Geography Reference
In-Depth Information
5.4 TOBIN-TYPE
TAXES
Since the early 1970s, some analysts of the world economy have put
forward proposals for the introduction of globally-based taxes in order
to fight world poverty and underdevelopment. Just as importantly it is
argued that, at the same time, such taxes would serve to reduce the
volatility of international financial markets. In other words, what some
people have argued is needed is for strong forms of global redistribu-
tion, representing a global response to the problems of global poverty
and underdevelopment.
In 1972 James Tobin, then Professor of Economics at Yale University,
suggested exactly that - the need for a global taxation on financial
speculation, speculation being regarded as where another currency is
bought over a short-term period in order to make a profit. Tobin put
this argument forward in the Janeway Lectures that he gave at
Princeton University. Born in 1918 and educated in economics at
Harvard University from 1935, James Tobin had a long-term interest
in financial markets and investment decision making extending back to
the 1960s (Simon, 2006). It was in this context that Tobin suggested the
need for global currency speculation to be taxed (see, for example,
Tobin, 1978; 1996).
Tobin referred to such a tax as 'throwing sand in the wheels' of inter-
national financial markets, which would serve to reduce their overall
volatility. At first this suggestion was ignored both by professional
economists and policymakers, who were generally against any market
interference, believing in the liberal and neoliberal view that markets
should be left to regulate themselves (Simon, 2006). This was the pre-
dominant view held in the 1970s and 1980s among those operating the
financial markets and among central bankers. Tobin was seen as advo-
cating the ideas of John Maynard Keynes, who had suggested the gen-
eral idea of transaction taxes in the 1930s. The implications of the tax
for redistribution have led to it sometimes being referred to as the
'Robin Hood tax' or the 'Financial or Currency Transaction' tax.
