EU being encouraged to impose a Tobin tax

So says Professor George Irvin on his blog, Political Economy 101, on the EUObserver website.  If anyone is trying to understand the mindset of those who stalk the corridors of power, dispensing economic advice to political leaders, then a read of Irvin’s blog is instructive.

Irvin is worried, worried I tell you.  His worry stems from a nervousness that Gordon Brown, Nicholas Sarkozy, Angela Merkel and other EU leaders might be cooling in their support for a Tobin tax.  For Irvin this is a crucial issue because he sees that there are widespread plans for what he describes as ‘swingeing’ budget cuts in many EU member states, possibly accompanied by rises in VAT.  Left wing, Keynesian, big government socialist Irvin tells us:

A Tobin tax (also known as a ‘Robin Hood Tax’) would be a fairer and more effective money-spinner than raising VAT. Such a tax was first suggested in 1971 by the American Keynesian economist, James Tobin, and was designed to slow down the volume of  speculative currency dealing by traders—what Lord Turner has recently termed ‘socially useless’ activity.  Although the idea was rejected by the Commission in 2002, much has changed since then; most particularly, currency speculation has risen by several orders of magnitude.

Do you see how he tries to give the impression of the Tobin tax being a good thing by equating it with the positive perception of Robin Hood, taking from the rich and giving to the poor?  Cynical doesn’t begin to describe it.  Irvin wants the EU to implement a union-wide Tobin tax.  He explains that the foreign exchange trade in euros is estimated to be worth nearly US$300tr (€220tr) per annum.  A 0.1% tax on euro trading would raise over €200bn a year—and that’s based on a tax rate of £1 per £1000, one-tenth the rate originally proposed by Tobin, or roughly double the size of the EU budget.  He wants European leaders to be seduced by the euro signs in their eyes and the thought of treasury coffers swollen to bursting with all this lovely cash.

But this is less Political Economy 101 and more Room 101.  These trillions of euros are not just sloshing around like a cork on an ocean.  This is money that funds pensions, facilitates mortgages and loans, enables business start ups and enables businesses to make money from their investments.  Listening to George Irvin, it might appear that skimming a tiny percentage off the top of currency dealing hurts no one and benefits everyone.  But stripping €200bn a year out of the private sector will impact all of us, not just the bankers.  Costs will rise and that increase will be passed on to consumers.

There will be less money for investment, hindering our economies.  Our pension pots, already plundered by wasteful government, will be reduced still further.  The only difference between raising VAT and imposing a Tobin tax will be the blurred line of sight between emptier wallets and the government that hoovers up the money.  People’s resentment will be focused on the higher cost of goods and services provided by businesses, rather than governments who brought it about.  Irvin argues:

We need a Tobin tax. Why should ordinary citizens be made to pay for the financial sector’s gambling debts? After all, currency speculation is just another form of gambling.

This is complete crap.  It’s nothing more than an excuse for government to make a power and money grab.  Consider the motives of the Tobin tax’s biggest advocates.  When ones stops and consider the billions and billions of pounds that have been spent wastefully by the UK government alone, why are budget cuts such a bad thing?  Why shouldn’t governments live within their means?  Far too much money, instead of being spent efficiently on well structured front line services, has been squandered with little if any benefit to taxpayers.  Think of the billions that were overpaid in tax credits and left unrecovered, the billions spent on military equipment completely unsuitable for the kind of conflicts our armed forces have been committed to, the billions handed over to special interest groups and for the creation public sector non-jobs that add no value to public services.  When Irvin asks rhetorically of a Tobin tax ‘why not?’ none of these reasons surfaces.

That is because none of this matters to the likes of George Irvin and his ilk.  The name of the game is ensuring government has ever greater control of our money and determines how it is spent.  It is an ideological objective to reduce the ability of the individual to enjoy any measure of choice or financial freedom.  Big government knows best in Irvin’s world and we must leave it to the political elite to tell us what is good for us.  The problem is a Tobin tax makes us all poorer and is an inadequate substitute for effective banking regulation.  This is the most blatant example of political opportunism, which would enable governments to cover up decades of economic incompetence by levying a huge tax to plug the gaps – again at our expense.

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2 Responses to “EU being encouraged to impose a Tobin tax”

  1. 1 Gareth 21/02/2010 at 2:28 pm

    Divide and rule. The left is very able at playing sections of society against each other. And worse, at claiming to represent the rest of society against the people they wish to control – ie it would be ‘fair’ to have a Tobin tax on ‘socially useless’ activities.

    This is post-normal economics putting political prejudice ahead of the good of the nation.(Which can be explained by Them in power thinking there is much that needs to be ‘fixed’ about this nation.)

  1. 1 We surely owe Jeffrey Sachs our thanks « Autonomous Mind Trackback on 10/03/2010 at 10:38 pm
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