The reason for the discussion on the Tobin tax in China

Nobel laureate James Tobin

Tax every major financial transaction for social equity by a fraction and allocate the funds to redistribution initiatives.

The Tobin tax is the shattered dream of the anti-globalist left, even if its history is slightly more complex.

Formulated in 1972 by James Tobin, the 1981 Nobel laureate in economics, it aimed to stabilize the financial markets of the time, through a tax on transactions in the currency markets of the time and avoid speculation.

In his last interview with the German newspaper Der Spiegel in 2001, James Tobin complained about the instrumental use of his idea and his name: “I have nothing to do with these self-styled anti-globalization revolutionaries,” he stated, “I am an economist and like most economists I am an advocate of free trade.

“I am also a supporter of the International Monetary Fund, the World Bank, the WTO, institutions against which the movement is fighting. They abuse my name. I had proposed to give the proceeds to the World Bank. But that wasn’t my goal.

“The tax on international trade was to be used to reduce fluctuations in exchange rates. The idea is quite simple: at each exchange from one currency to another, a small fee would be levied, let’s say half a percentage point of the amount.

“Thus, speculators would be discouraged, because many investors place their money in currencies very short-term. If this money is suddenly withdrawn, countries must drastically raise interest rates in order to keep the currency attractive.

“However, high interests are often disastrous for the local economy, as shown by the crises in Mexico, Southeast Asia and Russia in the 1990s. My tax would give the issuing banks in small countries some leeway and would counteract the domination of the financial markets quite well.”

Tobin thought of his tax as a means of financing “world improvement projects” but monetary income was not the focus – governments would decide where the revenues would go.

If the Tobin tax has been the subject of reflection in the West for over thirty years, the thought of the taxation of financial transactions has found new life in China.

The issue has been debated since the mid-ten years, when the governor of the Chinese central bank, Yi Gang, proposed its introduction. Subsequently the topic returned to the fore in 2020, and again in recent days, placing the raison d’etre on reasons that seem far from the reasons of their origins.

They are taxing to avoid foreign exchange speculation when much of the country’s fortune lies in exports, but also controlling markets and creating foreign exchange reserves to face any possible turbulence or be able to create it.

Nothing remains of the hope of James Tobin and many others, so that the tax could help alleviate the suffering of inequality for the left, or the more unscrupulous speculation for the Keynesian-trained globalists, if not the will to control the party communist and his bureaucrats.

With all due respect to those who look to the East like the sun of the future.

The article was originally published on the Italian language site www.altriorienti.com

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