To Enrich the Few

The lobby groups are marshaling the great and the good to speak up against a financial transaction tax in the European Union. Eleven of the twenty seven member states think a financial transaction tax is a good thing, but the rest are either undecided or are opposed to it. Britain is opposed, fearing the tax, which would be levied on trades in bonds, currencies and shares, will damage its “banking” and financial markets.

The aim of the tax is to discourage speculative trading; if a farmer or distributor wants to insure against the future price of his crop or commodity, then a future contract is a good way to protect his position and ensure some market stability. However most of the trades in currencies, futures and the like are not undertaken for genuine commercial reasons. They are undertaken as speculation. Speculators do not like stability because they have opportunities to make money when markets are unstable, going up and down like the proverbial underwear of ladies of the night. This instability is encouraged and often manipulated to create opportunities for speculators. Banks join in the speculation, using the money of their depositors as collateral to support such speculations, and we have seen the result in the banking crisis in 2008, the effects of which still remain and affect all of our prosperity and life opportunities. The present system enables the wealthy few to make huge amounts of money and as a by-product deprives millions of their opportunity to earn a living, as wealth moves from production into gambling.

A tax on speculative transactions would help bring economies into a steady state and if speculators find gambling too expensive because of tax they will have to turn to investment, as opposed to speculation, which will produced lower returns for the gamblers but higher returns for society.

A properly devised transaction tax would be a good thing. The difficulty is in devising a tax that could not be easily avoided by people switching the jurisdiction of their trades from a place that has a transaction tax to places where there is no transaction tax. That might mean international co-operation or, failing that, a transaction tax that is not based upon the place where the transaction takes place but based upon the place where the ultimate holding company of the company that carries out the trade resides.

That might see an end to many speculative transactions, especially those conducted at fractions of a second. Perhaps the concept of a transaction tax will gain more ground after the true extent of the banking crisis is revealed; that may take a year or two but eventually it will be revealed and that will be when we understand just how impoverished the many have become to enrich the few.