Here, in Lex.  You may have to buy the newspaper.  It is worth it.

Even so, the discussion deserves a wider airing. As Brazil seems to have demonstrated recently, Tobinesque taxes needn’t be a tithe on growth. Since the country imposed a 2 per cent charge on foreign portfolio investments on October 20th to cool “hot money” inflows, the real has steadily fallen – it is the fourth worst-performing emerging market currency since then – while volatility has slightly ebbed

I would like to point out that – unlike what the crowing TUC and LibCon seem to think – this is NOT a Robin Hood tax.  Brazil’s 2% tax is about 40 times’ what Robin Hood is meant to be gathering on the trillions of transactions – in fact 200 times what the currency tax is aimed at.   It is not about revenue raising, but changing behaviour: stopping money rushing in and then out.  I have no idea what it will raise, but it won’t fund poverty reduction in Brazil, regrettably.

Tobin’s idea is also not the same as the Robin Hood idea, which seems to base a lot of its revenue-raising aspirations on a stamp duty equivalent on all share trading worldwide.  Doing the latter would certainly raise costs for investors and borrowers everywhere.  Tobin’s original idea would affect FX only.  Insofar as it changes behaviour, that was the POINT of it; to stop what he regarded as damaging liquidity. He thought it would reduce volatility.

So: the TUC/Robin Hood Tax is – a ‘tiny’ tax that raise ‘enormous sums’ and has no damaging effects on economic activity, and is somehow magically born by overpaid rentseeking bankers. It’s effect would IMHO  damage liquidity and increase volatility.

What the FT warms to: a huge tax that raise not much but does change behaviour and may reduce volatile flows for a developing country, and is borne, probably, by foreign investors and the recipients of their cash.

Not very much in common …


6 thoughts on “The FT considers Tobin Taxes

  1. Seriously Giles for a sec. I’m following your Tobin tax stuff with interest and looking up economics-for-dumb-lefties as I go, but finding it a tadge scattergun. Anyway you can consolidate into one proper non-blog paper, which I think (as you suggest) would have a ready readership. I can help by getting my skilled 8 yr old to do the cartoons. Perhaps you’re already on this case.

  2. Paul. You are bang on. It is scatter gun – very reactive, and very much hanging on the bad arguments of opponents, rather than where the debate should be. And I do want to do it properly.

    |The only place you’re wrong is whether I am already on the case as to getting your relatives to scrawl pictures for me. Oh, that I was that organised…

  3. well he is in quite high demand, having received very favourable comment from famous cartoonist Marcia Williams (your kids will know the name) so you do need to book early to avoid disappointment. he’s currently specialising in ninjas with an extraordimary capacity to throw several bananas at once, but is reviewing his output and i’m sure the tobin tax is within his range

  4. if you do do it properly Giles, I’d be interested in seeing what you write after you’ve given some thought to the potential downsides to liquidity – I know I’ve posted this link before but ….this is the kind of think I have in mind.

    oh and I’ve come across a new blog you might like

    1. Thanks for the lnk, and yes I will try to be even handed. We have a deficit to close. If we have a way of getting $10bn more without damaging economic efficiency then I’m all ears. If it hits bankers, great. I will keep an open mind…

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s