their full name: "Association for a Tax
on financial Transactions and for Aid to Citizens".

James Tobin was (actually, he's still alive) an American Keynesian
economist who, after the 1944 Bretton Woods agreement on exchange rates
collapsed in 1971 when America floated the dollar, proposed a tax on
currency transactions as a way of reducing speculation. Here's how he
has recently described his proposal:

"This tax aimed to limit exchange rate fluctuations. The idea is
simple: on each operation a minimum levy is made equivalent to, say,
0.5 percent of the transaction. Enough to put off speculators. For many
investors place their money for very short periods in currencies. If
this money is suddenly withdrawn from the market, countries have to
raise their interest rates considerably so that their currencies remain

But high interest rates are often catastrophic for the internal
economy, as the crises which hit Mexico, South East Asia and Russia in
the 1990s show. The Tobin tax would give back some margin for manoeuvre
to the central banks of small countries to fight against the tyranny of
financial markets" (interview with Der Spiegel, reproduced in Le Monde,
11 September 2001).

Tobin got the idea from Keynes who had suggested a national tax on
internal financial speculation as one of his reforms to get out of the
Great Depression of the 1930s. The idea was to encourage money-capital
to be invested productively instead of being used for unproductive

Tobin was given a Nobel Prize for Economics in 1981 (not that this is
worth much in academic terms; it's little more than a monetary prize),
but no government took up his proposal. In fact, for it to work, all
governments would have to take it up. That was why he suggested it
should be paid to the World Bank or the IMF.

The Bretton Woods agreement had laid down fixed rates of exchange
between currencies, in particular with the dollar which in turn was
tied to a fixed amount of gold ($35 an ounce). Devaluations and
revaluations were allowed; in fact that is what a "devaluation" was: a
formal downward change in a currency's fixed rate of exchange with
other currencies. 

This system collapsed at the beginning of the 1970s when the Nixon
administration announced that the US was no longer prepared to exchange
gold at $35 an ounce. So began the present period of floating exchange

Today, the rate of exchange of a state's currency is determined by
market forces: the demand for it in relation to the desire to sell it,
which in turn depends essentially on a state's balance of trade. The
more it exports the higher will be the demand from foreigners to buy it
(to pay for the exports) while the higher its imports the more will be
the supply for sale as importers sell it for foreign currencies (to pay
for the imports). 

This is not to say that states don't try to maintain a more or less
stable rate of exchange. They do, but their only weapons now are
short-term interest rates or getting their central bank (and/or some
other central bank or banks) to buy and sell their own currency. But
these are not always that effective as was demonstrated by Britain's
ignominious exit from the European Exchange Rate Mechanism in 1992
under pressure from speculators led by George Soros.

The collapse of Bretton Woods coincided with the last years of the long
post-war boom, and was in fact a sign that it was coming to an end.
When the boom did end, or rather, fizzled out corporations found
themselves with large "cash mountains" made up of money they would
normally have re-invested but which they didn't because it was no
longer profitable to do so. This money thus became available for
currency and other forms of financial speculation.

Essentially, speculation is the use of money-capital, not to invest in
the production of new wealth and new surplus value, but unproductively
to try and swindle other capitalists' out of their past profits. It's a
zero-sum game in which the total amount of profits remains the same but
merely gets redistributed differently amongst capitalists depending on
their speculative skills.

The statistics show that most international monetary transactions are
now of this nature. Production of course continues and has even been
increasing slowly if in fits and starts, so some international
transactions are linked to productive activity  transfer of capital to
be invested in productive activity in some other country, payments for
exports or imports, etc. But these are only a fraction of the total,
estimated at less than 10 percent.

Just like Keynes in the 1930s on a national scale, some members of
ATTAC today look at this internationally and conclude naively that, if
somehow you could discourage speculation, the money tied up in it would
then be reinvested in production instead, so reducing unemployment. 

But this is to get things the wrong way round; there is so much money
available for speculation because there are not enough profitable
investment outlets. Even if speculation was made less profitable by,
for instance, the imposition of a Tobin Tax this would not increase
productive investment. To do that you would have to increase the rate
of profit or expand markets, but that's not something that can be done
by any tax.

Capitalism operates according to the rules of "no profit, no
production" and "can't pay, can't have" and, as the world market
system, is what is responsible for the desperate plight of most of the
world's population. Before anything lasting and constructive can be
done about this, capitalism has to go. 

The productive resources of the Earth have to become the common
heritage of all humanity, so that production can be directed to meeting
people's needs  all people's needs  instead of to making profits.


Do You Yahoo!?
Everything you'll ever need on one web page
from News and Sport to Email and Music Charts

This email was sent to:

Or send an email to: [EMAIL PROTECTED]

T O P I C A -- Register now to manage your mail!

Reply via email to