By Robin Round
March 4, 1999
RRSP deadlines have just passed. ''Will you be investing this year?'' the teller at my bank asked me last week. ''Not a chance!'' I responded. The global turmoil in financial markets over the last two years has made me too nervous to invest what little cash I have. It's not worth the risk. My money's safer under my mattress.
I want to secure my retirement with safe, reliable investments that grow slowly and steadily over time. I can't any more, because the global financial system is in a state of chaos. Canadians, who invest billions every year in mutual funds, have watched their nest eggs shrivel and their dreams of retirement security vanish.
My money isn't going anywhere until I can be assured that financial speculators, who both caused and worsened the global economic meltdown, will be stopped.
The Tobin tax is one way to help get speculators under control. The Tobin tax is not a tax on Brian Tobin's missing cod, but one proposed by Nobel-prize winning economist James Tobin in 1978. It is a very small tax that would hit only the big commercial banks and investment companies. The tax is designed to help stabilize exchange rates by reducing the small margins speculators profit from. It would not affect ordinary Canadians.
The tax would also not affect legitimate trade in goods and services or long-term investments. On the contrary, by discouraging short-term capital flows, the Tobin tax would encourage investors to take a long view on economic development.
The Tobin tax has an added benefit - it would generate enormous revenue. More than $1.5 trillion U.S. is traded every day on international markets, more than 90 per cent of which is purely speculative. A Tobin tax on these transactions at a rate of 0.1 to 0.25 per cent could raise $150 billion to $300 billion U.S. annually. The United Nations estimates that the cost of wiping out the worst forms of poverty worldwide would be $80 billion U.S. a year. Imaging wiping out starvation and disease globally and still having billions left over. Cash-strapped governments around the world should be jumping at this one.
Next month, Canadians will have a rare opportunity to have their say about the Tobin tax. On March 23, MPs will vote on a private member's motion that states: ''That, in the opinion of the House, the government should show leadership and enact a tax on financial transactions in concert with the international community.'' This is a critical vote. There's been lots of talk about what's wrong with the financial system - now's the chance to begin to set it right.
This motion may not pass unless we tell Parliamentarians that it must. It's a free vote, so MPs can vote as their conscience and their constituents dictate. The Bloc Quebecois and the NDP are in favour. Reform and Conservative ''market fundamentalists'' are still in deep denial that it was markets that failed and not governments. Neither like to tax bankers and will likely vote against the motion.
The Liberals have endorsed the motion in the House but are privately divided. Both Finance Minster Paul Martin and Foreign Affairs Minister Lloyd Axworthy have spoken publicly in support of the tax in the past. Lately, however, Martin has been backpeddling, using technical excuses to dismiss the tax as impractical and unworkable. These arguments mask his political timidity - leading economists addressed all his concerns years ago. The only significant roadblock to the Tobin tax is political will.
All nations have a vested interest in preventing the next financial crisis. When speculators run for the exits, as they did in Southeast Asia, Russia and Brazil, we all pay. Countries are still reeling from the economic contraction, political instability, widespread social turmoil and human suffering left in the wake of the crisis.
Canada is no exception. Collapsing international markets and prices have hit us hard. Canadian exports to Southeast Asia plummeted $5.7 billion in the first nine months of 1998 compared with the same period the year before. We still don't know how many Canadians have lost jobs as a result. Most analysts fear the worst is yet to come.
The global chorus of voices in support of measures to control capital markets is a growing one. It includes leading economists and prominent politicians. Even financier George Soros is calling for controls on the profession that made him billions. Parliamentarians need to know that we expect them to act in our interest. While all MPs publicly chastise the ''Bay Street boys in the red suspenders,'' not all have the courage to take them on.
I will be asking my MP to vote for this motion because I still believe in democracy and I plan to retire someday. I'd like to have something to retire with.
Robin Round is a policy analyst with the Halifax Initiative, a Canadian coalition for economic democracy.
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