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Sunday 8 November 2009

No Taxation without Denuclearization

(The writer of this article is attending an international NGO Conference in Stockholm on Nuclear Disarmament and Non-proliferation. See www.nucleardisarmament.se. The goal of the conference is to gather the International Movement against Nuclear Weapons and to facilitate coordination of strategies that will lead to a successful NPT Review Conference in 2010.)

Today's news is that Gordon Brown has proposed a global tax on financial transactions at the meeting of the finance Ministers of the G20.

They call it the Bank Tax, which may be OK, considering that Brown goes further than Nobel economist James Tobin in his original proposal at the beginning of the 1970ies. When the US abandoned the gold standard and let the dollar float against the other currencies, Tobin suggested a 0,5-1 percent tax on the trade in money. The rate of the tax which Brown now proposes would be just a fraction of 1 % (perhaps 0,001 % , or even 0,0001 %), but it would also cover the so called derivatives business in addition to the buying and selling of money.

What are the derivatives? In his movie Capitalism - A Love Story, Michael Moore has a scene where a Wall Street banker tries to explain the matter to a man from the street. The more the banker explains, the bigger the confusion and disbelief of the listener.

The Bank for International Settlements in Basel (BIS), which produces the statistics about the global trade in currencies and derivatives, describes derivatives as 'OTC foreign exchange and interest rate contracts'. The BIS estimates that the daily turnover of the trade in derivatives was $4.2 trillion in April 2007, while that in traditional foreign exchange markets amounted to $3.2 trillion. (1 trillion = 1000 billion = 1 million million.)

What these staggering figures mean is that even a very minimal "bank tax" could raise a yearly revenue of tens of billions of dollars.

But here we meet the fundamental problem of the global tax proposals of Gordon Brown and the other G8 leadres. The crux of the matter is that global taxation requires global representation.

The old slogan "No Taxation Without Representation" is still valid today, more than 250 years after the British colonists first used it in the 13 American colonies.

Who shall have the right to decide about the tax rate? The global taxation may raise tens, maybe hundreds of billions in revenue. Where and how to invest these billions? Who are to decide? Will it be a consortium of bankers led by Gordon Brown?

It seems that the "bank tax" will be more or less just that. It will be a tax that is implemented not only by the bankers, but also for the bankers. The tax management will most probably be trusted to The International Monetary Fund (IMF).

Freely, the IMF takes its decisions by vote. There are 2,216,193 votes in total. Of these, the USA has 371,743 (17%), the twent-seven EU countries have 710,786 votes (32%), Japan has 133,378 (6%) and Canada has 63,942 (3%). Major decisions require an 85% supermajority. Therefore, both the USA or the EU (on the condition that the European countries reach agreement among themselves) have voting power enough to block any important decision.

What could be more important in our global political economy than global taxation and the redistribution of the global tax revenue?

The question should probably be put in a slightly different way. Why can we not have a new Financial Transaction Tax Organization (FTTO), where decisions can be taken in a democratic way by representatives of all the nations who, each one, have one vote, and where also the organizations of the civil society can have a representation? (1)

The reason is our obsolete world political system. People now have have begun to understand that the common ecological problems, such as the climate crisis, require global political solutions. Humanity now also, for the first time, has an Internet, which may be a necessary precondition for a common human understanding, and, therefore, of the common solutions.

Since 1945, the world political system has been dominated by powers who build and maintain weapons of mass destruction (WMD). The WMD has stood in the way of the development of the United Nations. They are still one major obstacle to global democratization, and to the necessary global redistribution of common gods and public services. Therefore, we must tell Gordon Brown and the the other leaders of the triad of North America , Europe and Japan, which dominates the world of finance and the IMF: No Global Taxation Without Denuclearization.

Denuclearization means, firstly, the abolition of the WMD. Gordon Brown and the UK could start by abolisihing the Trident missiles, painting the nuclear submarines yellow and turning them into a Museum. France is also well placed to take the lead in this. In my view, contrary to what we constantly hear being repeated in the media and by the official experts on nuclear disarmament (2), as well as, unfortunately, by the present political leaders of the EU-countries, neither the United States nor Russia are very likely to lead the world in the right direction. (When presidents Obama and Medvedev put forward visions of a world without WMD, then we, who are not Americans or Russians, should of course be happy and support them, anyway.)

