Sometimes it’s just about being lucky

Maybe this is what happens when I read too much of the Guardian and UK press, but the stream of pieces over the past few months about a potential Tobin tax being introduced is finally starting to excite me.

Call it a Tobin tax, call it a currency transaction levy, call it sterling stamp duty, the point is that maybe, just maybe, momentum is reaching a critical mass to make it happen. It’s a straightforward idea: a small levy (say 0.005%) on international currency transactions. The original intention when proposed by economist James Tobin in the 1970s was to throw some sands in the wheels of international finance, to slow down the kind of ‘mad money’ of large capital movements apparent even then, and that was to turn financial uncertainty into crisis in Southeast Asia in 1997-8. But now it’s being mooted also as a fundraising scheme, one of many new methods of innovative finance to supplement conventional overseas development aid (ODA) in meeting the Millennium Development Goals, AIDS treatment, climate change adaptation, and so on.

It strikes a personal chord not just because it dredges up a splintered memory of high school economics, but because just a couple of years ago I attended the launch of a report at the House of Commons by a group of MPs seeking to revitalize the idea. Sterling stamp duty, we called it, to avoid people instinctively reaching for old memories evoked by ‘Tobin tax’. The reply from Chancellor Alistair Darling at the time said: “we remain of the view that there would be significant legal, economic and technical problems in introducing such a tax”.

Fast forward just over two years later, and Messrs Sarkozy and Brown are climbing all over each other to push the idea up the G20 agenda. The Guardian’s Larry Elliot has been a consistent advocate of the idea in his columns and French foreign minister Bernard Kouchner was also a well-known supporter, but perhaps the first real big shift in the political terrain came last August with Lord Turner, chair of the Financial Services Authority publicly backing the idea. Some things are all right and good, but it takes the right person to say it – and for an establishment figure at the heart of British finance to do so make a difference. Cue sudden media and political interest at the G20 Pittsburgh summit, IMF studies, Gordon Brown’s public support, Commonwealth discussion, Democrat interest, Copenhagen COp15, and now – the British minister responsible for the City of London and a bit more sound and light after Obama’s plans to reform financial services and Wall Street.

There’s still a way to go before this might turn into reality, and I’m not holding my breath yet, but what this burst of activity reminds me is just how much it matters for ideas to resurface at the right time – a certain degree of contingency which is utterly out of our control. 2007 also marked the bicentenary of the abolition of the slave trade by the British Parliament, with tribute paid to campaigners like William Wilberforce (including a really inspiring movie, Amazing Grace) persisting with his convictions despite ridicule and apparently insurmountable odds. But we neglect* that the abolitionist movement achieved what it achieved at that particular time too because of a confluence of various factors, of people acting for reasons other than the moral. Political calculation and the balance of interests,  domestic moral reform of a corrupt ruling elite, and the ‘national interest’ of British imperial maintenance at that particular juncture in history, Kaufmann and Pape argue, played more of a role than a conviction of universal human equality. It’s a reminder, it seems to me, that it doesn’t matter why people support particular ideas for reasons other than which we might want them to. All that matters is that we get to the desired end result.

So bankers might back a levy because it gives them a bit of cover against the charge of being ‘socially useless’, and politicians might do so for populist vote-grabbing. We might still be surprised at the quarters from which support comes from. But it’s really nothing to be bothered about.

*Kaufmann, Chaim D. and Robert A. Pape, 1999, “Explaining Costly International Moral Action: Britain’s Sixty-Year Campaign Against the Atlantic Slave Trade”, International Organization, 53(4), pp.631-668.

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2 thoughts on “Sometimes it’s just about being lucky

  1. Peter Cheek says:

    Hi Nick,

    Great article…I just wanted to let you know that we have become the first FX company to voluntarily introduce the CTL for all transactions. Ethical Currency is out name and we pledge to donate 0.005% of the nominal value of all transactions to charities targeting Millennium Development Goals 4, 5 & 6. Although our donations will not change the world on their own we hope to demonstrate the simplicity of instigating a CTL and in so doing lead our industry towards a more socially conscious future.

    The world is changing if a little slower than we would all like!

    Regards,

    Peter

  2. […] We tend to live in a world of personalities and individuals, and not just in terms of a celebrity-obsessed media. Time magazine’s covers and Man of the Year awards do their best to find a face that reflect the stories of the day and the mood of the times (although somewhat US-centric). Personal narratives are incredibly compelling stories, which do help us to try and make sense of the wider world. But as much as we laud and mark particular people in world history – the anniversary of Mandela’s release from prison being one of the most recent examples of this – there is a much bigger set of forces at play, and individual people really only matter because they happen to come along at the right time, in the right place (related: see my previous post on timing and luck). […]

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