\nThe call for a Tobin tax – a tax on financial transactions – is not\n“anti-capitalist”, as some in the “anti-globalisation\nmovement” seem to think.<\/em><\/p>\n\n\n\n \n\nIt is all very well being against something but if this is to be \nanything more than permanently protesting against some never-ending \nproblem you’ve got to be for something too. Most of those who organise \nthe “anti-capitalist” and “anti-globalisation” protest demonstrations \ndon’t seem to have thought it through this far, and those that have show\n themselves not to be against capitalism. What they are against is what \nsome of them call “neo-liberalism” \u2013 by which they mean the return of \nlaissez-faire economic policies. What they are for is to go back to a \nmore regulated capitalism. They merely want states to intervene to try \nto control capitalism, to make it more human, to suppress what they see \nas its worst excesses.\n<\/p>\n\n\n\n A case in point is the French-based organisation, with branches in \nmany other countries, ATTAC whose vice-president is Susan George, author\n of such readable and informative books as How The Other Half Dies and A\n Fate Worse Than Debt. Their hobby horse is a call for the so-called \n“Tobin Tax”, as is reflected in their full name: “Association for a Tax \non financial Transactions and for Aid to Citizens”.<\/p>\n\n\n\n James Tobin was (actually, he’s still alive) an American Keynesian \neconomist who, after the 1944 Bretton Woods agreement on exchange rates \ncollapsed in 1971 when America floated the dollar, proposed a tax on \ncurrency transactions as a way of reducing speculation. Here’s how he \nhas recently described his proposal:<\/p>\n\n\n\n “This tax aimed to limit exchange rate fluctuations. The idea is \nsimple: on each operation a minimum levy is made equivalent to, say, 0.5\n percent of the transaction. Enough to put off speculators. For many \ninvestors place their money for very short periods in currencies. If \nthis money is suddenly withdrawn from the market, countries have to \nraise their interest rates considerably so that their currencies remain \nattractive. But high interest rates are often catastrophic for the \ninternal economy, as the crises which hit Mexico, South East Asia and \nRussia in the 1990s show. The Tobin tax would give back some margin for \nmanoeuvre to the central banks of small countries to fight against the \ntyranny of financial markets” (interview with Der Spiegel, reproduced in\n Le Monde, 11 September 2001).<\/p>\n\n\n\n Tobin got the idea from Keynes who had suggested a national tax on \ninternal financial speculation as one of his reforms to get out of the \nGreat Depression of the 1930s. The idea was to encourage money-capital \nto be invested productively instead of being used for unproductive \nspeculation. Tobin was given a Nobel Prize for Economics in 1981 (not \nthat this is worth much in academic terms; it’s little more than a \nmonetary prize), but no government took up his proposal. In fact, for it\n to work, all governments would have to take it up. That was why he \nsuggested it should be paid to the World Bank or the IMF.<\/p>\n\n\n\n The Bretton Woods agreement had laid down fixed rates of exchange \nbetween currencies, in particular with the dollar which in turn was tied\n to a fixed amount of gold ($35 an ounce). Devaluations and revaluations\n were allowed; in fact that is what a “devaluation” was: a formal \ndownward change in a currency’s fixed rate of exchange with other \ncurrencies. This system collapsed at the beginning of the 1970s when the\n Nixon administration announced that the US was no longer prepared to \nexchange gold at $35 an ounce. So began the present period of floating \nexchange rates.<\/p>\n\n\n\n Today, the rate of exchange of a state’s currency is determined by \nmarket forces: the demand for it in relation to the desire to sell it, \nwhich in turn depends essentially on a state’s balance of trade. The \nmore it exports the higher will be the demand from foreigners to buy it \n(to pay for the exports) while the higher its imports the more will be \nthe supply for sale as importers sell it for foreign currencies (to pay \nfor the imports). This is not to say that states don’t try to maintain a\n more or less stable rate of exchange. They do, but their only weapons \nnow are short-term interest rates or getting their central bank (and\/or \nsome other central bank or banks) to buy and sell their own currency. \nBut these are not always that effective as was demonstrated by Britain’s\n ignominious exit from the European Exchange Rate Mechanism in 1992 \nunder pressure from speculators led by George Soros.<\/p>\n\n\n\n The collapse of Bretton Woods coincided with the last years of the \nlong post-war boom, and was in fact a sign that it was coming to an end.\n When the boom did end, or rather, fizzled out corporations found \nthemselves with large “cash mountains” made up of money they would \nnormally have re-invested but which they didn’t because it was no longer\n profitable to do so. This money thus became available for currency and \nother forms of financial speculation.<\/p>\n\n\n\n Essentially, speculation is the use of money-capital, not to invest \nin the production of new wealth and new surplus value, but \nunproductively to try and swindle other capitalists’ out of their past \nprofits. It’s a zero-sum game in which the total amount of profits \nremains the same but merely gets redistributed differently amongst \ncapitalists depending on their speculative skills.<\/p>\n\n\n\n The statistics show that most international monetary transactions are\n now of this nature. Production of course continues and has even been \nincreasing slowly if in fits and starts, so some international \ntransactions are linked to productive activity \u2013 transfer of capital to \nbe invested in productive activity in some other country, payments for \nexports or imports, etc. But these are only a fraction of the total, \nestimated at less than 10 percent.