Whoever wants to take the lead should abolish his WMD, unilaterally. Unless at least one of the present nuclear states decides to break the link between its kind of power and its own WMD, the process leading the goal we all want to see reached, the agreement and implementation of a global nuclear disarmament convention, will probably never take off.

Denuclearization, it must be added, is not only about abolishing the existing stockpiles of nuclear weapons.

Firstly, the production and proliferation of new robotics, genetics and nanotech WMD now also has to be prevented (3). These new, and all future WMD must be included in our vision of a denuclearized world.

Secondly, no new nuclear power plants must be buils, and the existing ones must be dismantled. For heavens sake, from where does all the plutonium come, for the bombs and the proliferation of the bombs? Here, again, the denuclearization initiative could, and should, come from Europe.

To sum up: Don't Nuke the Climate! No Global Taxation Without European Denuclearization!

References:

(1) (Political scientists and lawyers have indeed drafted treaties on global transaction taxes, with proposals concerning democratic tax management; see e.g. www.nigd.org/ctt.

(2) See, for instance, the 60 Recommendations by the WMD Commission in the report "Weapons of Terror".

(3) See the article "Will the Future Need Us?" by the computer scientist Bill Joy, in Wired 4:2000.

Monday 21 September 2009

When A Fake European Union Discusses a Fake Tobin Tax

The EU governments have been discussing a plan to put some kind of financial transactions tax on the agenda for the G20 meeting in Pittsburgh on 24th-25th September.

James Tobin, who in the 1970s advanced the concept of a global tax on currency transactions, himself thought of it as sand to be thrown in the wheels of the runaway financial system that had resulted from the abandonment of the gold standard (1971). Tobin hoped that the currency transactions tax (CTT) would stabilize the system and save it from crisis. Now, when the governments are coming round to Tobin's idea, the crisis is already a fact. At this stage, then, the CTT is about covering the costs of the crisis, as former Lehman-banker Sony Kapoor puts it in his fascinating interview with The Real News Network.

Officially, the governments are looking at the CTT as an innovative means for obtaining development finance. Precisely how the tax revenue would be used for the benefit of the development of developing countries, we do not yet know. Perhaps, it could be used to finance the Millennium Development Goals of the UN.

According to Bernard Kouchner, the French minister of foreign affairs, the rate of tax could be set at 0,005 %, in which case the expected revenue would amount to 20-30 billion dollars per year. Kouchner's proposal is actually more than a CTT, in the sense that the international trade in assets and derivatives would also be taxed. It would, in other words, be a Financial Transactions Tax (FTT).

A number of European government ministers and heads of states, including Sarkozy, Merkel and Barroso, have stated willingness to support on FTT of the kind Kouchner has proposed.

For their part, leaders of the Association to Tax financial Transactions to Aid Citizens (ATTAC) have pointed out (although perhaps not with the desired clarity) that Tobin's original tax-rate was 0,5-1 %, and thus 100-200 times higher than Kouchner's. While Tobin actually wanted the CTT to intervene in the speculative movements of capital, Kouchner &Co definitely wish to let these movements continue unhampered. Ironically, James Tobin paid very little attention to the tax revenue, because he was after stability, not 'development finance'. On the other hand, the money trade has grown with two orders of magnitude since Tobin's time, as has, of course, the potential revenue from a global "Tobin Tax". In the present situation, therefore, the proposal to use a FTT to "aid the citizen" of the South, might well be feasible.

The French ATTAC leaders Aurelie Trouvé and Jean-Marie Harribey stated last Friday, that the EU governments are deliberately putting forward a proposal that they know will not be accepted by the US government. (Note also that Mr Reinfeld, the leader of the Swedish EU presidency, and Mr Juncker of Luxemburg, have given the thumbs down to the FTT proposal.) For ATTAC a FTT could anyway only be a first step towards genuine regulation of the financial markets, to be completed by measures to close down tax havens and forbid the speculative trade with complex derivatives and contaminated assets.

