An idea that many advocates for the poor have been campaigning for is the so-called "Robin Hood Tax." The idea should finally see some recognition by the powers in the international community this year. France is now behind the idea and plans to talk about it when they chair the G-20 meetings later this year.
The Robin Hood Tax would tax a small percentage on international finance transactions. This would be the trading and speculating that deals with currencies. The idea is gaining traction with governments because they feel the tax would help the value of their money from being at the mercy of speculators. Current proposals for the tax only call for the rate to be at 0.05%.
From the Guardian comment section, writers Duncan Green from OXFAM and Ha-Joon Chang from the University of Cambridge say that the time has come for the Robin Hood Tax. Green and Chang compare the tax to the establishment of the income tax in Britain during the 18th century.
The same destiny may now await the Financial Transactions Tax (FTT) – or Robin Hood tax, as it is widely known. Although the French government, which chaired meetings of the G20 finance ministers and the IMF/World Bank member states last weekend, supports a global FTT, American opposition means that initial progress is more likely within a smaller "coalition of the willing", including France, Germany, and South Africa. French and German support may ensure that the eurozone is the first international forum that agrees an FTT.
Even a decade ago, when it was doing the rounds under the alias of "Tobin tax" (named after James Tobin, the Nobel laureate economist who first raised the idea), the levy was an absolute taboo in polite society. But after the great financial crash of 2008, the case for it is looking "obvious" to many, as indeed the income tax did in the late 19th century. Its time, too, has come.
This levy on financial transactions, even at the very low level that is currently proposed (0.05%), is expected to slow down the most speculative elements of international capital flows and raise the significant sums needed to provide the newly required global collective goods – especially green technologies and development aid.
Of course, the FTT alone will not achieve much in terms of stabilising our financial system. It needs to be implemented as a part of a comprehensive package.
First, countries that cannot issue "hard currencies" should be allowed to use capital controls. The significant change of position by the IMF in this regard following the 2008 crisis is encouraging, but capital controls should be seen as normal policy tools – rather than a measure of last resort, as the IMF still suggests.
Second, we have to reform the rating agencies. Despite their incompetence and even cynicism, revealed both in the 1997 Asian crisis and in the 2008 crisis, these agencies are still deciding what is a good financial asset and dictating how governments should conduct their policies – not just fiscal policies but also monetary and social welfare policies. They need to be regulated more heavily, and a non-profit public agency should be set up to provide a credible alternative to their ratings.
Third, if we are serious about the revenue implications of our financial policy, tax havens need to be reined in, if not totally abolished. That single act would generate sums on a par with a global FTT.
Last but not least, overly complex financial instruments should simply be banned, unless they can be shown by their inventors to bring significant net benefits in the long run, in a manner similar to the drugs approval procedure. Otherwise our ability to manage the system will be outstripped and we will repeat the crisis of 2008.