For those of us who want the financial industry to serve people and the planet rather than dominate them, this is the most exciting reform under serious consideration on the world stage.
For decades, international activists have been pushing the idea of a tax on financial transactions. Such a tax would give us a twofer: a drop in short-term speculation that serves no productive purpose and leads to dangerous bubbles, and 2) loads of money that could be used for good things, like health, climate, and jobs programs.
Today, we’re closer to achieving this two-for-one deal than we’ll probably ever be in our lifetimes. Reeling from the worst financial crisis in 80 years, policymakers are not only desperate for new sources of revenue, they’re more open to rethinking the role of Wall Street and making sure it serves real economic needs.
To take advantage of these new opportunities, a wide range of activists, including trade unionists, international health advocates, and climate justice groups, have come together to move this decades-old proposition into practice. Their efforts are gaining traction—and even some celebrity support.
The specific proposal is to tax trades of all types of financial assets, including stock, derivatives, and currencies. The tax rate would be so low that ordinary investors wouldn’t even notice it. Some U.S. legislative proposals would even exempt retirement funds and mutual funds, the primary middle class investment vehicles. The real target would be the hedge fund investors and other high fliers in the global casino, who make most of their money through high-frequency betting on short-term market movements that often have nothing to do with what’s going on in the real economy. Since the tax would apply to each of these transactions, it would make this type of speculative gambling much less profitable and encourage more long-term, patient investment.
The Center for Economic and Policy Research has analyzed the likely impact of a set of taxes, ranging from 0.01 percent on currency transactions to 0.25 percent on stock trades. Assuming that trading volumes dropped by 50 percent, these taxes could raise more than $175 billion per year in the United States alone.
The call for such taxes has been particularly loud in Europe, where activists have managed to win promises of support from leaders of the three largest economies—the United Kingdom, Germany, and France. But more pressure is needed to make speculation taxes a reality. ...
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