But nobody, even within the ATTAC movement, now seems to remember the precise and politically mature model Treaty on Global Currency Transactions Tax that Finnish political scientist Heikki Patomäki and Belgian lawyer Denys Lieven presented at the World Social Forum in Porto Alegre 2002. Under this proposal the governments who want a CTT or FTT would form a new CTT Organisation, if necessary independent of the USA. It would be possible to do so already if these countries accounted for 20 % of the global financial markets. The CTTO would have democratic decision-making bodies for the decisions about the tax-rate and the use of the revenue. The European Union alone would not be capable of setting this up; but several countries of the Global South would probably be willing to join. (The Draft Treaty on Global CTT is available online ,in a number of languagues, at http://www.nigd.org/ctt.)

The issue of the CTT and/or FTT obviously leads back to the question of the European Union. What we have today is a fake union, divided on most strategic issues and therefore also incapable of making a worthy contribution to rectifying the world's financial system. A genuinely independent EU would certainly be able to help, and the USA would have to follow, because the USA has exhausted its capacity to provide world leadership. It is still a military giant, but a giant with feet of clay. Hopefully the day is drawing closer when the peoples of Europe decide to put away the 'nuclear umbrella' and  start the process of nuclear abolition on their own. When that day comes Europeans will at long last acquire the ability to form a real Union and, therefore, also to contribute to the building of a new financial architecture.

Thursday 30 October 2008

The same subject continued

I do not think that we should try to sell the idea of a global tax on financial transactions (FTT) with the "insurance fund" argument. All sound economical systems should provide mechanisms for saving some money or resources for the bad days, but certainly not "to protect citizens from the astronomical costs of bailing out further banks and financial institutions".

In general,  I consider the main argument for a global FTT to be that it can help open the black boxes of the world's computerized financial system; thus I recommend an information-oriented approach to the FTT. The revenue generated by such global taxation may also be significant, and the FTT might also be used to stabilize the financial system , but the really important function of a global FTT should be to further global democratization by increasing the public's knowledge about what is going on in the world of finance.
The Schumacher lecture of Susan George, which I already quoted, contains a vision of how another, alternative financial system should be constructed. One of the necessary points on the agenda is the abolition of the tax havens, about which John Christensen and Richard Murphy from the Tax Justice Network have published a fresh article, Tax havens and the financial crisis.

But neither Susan George nor Christensen & Murphy mention Clearstream. While looking for news about Clearstream I found, to my dismay, that Denis Robert, the French investigating journalist has recently been sentenced in court for libel against the bank of all banks in Luxembourg. So Clearstream has scored a victory in its tenacious efforts to silence him! Hope to be back on this subject when I have more details about the continuing harassment of Denis Robert.

Choike has collected signatures on a statement "on the proposed "Global Summit" to reform the international financial system". (http://www.choike.org/bw2/). This relates to the planned G20 meeting on the financial crisis, which president Bush will be hosting on the 15th of November. The main demands of the statement are that a global summit on the financial crisis

  1. " is inclusive and participatory of all governments of the world;
  2. includes representatives from civil society, citizen?s groups, social movements and other stakeholders;
  3. has a clear timeline and process for regional consultations, particularly with those most affected by the crisis;
  4. is comprehensive in scope, tackling the full array of issues and institutions;
  5. is transparent, with proposals and draft outcome documents made publicly available and discussed well in advance of the meeting."
I signed this statement as an individual, because these are elementary democratic demands. Yet I am convinced that the governments will not be capable of doing any good and right things without a strong pressure from non-governmental, civic movements. Susan George, in her Schumacher lecture, has sketched the programme we should be agreed on and forcefully put forward now:
  • "... a new Keynesianism, not military this time, but environmental; a push for massive investment in energy conversion, eco-friendly industry, new materials, efficient public transport; the green construction industry and so on";
  • "... take taxes up to the European level and to the international one through currency and other financial transaction taxes";
  • "... debt cancellation for poor countries";
  • "Tax havens that allow affluent individuals and corporations to avoid paying their fair share of the conversion should be shut down: it would be cheaper to pay the inhabitants of the Cayman Islands, Liechtenstein and the rest a living wage for twenty years. Plenty of cash would remain for eco-investments, job-creation and poverty relief."
In its essence, this is the program of ATTAC. But it has two weak spots. We must also, and in particular, raise the demand for European Nuclear Disarmament and make it a condition of the European Union, to be inscribed in its constitution.  This is a goal to achieve for Europeans, in the first place. Every important political question is connected to it: the future of NATO, the question of how to organize a global governance, the orientation of the real economy, which is a permament war economy, and of which the nukes and the related weapons systems (missile defense, and "star wars", in particular) are the top of an enormous economical -- or rather, uneconomical -- iceberg. Without this demand the movement will continue to lack a real political perspective. It will continue to grope in the dark. The weapons of mass destruction are also the weakest point of our adversary, it is his means to keep us scared and under his control; but when we attack him united on this point, we will we be real and courageous again, and we will win.

