If we have learnt anything over the last few years it is that we have to make banks - and bankers - more responsible to society as a whole. For too long, they have been too willing to take more than their fair share of the economic success of this country and others but then do a disappearing act when the chips are down. One way to get to grips with this behaviour is to learn from the past.
It is now almost 40 years since James Tobin, an American economist who went on to win the Nobel Prize for Economics, devised a very small levy to "throw sand in the wheels of global finance." It aimed to slow down currency speculation and reduce the frenzy of buying and selling currencies whatever the true state of national economies. Such speculation has since soared massively and now involves several trillion dollars each day.
Tobin's idea was taken up by campaigners who also saw the potential of raising funds for global good. Policy-makers dismissed the idea as impractical. However, last year the chickens came home to roost with a world-wide recession sparked by the short-term, selfish and socially useless activities of many banks. The result is that UK taxpayers must stump up £1.5 trillion to clear up the mess.
The resistance to making the banks pay their share for their errors was recently eroded by the Chairman of the Financial Services Authority, Adair Turner, whose support has given new credibility to the Tobin Tax.
Gordon Brown then made a surprising speech at a major international conference of the G20 group of rich nations. He argued that "it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us."
The PM suggested "a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards."
A fair and popular question is why should the many suffer deep spending cuts and/or tax increases to pay for a few bankers' mistakes without them changing their tune?
For my money, a Financial Transaction Tax is long overdue. A new and powerful alliance of development groups, the TUC and others, including myself, is being launched in the near future.
We advocate a small tax (say 0.05%) on the many trillions of dollars that change hands each day. This could raise several hundreds of billion dollars annually.
Half the proceeds could be kept by the countries where the trade originates. This could, in the case of the UK, bring in much needed revenues that help avert public spending cuts and tackle, say, child poverty.
The other half could go towards the cost of tackling climate change and increasing development around the world by, for instance, getting a place for every child in school, stopping mothers dying in childbirth or providing bed nets to prevent Malaria.
However, this tax cannot be turned on with the flick of a switch and requires international co-operation and agreement. The technical basis of its collection is in place because all transactions are already tracked and this could be used to tax them. But it would be difficult for one country or a group of countries to go alone. The backing of the UK, France and Germany needs to be expanded.
As far back as 1999, I was part of a group who went to the World Trade Organisation (WTO) talks in Seattle where we thought we could make a breakthrough on a similar proposal. Sadly, we failed and a decade has been lost. But the current situation has made our arguments stronger than ever.
We need a popular and international campaign to make the main message irresistible. This tax takes from the few for the many and can bring hope that globalisation can benefit us all and not just the well-heeled whose greed has been exposed as damaging. It is time to contribute to the common good.
Newcastle Chronicle and Journal
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