Paul Staines writes in with a rational explanation about how the advocates of flat-earth economics want to ‘end poverty’ by taxing the very mechanisms of trade.
Tom Burroughes wrote on Samizdata on Wednesday:
“This morning a contact of mine called up to say he was attending an event discussing the so-called Tobin Tax, which is a levy on foreign exchange transactions named after the Nobel Prize Winning Laureate of 1981, James Tobin.”
Tom might admit its not so weird when you know that contact was myself, I took his advice and put on a pinstripe, garish shirt and clashing braces – if you are going to be an evil currency speculator, best look the part he said.
Bizarre gathering, left winger Shirley Williams was the keynote speaker, ‘anti-poverty’ campaigners, the Guardian’s economics editor and a couple of economists who have never worked outside academia made up the panel. If you plan to tax foreign exchange transactions best not to involve anybody who has actually done an FX trade in the planning I guess. Besides myself, amongst a sea of ‘anti-poverty’ campaigners the only dissident voice was a journalist from the Financial Times and a pretty young student thing from London School of Economics. The cherub from the LSE asked the entirely logical question “won’t this be a regressive tax on third world traders?”
For example I’m a gum farmer from Sudan, I sell my gum to Rowntrees Ltd. in the UK so they can make fruit pastilles. I want Sudanese dinars, Rowntrees pay pounds sterling, I sell the pounds for dollars (Tobin tax time), I sell the dollars for dinars (Tobin tax time). Minor currencies are always quoted against the dollar, so if you come from a small country you pay the tax twice – and this regressive tax helps the developing world?
War on Want reckon that $250 bn a year can be raised by taxing currency speculation at a mere 0.1%. Sounds like a cheap tax with great rewards. Lots of talk about how $1 trillion a day passes across the FX markets daily. You know how it is, I buy a $1m you sell ¥130m, I buy £1m you sell $1.6m next thing you know, by days end we’ve consummated $1bn in trade. And hopefully I’m up $10,000. Did you notice how the big numbers and the profits are very different? Banks also have their profits taxed by the way. I pointed out that if you add up the profits of all the investment banks this year, it probably doesn’t even make $10bn. Its been a tough year. So where will this $250bn come from? Stand up row ensues, I don’t care about the poor being the conclusion. They were, genuinely, quite shocked to realise the sums couldn’t add up by a factor of 2500%. So much for ending world poverty next year.
Have you ever played poker for hours and ended up with the same money you started out with? Well these jokers think that we’d still play cards if the croupier stole a chip every deal. Obviously we’d play at a casino that didn’t steal our chips, say the Bahamas, Zürich or cyberspace, but I suspect Chancellor Gordon Brown will continue to be the croupier for a free market City of London, home to nearly half the world’s FX deals, he won’t start stealing the chips any time soon.