Secondly, we must make an offensive towards the heart of the present financial system, which is a computerized system, where the money is becoming equal to digital information. The "shadow banking system" , which now breaks down, has its centre in Luxembourg, in the financial machinery of Clearstream, the "notaries of the world". It is a myth that the financial system is non-transparent; yes, it is opaque to us, the people, but every deal of the financial capitalists in their tax havens is certainly being documented, all the data are there, and for the ones who have all the data, it is not non-transparent at all. As long as Clearstream, Euroclear and SWIFT are not under democratic control, the financial system cannot be controlled by the people. The situation now is, that the average journalists or ministers or economists, for that matter, have scarcely heard about these nodal points in the financial machinery, the digitalized clearing-houses, which have come into being only during the last few decades, and without which the financial globalization would not have been possible.

The role of information in the financial system has always been of prime importance, but the networked computer has changed the basic conditions - far from being opaque, the system is now transparent and controllable, at least in principle, thanks to the digital networks.

PS.  In addition to Susan George´s impressive Schumacher lecture (see above), I also re-read her "Budapest Paper" from October 2001, where she constated that we had all entered 'an age of radical insecurity and post-State conflict.'

In order to end this age of insecurity, we need to recognize the library-cum-internet as a global state power on pair with the national state powers. Instead of being hidden in the secret databases of Luxembourg's shady notaries, the financial data of the world must be recorded in public libraries and archives.

Monday 20 October 2008

A Global Taxation of Financial Transactions

Taxing and regulating the financial transactions is more necessary than ever. We need a global and comprehensive global Financial Transactions Taxation (FTT).

The FTT should combine a currency transactions tax with a tax on all transactions in securities.

The purpose of the general taxation of financial transactions should be threefold:
  • To provide instruments for the stabilization and the regulation of the global financial flows;
  • To generate funds for the financing of social and economic development and public service;
  • To make the financial system transparent, and, thereby, to further global democratization.
Today's highly centralized and digitalized systems for financial transactions and clearing, such as SWIFT, Clearstream and Euroclear, must be placed under democratic control. This is conditio sine qua non of greater financial transparency.

A Financial Transactions Tax Organization (FTTO), corresponding in many ways to the Currency Transactions Tax Organisation (CTTO), which is described in the Draft Treaty on CTT (2001) [1] by Lieven Denys and Heikki Patomäki, will probably be needed to implement the necessary FTT.

According to the the most recent report from the Bank of International Settlements, "a huge shadow system" is at work within the present financial system. [2] Ernest Backes and Denis Robert have exposed a central part of this shadow system in their books about Clearstream.[3] At he center of their investigation stands the networked, digital computer and the insight that, henceforward, banking and finance are, essentially, a computer programming project.

The management of the information about the financial flows, must, in the end become a task for public archivists and/or librarians [4]. The software which is developed for the financial management must also be free and open.

Mikael Böök
member of the ctt-team

References

[1]See the Draft Treaty on Global Currency Transactions Tax, written by Heikki Patomäki and Lieven A. Denys. This consultative document was first introduced at the World Social Forum in Porto Alegre in January 2002. The text of the draft treaty in English and in various translations to other languagues are found at www.nigd.org/ctt

[2] "Moreover, as evidence has accumulated that the financial system as a whole is no longer functioning effectively, those charged with prudential oversight must also ask themselves what went wrong. How, for example, could a huge shadow banking system emerge without provoking clear statements of official concern?", see Bank for International Settlements. 78th Annual Report, 1 April 2007– 31 March 2008, p 146.

[3] See Robert, Denis & Backes, Ernst: Révelation$ . Les Arènes, Paris 2001; and Robert, Denis: La boîte noire . Les arènes. Paris 2002.

[4] According to the present writer, the internet is becoming the new public library of mankind. The road forward towards democratic self-government goes via the "open space" of the social forum(s). I have presented some thoughts on this subject in a writing about The Documentation of the Social Forum(s).

Note: The above entry is also found at www.cttcampaigns.info