>
>Ed,
>
>You undoubtly saw the posting on Linda McQuaig's article re: the Tobin
>tax if you missed it in The Toronto Star March 22. As I understand it,
>the argument goes that "by scooping a tiny percentage of the enormous
>sums traded daily on foreign exchanges, the Tobin tax could help reduce
>the volatility in world currencies and collect billions of dollars for
>good causes". Ontelevision and elsewhere on paper McQuaig is among those
>who believe that the rapid exchange of money across currencies tends to
>destabilize national currencies, making it hard for countries to conduct
>international trade. This, it has been argued, is also one of the major
>factors that contributedto the Asian money crisis.
>
>Rose Dyson
Rose,
I'm aware of Tobin tax proposals, though I did miss the McQuaig article. I
have a lot of respect for Linda McQuaig as a journalist, not an economist.
I agree that the rapid flight of capital may have been a factor in the Asian
crisis, but would argue that it was an effect, not a cause. When capital
perceives itself to be in trouble in any country, it does what it can to get
out, and these days it can get out fast. From what I've read, the problem
with the Tiger economies was the widespread overinflation of property and
productive asset values combined with an overcrowding of the foreign markets
for the goods which those countries produced. Relying on export lead
economics and easily available credit, the Tigers had grown very rapidly,
but in the process far too many bad investments were made. From what I've
read, it wasn't foreign capital that moved out first, it was capital
invested by wealthy nationals, who were in the best position to see what was
coming.
I believe that a MAI could have gone some distance toward preventing the
Asian crisis because the same rules would have applied to both national and
foreign investors. This would have made it more difficult for favouritism,
cronieism and corruption to flourish.
Ed Weick
