Jamaica should support the Robin Hood TaxSunday, November 06, 2011
ONE of the difficulties confounding and confronting policymakers is how to simulate the resurgence of economic growth in their economies and how collective multilateral actions could resuscitate the world economy.
The crux of the policy dilemma is how fiscal policy can be deployed to promote growth in a context where nearly all governments have little or no fiscal space because of the burden of servicing huge public debts and how to increase tax revenue in stagnant economies. The answer lies in restraining or reducing government expenditure while increasing tax from those sectors that can afford or withstand it.
An obvious candidate is the international financial system because, despite financial stress in some national banking systems, foreign exchange transactions continue unabated.
Nobel Laureate in Economics Mr James Tobin has suggested a tax on some forms of foreign currency transactions with the objective of helping to stabilise international currency markets and exchange rates by discouraging speculation. This basic idea has been around for years, but policymakers have politely dismissed it as a little farfetched.
However, the kernel of the concept has been expanded to apply to a broader set of international financial transactions, having as its objective, generating revenue to be applied to the promotion of economic development in the less well-off countries through development aid.
Like everything else in the so-called science of economics there is disagreement. On one hand, advocates see a small transaction tax as a way to raise an enormous amount of revenue without affecting the profitable operations of the international currency markets. Since it takes an insignificant share of revenue from the super rich and transfers it to the poor, the raft of proposals for taxing international currency transactions has come to be known as the Robin Hood Tax.
On the other hand, profit-engorged and largely unproductive international financiers have suggested that such a tax would discombobulate international currency markets. The widespread support for the campaign for the tax was given a fillip when a letter signed by over 1,000 prominent economists (including Nobel Prize winners Joseph Stiglitz and the eponymous Paul Krugman) was sent to the G20 finance ministers at their April 2011 meeting.
Much to the appreciation of supporters of the Robin Hood Tax, Bill Gates — in a report to the most recent G20 meeting — suggested that development aid should be funded from such sources.
Indecision on this urgent issue, like most things on the G20 agenda, is the subject of contentious debate. It is reported that those in support include Germany and France and those opposed include the US, UK and Canada. As usual, while the rich pontificate and fulminate about helping the poor the world’s poor continues to suffer. Jamaica, a once vigorous advocate of a new international economic order, should be among the leaders for the Robin Hood taxes, but alas, our foreign policy is now characterised by a disturbing reticence.
Small states such as Jamaica have proven repeatedly that they can exert some influence on world affairs. The late Mr Hugh Shearer as foreign minister of a newly independent Jamaica proposed the UN International Year of Human Rights. The late Mr Norman Manley made Jamaica the first country to ban imports from South Africa. Mr PJ Patterson led the ACP in creating the Lomé Conventions. The late Mr Michael Manley made Jamaica a leader of the Third World in international fora.
Jamaica needs to be more assertive on global economic issues. Even if we do not succeed, let us at least know that we fought the good fight.