The Tobin Tax Idea, World Prosperity and Security
Lucy Law Webster, April 2006
The Center for War/Peace Studies has advanced a proposal to combine a commitment to weighted voting in the UN to facilitate making binding UN decisions, with a proposed currency transfer tax to generate the money needed for development to provide a new more stable basis for peace and security..
The idea of a Tobin tax was proposed in 1972 by James Tobin, a Nobel laureate economist at Yale. The primary initial intent was to stabilize exchange rates by discouraging speculation. However Professor Tobin himself expressed the view in his later years that the proposed tax might not be worth establishing for that purpose, but he retained his support for the secondary objective, to provide funding for global public goods such as reducing world poverty, disease and to address global warming.
It was originally suggested that a currency transfer tax would reduce “noise” from market trading while allowing traders to respond to fundamental economic changes. At the same time various economists have said that a tax rate high enough to deter speculation would significantly hamper efficient financial intermediation.
A logical response to this fear is to have a tax on currency transactions that would be so low that it would not distort market behavior, but would nonetheless generate revenue. Even a tax of 0.02% would generate some $40 billion to $60 billion per year.
That would be enough financial support to meet the Millennium Development Goals by 2015 if at the same time the recipient countries reformed their policies, strengthened institutions and improved the delivery of services to their people. Thus an agreement to combine a commitment to a currency exchange tax could be an important part of a package to reform the decision-making system in the UN and to, at the same time, obtain a new commitment from leaders of the poorest countries to replace corrupt governance with people-centered development programs including those defined by the MDGs.
The authors of the three papers on The Tobin Tax and on Weighted Voting can be contacted at:
Lucy Law Webster lucywebster@lvistas.net
Myron W. Kronisch Mwkronisch@aol.com
Joseph Schwartzberg schwa004@umn.edu
See also: www.cwps.org
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality without gender disparity in education
4. Reduce infant mortality by 2/3
5. Improve maternal health
6. Combat HIV/AIDS
7. Ensure environmental sustainability in country policies, halve the proportion of people without access to clean water
8. Develop a global partnership for development that expands market access and reduces debt.
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