Globally, support is growing for an International Financial Transaction Tax (FTT). The proposal is strongly supported by France and has the backing of Germany, Belgium, and others. The Harper administration is a leading opponent.
The concept of an international FTT is a very small tax that is placed on all ‘speculative’ financial transactions. The initial proposal, known as the Tobin Tax (in reference to its first advocate, Nobel Laureate James Tobin), was to be a global tax applied only to currency speculation. This concept has since been expanded to include a small tax on hedge funds, derivatives, and bonds.
On March 23, 1999, the Canadian House of Commons passed Motion M-239 by a vote of 164 to 83:
“That, in the opinion of the House, the government should enact a tax on financial transactions in concert with the international community.”
At the time, Finance Minister Paul Martin and most of the governing Liberal party supported the opposition New Democratic Party in favour of the Motion, but it was non-binding and was not acted upon without prior international acceptance.
The economic collapse of 2008 was a result of ‘casino capitalism,’ an international casino where gamblers bet on speculative, unsustainable investments. Durable financial transactions could not compete with the return on investment (ROI) achieved in the casino when the bubble was growing. And as demonstrated in 2008, those bubbles inevitably burst.
When James Tobin described his idea, it was to ‘cool down the hot money.’ So much currency speculation was taking place, thanks to the decision to allow currency to set its own level in the market (it had previously been set by the International Monetary Fund), that the health and stability of whole societies could be up-ended by the currency devaluations caused by billionaire gamblers. One such gambler, George Soros, famously once devalued the British pound. The 1994 peso crisis, the collapse of the so-called Asian Tigers in 1997-98, the currency devaluations of the Thai baht and others throughout Southeast Asia, and the Russian currency crisis in 1999 have all been linked to the impacts of rampant currency speculation.
The 2008 economic meltdown went far beyond the currency speculators and included the trading of sub-prime mortgages, which built up in speculative value far in excess of real assets. The crash that ensued left the billionaires dusting off their trousers. The poor were impacted the most, the middle class was traumatized, and governments bailed out the gamblers, including major financial institutions, using the ‘too big to fail’ argument.
A further concern from the development community is the growing impact of gambling in commodities, which is driving up prices on oil and food.
The proposal is for a tax of 0.05% on all speculative transactions – or five cents on every $1000 invested. The goal is to create some funds for governments to be prepared if speculation once again creates a disaster. It is also, as Tobin suggested, just enough money to take the edge off of multi-billion dollar transaction, but not deter prudent investment.
The ‘Robin Hood’ element is that these funds should be directed to achieving the United Nations’ Millennium Development Goals (MDG) goals (see Overseas Development Assistance note). We agree with France that the tax should be collected and kept in international funds, with at least 50% directed to achieving MDG goals as well as climate change mitigation and adaptation.
The Green Party believes a FTT will contribute to enhanced global stability while efficiently providing much-needed funds to fight global poverty. The Canadian Parliament passed a non-binding, all-party resolution favoring the similarly designed Tobin Tax in 1999. It is time to act on this declaration of support.
The Green Party of Canada will:
Make the Financial Transaction Tax (FTT) a priority in international relations;
Negotiate to bring a FTT within the GATT (General Agreement on Tariffs and Trade) as a prerequisite for admission to the World Trade Organization. The focus on the FTT in multilateral negotiations is long overdue.