In 1972, financial currency exchanges, gambling on the differences in currency values, amounted to some $16 billion each trading day. Today, FX's amount to $4 trillion each trading day. The North-South Institute estimates that a levy of 0.075 percent on only currency transactions in dealer markets would yield approximately $500 billion annually, assuming a 14.5 percent drop in trading.
In April of 2011 over 1,000 economists, including Jeff Sachs of Columbia's Earth Institute, called for a Tobin Tax (aka, a "Robin Hood tax") to address world poverty and disease. And in June 2011, Jose Manuel Barroso, president of the European Commission called for a Tobin Tax to address the imploding economies of Europe. A recent Oxfam poll showed that 51 percent of Britons support a Tobin Tax.
The need for economic stimuli is becoming clear. Larry Summers, former U.S. Treasury Secretary, and an architect of deregulation, recently argued in the Financial Times for a new stimulus package and higher payroll taxes. The U.S. Chamber of commerce, alarmed by the current dismantling of state structures (known as structural adjustment programs or SAPs), affirmed the need for governments to support infrastructure, including ports, railroads, and bridges. The need for stimulus rather than weakening the public sector has never been greater.
A small Tobin Tax would make possible a global Keynesian stimulus package for clean development that could address our needs for climate adaptation and stabilization, disease control, ecological restoration, and sound economic development. Will world financial leaders ever agree to such a thing?
A precedent: In the late 1980s interest rates were skyrocketing. Money was flowing from other nations into the Bank of England in search of high returns, but the British economy remained stalled. To address the mismatch, the U.K. government and the financial sector lowered interest rates, leading to a flow of investments into the productive sector.
Project finance, credit, and loans occupy the role of the brain or the central nervous system of the global economy, while industry and farming are the body, which responds to the financial signals and rules of economic engagement. Given the dire situation we're in today, there is a critical opportunity to revamp the global institutional architecture and ensure that there are the funds to propel the transformation to sustainability. Though there is little sign that financial sector will act in a self-enlightened manor -- without a lot of pressure from all levels of society -- such a transfer of funds from finance to industry would constitute a healthy and intelligent investment into our common future.
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No past generation has had to plan for the subsequent 100 years. However, systems that are unstable can restabilize -- but only if we back off on burning fossil fuels and felling forests. Addressing the potential economic collapse simultaneously there is a hope for recovery based on clean energy, energy efficiency, and green technologies.