Tobin tax etc.

Chris Burford cburford at
Tue Jun 2 11:56:40 PDT 1998

At 01:51 AM 6/2/98 -0700, Jordan wrote:

>> Why with all this accelerated movement of financical assets around the
>> world's computer terminals is the net result usually zero in terms of
>> transfer of real assets?
>The simple answer is: it's not being done for the purpose of
>transfering real assets, it's (largely) being done for the purpose
>of transfering *risk* ...

Yes OK. I am not going to attempt the little calculation but what this point brings to mind is this: -

Although leftists IMO should back global taxation on the grounds of political principle, tactically there is a case for discussing the Tobin tax for other purposes. One is for the purpose of stabilising the volatility of foreign exchanges by putting grit in the wheels.

Jordan's remark here suggests to me that it could be seen more widely as a contribution to risk management. After all if dealers take a slice to move assets from dollars to yen to hedge against risk, we are talking about presumably between a fraction of a percent and a few percent. (Many of you will know better than me). A Tobin tax could be conceptualised as alongside that and of a comparable size.

A re-investment of a few hundred billion a year from this, could be argued to be neutral in its inflationary effect on the global economy, because the tax is (more or less) global, and could be argued to be promoting the circulation of the international economy when it is operating significantly below capacity.

The fund could also be argued to help manage environmental risk constructively, as an insurance through investment in conservation projects to guard against certain costs rising drastically in the future. (eg How about $50 billion to go into a fund to receive joint bids from of course capitalist companies to develop the Amazon in such a way as to preserve the rain forest - I know that sounds a paradox but pitched the right way a number of capitalist companies would see profits and honour gleaming at them in such joint ventures, and I guess we cannot necessarily gamble on a socialist revolution to save the Amazon rain forest before it turns into a desert like the Sahara).

Shamelessly reformist of course, but there may be unprincipled allies who would see merits in it for the social control of risk.

This is a wider concept of the Tobin tax than just to damp down the volatility of the foreign exchange markets.

What major fallacy have I committed?

Chris Burford


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