So here we are. It's as if the whole world is channeling the scene from the movie, Jerry Maguire, when Cuba Gooding Jr. jumps up and down shouting, "Show me the money!" Fund universal health care and climate policy, extend unemployment benefits, and rebuild crumbling infrastructure.
Remember the claims that government is your enemy and that only deregulated business powered by the market's infallible wisdom can sustain democracy and create growth, jobs, and security? No such talk now as everyone scrambles for a place in the bailout line behind the banks. But there is talk of a way to get the money: a financial transactions tax (FTT).
Currency speculation and financial deregulation topped a recent U.N. Conference on Trade and Development special report as root causes of the recent breakdown of the global economy.
Existing regulations encourage casino-like financial markets. Trillions of dollars in currency trades, for example, do nothing to create real jobs, goods, and services. They only create paper profits from momentary exchange-rate fluctuations.
This lightning-fast, globe-trotting speculation easily eludes regulation and taxation. Yet it can destabilize entire economies and it places more grounded, long-term business and investment at a significant competitive disadvantage.
An FTT could help with both the need to rein in speculation and the need to fund vital projects. The Center for Economic and Policy Research estimates that an FTT of only one-half of one percent would generate at least $60 billion to $100 billion dollars in the United States alone.
This would amount to two pennies for every $4 invested-a pittance for the long-term investor.
But for the speculators, who depend on trillions in quick trades, it would reverse the risk-cost-benefit equation and create an exponentially higher cost. It would give the advantage to long-term, productive investment.
Beyond the revenue potential and discouraging harmful speculation, the tax would have a powerful multiplier effect because it introduces an enforceable mechanism for requiring markets and financial systems to give back to the people, economies, and communities on which they depend. They must contribute their fair share. No more. No less.
The G20 convened in Pittsburgh last September amid rising calls for making an FTT the heart of global economic reform. Former German Finance Minister Peer Steinbrück voiced his support followed by a nod from Chancellor Angela Merkel. U.K. Prime Minister Gordon Brown and French President Nicolas Sarkozy have each supported slightly different versions of the tax.
The G20 missed that opportunity to push this proposal forward, but since the September meeting, they have released general, non-binding language that the financial sector should do more to compensate for its role in the economic crisis. Domestically, the Obama administration has proposed a Bank Responsibility Tax targeted at recouping federal bailout funds. The administration is also expected to propose new limitations on the level of risk that banks in the United States can undertake.
These measures are important, but insufficient to respond to what is called for on both the domestic and international fronts.
The International Labor Organization estimates that the economic crisis will put 51 million people out of work. In the United States, unemployment, hunger, homelessness, and insecurity have reached alarming rates.
There is still time to step up to the need for the kind of ambitious, globally minded, and innovative public policy that an FTT represents. The June G20 meeting in Canada, the U.N. General Assembly, and the debate in Washington, D.C., and capitals around the world are the key venues.
The outcome, of course, depends on whether or not policymakers think they can get away with ignoring such an obvious and strategic opportunity to chart a new path and relieve human suffering. If they hear from their constituents, it won't be so easy to ignore. If the public keeps the pressure on, it just might happen.
