Tobin Tax & Ethical Currency

From The Guardian (UK), via Share The World's Resources, August 2009

'For decades economists have rejected James Tobin's proposal to protect national economies from speculators by taxing foreign currency transactions. Yet the global financial crisis has generated new support amongst policy makers for Tobin's transaction tax brainchild, says Larry Elliott...

Tobin, who was born in 1918 and died in 2002, outlined his proposal in 1972, just after the break-up of the Bretton Woods fixed-exchange-rate system. The idea was simple: there should be a tax on foreign currency transactions that would allow national governments to stop their economies being at the mercy of speculators...

The first line of attack for the authorities will be higher capital requirements to prevent financial institutions from speculating so wildly during booms.

But Turner [chairman of the Financial Services Authority] adds: "If increased capital requirements are insufficient I am happy to consider taxes on financial transactions – Tobin taxes. Such taxes have long been the dream of the development economists and those who care about climate change – a nice sensible revenue source for funding global public goods."

Turner says that the sheer scale of the crisis means nothing should be ruled out. "What has occurred has imposed huge economic harm throughout the world and so we really do have to work out how to stop it happening again in five or ten years' time," he said in today's interview. "And that requires a very major reconstruct of the global financial system."...

But not everyone is waiting for regulators to start taxing City profits. Today, Ethical Currency will become the first foreign exchange broker in the world to voluntarily ringfence 0.005% of all its transactions into a single pot that will go to the Global Fund, set up to fight Aids, tuberculosis and malaria.

Founded by foreign exchange trader Alastair Constance, Ethical Currency has been warmly received by campaigners. The timing of its launch, they say, comes as the financial crisis is having an adverse effect on poor nations. Oxfam estimates the number of people facing chronic hunger will rise to 1 billion. And the Global Fund, which buys life-saving drugs and distributes them to poor countries, is facing severe shortfalls in funding.'