Last Updated: Friday - 09/24/2010
June 28, 2010
Is it time for a Robin Hood Tax?
Catholic teaching seeks controls on global capital flow; Harper wants party to continue
THE CATHOLIC REGISTER
On any given day on Bay Street, Infinium Group makes between 500,000 and one million trades in stocks, stock options, currencies, futures and financial derivatives. As the largest single trader most days on the Toronto Stock Exchange - bigger even than any of the Big Five banks - that's what it does every day.
Infinium doesn't make its trades based on the value of companies involved or their plans for new investment. The thousands of trades per second are triggered by computer programs based on mathematical models.
At the G20 meetings in Toronto June 26-27 European countries want to slow down companies like Infinium and their breakneck, second-by-second bets on financial products. Canada's Prime Minister Stephen Harper says no.
It's a pretty sure bet the pope is not on Harper's side on this one.
In the encyclical Caritas in Veritate issued a year ago, Pope Benedict makes a vigorous argument for an economy focused on the good of human beings, based on the concrete, tangible realities of daily life, not algorithms, speculation and figments of the financial imagination.
LOVE AND TRUTH
There's a reason why the title of Benedict's encyclical emphasizes love and truth, said Janet Somerville, who has been working with the Jesuit Forum for Social Faith and Justice on a popular guide to Caritas in Veritate.
"The encyclical is very grounded in the real needs of people, the very basic needs of people, and the fact the economy first of all has to take care of that and has to respect the way nature really is," said Somerville. "He's saying what the Church has said all along and what the Old Testament said long before - that the economy is part of our moral life. The economy is part of how we care about each other."
Benedict came out very definitely on the side of international controls on the financial industry in Caritas in Veritate.
"The state finds itself having to address the limitations to its sovereignty imposed by the new context of international trade and finance," Benedict wrote, "which is characterized by increasing mobility both of financial capital and means of production, material and immaterial. This new context has altered the political power of states."
While Infinium plays global markets as a computer game, Benedict wants us to think of economics as a human enterprise.
"I would like to remind everyone, especially governments engaged in boosting the world's economic and social assets, that the primary capital to be safeguarded and valued is man, the human person in his or her integrity."
That's why the churches want the G20 meetings to focus on the eight Millennium Development Goals and climate change, said John Dillon, KAIROS researcher on global economics.
"We can't ignore the climate crisis given what it forebodes for humanity and all of creation," Dillon said.
KAIROS - supported by the Canadian Conference of Catholic Bishops, the Canadian Religious Conference, the Anglican Church of Canada and several Protestant denominations - is going into the G20 advocating a Financial Transactions Tax (FTT) of 0.05 per cent. Revenue from the tax would be used to pay for climate change adaptation, the Millennium Development Goals and paying down the big national debts incurred by financial crisis bailouts over the last two years.
"The disappointment there is the prime minister's position that he doesn't want anything to happen on a financial transaction tax," said Dillon.
Based on calculations by the Trade Union Advisory Committee to the Organization for Economic Co-operation and Development and the Austrian Institute for Economic Research, KAIROS figures a global tax set at 0.05 per cent of every trade made in stocks, bonds, derivatives and currencies could just about pay for the Millennium Development Goals, climate change adaptation in poor countries and the accumulated budget deficits of developed countries that had to bailout the collapsing financial markets in 2008 and 2009.
The Trade Union Advisory Committee estimates it will take $168 billion per year to meet the Millennium Development Goals by 2015, $156 billion a year to adequately finance climate change adaptation and $372 billion per year to cover first world deficits stemming from the financial meltdown of 2008. The grand total is $696 billion a year.
The Austrian Institute for Economic Research estimates such a tax would raise $650 billion per year.
PUNISHING FOR BANKS
Countries like Canada could meet international obligations to pay for climate change and Millennium Development Goals and balance their books without raising taxes on ordinary taxpayers, said Dillon. But Harper thinks such a tax would punish Canadian banks for a crisis they didn't create.
"It won't happen in Toronto, but it won't disappear from the agenda," said Dillon.
The Europeans, reeling from financial meltdowns and near-meltdowns in Greece, Portugal and Spain, would be quite happy to see the bankers cough up at least a fair share of the costs incurred by financial speculation.
"We cannot avoid the debate on a tax on speculation. Whether we wish to restrain the frenzy of the financial markets, finance development aid or bring the poor countries into the fight against climate change, it all comes back to taxing financial transactions," French President Nicolas Sarkozy said in Davos, Switzerland, Jan. 28.
"There is indecent behaviour that will no longer be tolerated by public opinion in any country in the world."
FRANCE PROMOTES REFORM
France chairs the G8 and G20 in 2011, and Sarkozy has promised he will push for reform of the international monetary system. He's got the backing of German Chancellor Angela Merkel and at least the serious interest of the newer G20 players, including Brazilian president Lula Da Silva and Korean president Lee Myung-bak.
The naysayers - Harper and U.S. President Barack Obama - are going to have to explain to the rest of the world how they're going to keep the developing world developing without the revenue from an FTT. Or how they would put a leash on a financial industry that no longer seems connected to the economy that makes things or delivers services to people.
"Expectations are low for Toronto, there's no doubt about that," said Dillon. "The world economic and financial crisis will not go away. The issues will still have to be faced even if delayed until November in Korea."
Dillon is convinced most people would side with a Robin Hood tax.
"It would address one of the principal causes of the financial crisis and that was speculation on financial markets," he said. "Christians who are concerned about the future of our planet and survival of all creation, and about poverty, have to look at these issues very seriously."
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