Press Responses - March 16, 1999

PUBLICATION: GLOBE AND MAIL
DATE:   TUE MAR.16,1999
PAGE:   A11
CLASS:  Commentary 
DATELINE:
WORDS:  582 

For its own protection, the world needs the Tobin tax. Canada's members of Parliament should push for an international levy to deter currency speculators.

The House of Commons will vote next week on a private member's bill directing the government to "enact a tax on financial transactions in concert with the international community."  The Tobin tax, proposed in 1978 by economist James Tobin, would be levied on all foreign-exchange transactions to discourage speculators. The following is from an open letter to MPs, prepared by the Halifax Initiative (a coalition "committed to the democratization of economic decision-making") and signed by some 40 professors of economics and other disciplines, and by representatives of some 45 non-governmental organizations, including CUSO, the Canadian Labour Congress and the Canadian Conference of Catholic Bishops. The letter was released yesterday.

The global economy is careening out of control. Mexico, Thailand, South Korea, Indonesia, Russia and Brazil have fallen, and we are all asking, 'Who's next?' Collapsing currencies leave total devastation in their wake.  Skyrocketing prices, massive business closures and soaring unemployment create widespread social, economic and political havoc and result in human suffering and environmental degradation around the world.  Canada has not been spared. Speculators went after our dollar in a crushing attack from which we are only now beginning to recover. Exports plummeted and people were thrown out of work as markets and prices collapsed globally.  Canadian exports to Southeast Asia plummeted $5.7-billion in the first nine months of 1998 compared with the same period the year before. Analysts predict the worst is yet to come, as crisis begets crisis, with no end in sight.

Currency speculators, people who gain wealth without productive work, are gambling with futures -- our futures. Leading thinkers around the globe are calling for measures to control speculative capital which has become a global 'wrecking ball,' knocking over one economy after another. From prominent politicians and leading economists to the speculators themselves, the chorus for controls on international financial transactions is a growing and loud one. We, the undersigned, join in that chorus, and call on all members of Parliament to stand up in the House on March 23, 1999, and vote yes to controlling currency speculators. We urge you to vote yes to enacting a Tobin tax in concert with international partners.

With a strong mandate from the House of Commons and the people of Canada, the federal government will confidently advance the Tobin tax as one of many measures essential to reshaping global financial markets along more equitable and sustainable lines. If we fail to challenge the assumption that unfettered markets perform efficiently, in the face of overwhelming evidence to the contrary, we surrender our economy, our political sovereignty and ultimately our democracy.

We recognize that many in the financial sector will strongly oppose any actions that would impede the unrestricted flow of capital. We further recognize that continued inaction on this issue is unacceptable to any Canadian concerned with protecting and increasing jobs and social security, ensuring the stability of currencies and maintaining economic productivity both domestically and internationally.

The Tobin tax will not stop all speculative activity; in fact, it was never designed to. The tax will be avoided to a certain extent, as all taxes are.  Technical and administrative challenges to implementation exist, but are clearly outweighed by the cost of the status quo and are not insurmountable.  The Tobin tax is but one critical element of what must be a co-ordinated international strategy to restructure financial markets to protect citizens, nations and their economies from market panic.