When Stephen Harper sent his anti-tax crusaders around the globe to preach against a bank tax, he not only reinforced Canada’s growing image as “tea party North”, he left massive confusion in his wake.
Many people now equate the bank tax with the Financial Transaction Tax (FTT) popularly known as the Robin Hood Tax and an idea dear to the heart of the anti-poverty and climate change community.
As an old hack now ancient NGO flack, please let me set the record straight.
A bank tax and the FTT/Robin Hood Tax are not at all the same thing and can’t be conflated. As my Oxfam colleague Mark Fried puts it: “The bank tax as proposed would bail out the banks in any future crisis. We need a tax that will bail out people now.”
When discussions began prior to the G20 in Pittsburgh last year to “do something” about the banks and the mess the global economy was in, Gordon Brown raised the idea of a Financial Transaction Tax, a re-working of the old Tobin Tax idea to properly reflect the times. This would be a tiny levy of .05% on all commercial global financial transactions. (The Tobin tax was just on currency trading.)
France’s Sarkozy and Germany’s Merkel joined with Brown in supporting the idea of an FTT. The G20 was asked to study the idea and report back.
The FTT would earn a very substantial amount of money each year. Something in the order of $650+ billion per year. Half of the funds raised would remain in domestic hands, and could be used in the event of another financial meltdown, or to shore up domestic social programs. The other half of the funds would go into a global fund to aid development in the world’s poorest countries and to help developing countries adapt their economies to the realities of climate change.
It was a recognition that the poorer countries had no hand in creating either the economic crisis or the over-consumption that led to global warming, but were suffering unequally as a result of both.
Then Obama began talking about a tax on the banks to gain back the money lost from the public purse. Gradually the debate among the G8 leaders morphed away from the FTT and into the idea of a “bank levy” which, it would seem, seemed more digestible than the FTT.
The reason the two are very different is that a bank levy would simply impose a tax on banks. It would not be an instrument of global redistribution as is the FTT. And, in fact, it has been criticized as possibly creating an atmosphere of even greater recklessness as the banks would now have an “insurance” fund to fall back on.
An FTT on the other hand, is seen as something that could stabilize markets by discouraging the most egregious kinds of market activity, day trading, short term speculation – what has often been called “gambling” on the exchanges of the world. The FTT aka The Robin Hood Tax has had a great deal of publicity in the UK and Europe, in part due to the Oxfam International campaign and the participation of Ben Kingsley and Bill Nighy, but also because it was seen by many to be a global tax whose time had come.
Understanding the difference is important because the debate is not over and Harper may, in fact, be trying to beat down a straw dog as he whips away against a bank tax. He should really be taking aim at Robin Hood!
That’s because, today Angela Merkel served notice that she wants the FTT on the G20 agenda in June. She has already moved unilaterally to impose regulation on those short-term traders/gamblers. The Greek crisis and the instability in Portugal, Spain and Ireland have the European Union under threat. European citizens, especially public servants, are refusing to be scapegoats for a system mired in greed. A bank levy is seen by many as just not up to what’s needed.
Obviously, for those of us in the anti-poverty/climate change world, the FTT is very attractive because it recognizes the development obligations involved in being part of a global community. And of course, that is even more pressing, given that the economic crisis has meant major cutbacks by G8 countries in their aid commitments. They are already $18 Billion dollars behind in their promises.
Just think what Robin Hood could do to that deficit!