By Sonia Mikich
MonitorMay 13, 2002
Moderator: Every day 1.5 billions US-Dollars - that is the figure I read anywhere on the web - are fluctuating around the world in speculative trading. 80 % of it is hot money, short-term movements. Now there are calls for taxation of these movements. What is your position on it?
Stiglitz: There are two motivations for the Tobin Tax - which is this kind of taxation of capital flows - one of the motivations is that we need a source of revenue to pay for global public goods. As the world is becoming more integrated, globalization has occurred, we have more needs that need to be fulfill at the global level, we have needs in terms of financing the war against AIDS and other international diseases, the war against terror, providing for a better environment...
Moderator: ...addressing poverty...
Stiglitz: ...addressing poverty in developing countries. The development issue alone is estimated to meet the minimum millennium goals. The goal is 50 billions dollars more. So we need more revenue to finance these really important global needs that all of us, I think, feel would benefit from. And we do not have a source of revenue today. Right now, we are in a situation where the US can hold the rest of the world hostage. The US decided it did not like something the UN did, so it would refuse to pay the dues. This is an intolerable way of running an international environment. The Tobin Tax is one way of raising that revenue.
I think the Tobin Tax has enormous symbolic value. What it is said is that in recent years financial markets have driven the world. Financial markets have brought enormous instability. Free mobility of capital has not only brought instability with enormous costs to the people in the country including the very poor, it actually changes the bargaining power within a country - because if you have free mobility of capital, if you try to tax capital it says "we will leave" - so it is more than symbolic. It is symbolic, but it is more than symbolic. It affects the outcome.
Now what is important about the Tobin Tax is that part of the proposal is telling that the money raised from the revenue will be used for the financing of public goods. That is more than symbolic. It recognizes the fact that we need collective action on a global level. And if we are going to have collective action on a global level, we need resources. We need resources for development, resources to help the poor, to attack poverty, to assess global health issues, to assess global environment issues. We do not have these funds available today.
So the Tobin Tax is doing two things at the same time: it is providing the basis for revenues to attack these very important public needs at the global level - and it is trying to address the imbalance associated with the free mobility of capital that has brought such devastation around the world.
Moderator: Well, I think that supporters of the tax actually say that it can only be part of the whole mechanism - on its own it will not do very much because as you said there are too many loop holes where capital can flow - but in your opinion, would Europe be a big enough entity to start?
Stiglitz: Oh yes!
My point of view on it is, that unlike taxing good things, even if it does not succeed in greatly stabilizing financial markets, it is taxing something that is not going to do any harm. You know if you discourage some of this speculative activities the world is not going to be a worse place.
Global efficiency would not be adversely affected. What I think Europe has to worry about though even if it cannot get broader cooperation is that the transactions migrate off shore, off of Europe. And it is therefore important as part of the process to make sure that it is a tax up all the transactions of European residents no matter where they occur. It has to be a European residents´ tax no matter where they occur. That is very different from what the basis of all the taxation that currently occurs in Europe. So that is why I say the key issue is: can you implement it? I think that is a technical issue.
Moderator: technical or political?
Stiglitz: Well, technical and political. Can you design law that can insure that it is not circumvented? My main reservations are that there are some very difficult problems with implementation particularly associated with derivatives and options. I think those can be overcome. I think we need a little bit more study. People in the financial market are very creative in circumventing taxes. When I was in the White House, I saw this. I do not want a tax that is just symbolic. I want a tax that works.
Interview with Nobel Prize winner Joseph Stiglitz in German television (ARD, Monitor), broadcasted on the 13th of May 2002
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