<\/p>\n\n\n\n Just like Keynes in the 1930s on a national scale, some members of \nATTAC today look at this internationally and conclude naively that, if \nsomehow you could discourage speculation, the money tied up in it would \nthen be reinvested in production instead, so reducing unemployment. But \nthis is to get things the wrong way round; there is so much money \navailable for speculation because there are not enough profitable \ninvestment outlets. Even if speculation was made less profitable by, for\n instance, the imposition of a Tobin Tax this would not increase \nproductive investment. To do that you would have to increase the rate of\n profit or expand markets, but that’s not something that can be done by \nany tax.<\/p>\n\n\n\n What would happen would be the same as happened in Japan over \ninterest rates. The government there thought that what has been \ndiscouraging investment was not low profit prospects but too high \ninterest rates. So they reduced short-term interest rates to zero \u2013 but \nnothing happened. They learned the hard way that you can take a horse to\n water but you can’t make it drink. Japanese capitalists hadn’t been not\n investing because of high interest rates but because of low profit \nprospects. Similarly, capitalists have been speculating rather than \ninvesting productively, not because the gains to be had from speculation\n are too high but because the gains to be had from productive investment\n are too low.<\/p>\n\n\n\n Actually, ATTAC are not agreed on why they want to impose an \ninternational tax on currency transactions. Some want to do this to \nencourage productive investment and so employment (on the mistaken \narguments above). Others want to use the revenue to help the so-called \nThird World; which, of course, assumes that speculation should continue \nas the cow to be milked for this purpose. Susan George has explained the\n arguments here:<\/p>\n\n\n\n “One of the aspects of this tax is to slow down speculation, i.e. \nmaking money with money without passing via an exchange of commodities. \nIt could build up a mass of money to help essentially the citizens of \nthe South since it is there that the needs are. At the moment, there is a\n debate within ATTAC about whether we want a high tax to stop \nspeculation or, on the contrary, a less high one to restrain speculation\n while building up this financial aid to the citizen. Personally, I \nprefer the second option” (Le Soir, 24 September).<\/p>\n\n\n\n It is for this reason that you find different rates being mentioned \nin ATTAC literature from 0.01 percent to 0.1 percent to the 0.5 percent \nthat Tobin himself suggested (but he wanted to stop speculation and was \nnot particularly concerned how the money raised was used).<\/p>\n\n\n\n George’s preference for a low rate, to raise money to spend in the \nThird World, is in accordance with ATTAC’s main declared aim, but it \ninvolves calling people on to the streets not to denounce capitalist \nexploitation, but to demand a minimal tax on the financial transactions \nin which capitalists try to swindle each other out of the proceeds of \ntheir past exploitation of the working class. It really is one of the \nmost pathetic reform proposals for which people have ever been called \nupon to demonstrate for. Of course, people are right to protest against \nthe deal capitalism is meting out to the poor in the \ncapitalistically-underdeveloped parts of the world, but the Tobin tax is\n not going to help them in the least, even if the political will and \ntechnical means to implement it could be found.<\/p>\n\n\n\n Tobin was \u2013 and still is \u2013 an unrepentant Keynesian. Despite the fact\n that the main result of implementing Keynesian policies was a 30-40 \nyear period of permanent inflation, Susan George and ATTAC are \nessentially “global Keynesians”, people who want to apply on a global \nscale Keynes’s ideas on how to make capitalism work better. George in \nfact has openly called for the adoption of Keynesian policies. As she \nput it in the Le Soir interview we have already quoted:<\/p>\n\n\n\n “Our leaders must be more serious and move towards Keynesian \nsolutions, as was the case after the Second World War. We need a \nMarshall Plan for the environment, for reducing inequalities in the \nworld and particularly in the South”.<\/p>\n\n\n\n And<\/p>\n\n\n\n “We don’t expect le grand soir [a derogatory French term meaning “the\n Revolution”], but a more democratic type of economy. The market will \nhave its place, but not all the place”.<\/p>\n\n\n\n What ATTAC, and their equivalents in this country, the campaigning \nnon-governmental organisations (NGOs) such as Oxfam, the World \nDevelopment Movement, Christian Aid, etc (not that some of them are all \nthat “non-governmental”, given the grants they get from the state), want\n is to retain the world market economy but to try to control it for the \nbenefit of humanity, to humanise it. Their hearts may be in the right \nplace but this is to display an incredible lack of vision as well as an \nappalling ignorance of the way capitalism works, and has to work.<\/p>\n\n\n\n Capitalism operates according to the rules of “no profit, no \nproduction” and “can’t pay, can’t have” and, as the world market system,\n is what is responsible for the desperate plight of most of the world’s \npopulation. Before anything lasting and constructive can be done about \nthis, capitalism has to go. The productive resources of the Earth have \nto become the common heritage of all humanity, so that production can be\n directed to meeting people’s needs \u2013 all people’s needs \u2013 instead of to\n making profits.<\/p>\n\n\n\n
\n\n\n\nThe horse wouldn’t drink<\/h3>\n\n\n\n
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