One is something we have now heard clearly from many sources ”“ a plea endorsed by the Vickers Commission that routine banking business should be clearly separated from speculative transactions. The rolling-up of individual and small-scale savings into high-risk and high-return adventures in the virtual economy is one of the more obvious danger areas. Early government action in this area is needed. A second plea is to recapitalise banks with public money. Banks should be obliged in return to help reinvigorate the real economy.
The third suggestion is probably the most far-reaching. The Vatican statement strongly backs the proposal of a Financial Transaction Tax ”“ a “Tobin Tax” or, popularly, a “Robin Hood Tax” in the form in which it has been talked about most recently. This means a comparatively small rate of tax (0.05 per cent) being levied on share, bond, and currency transactions and their derivatives, with the resulting funds being designated for investment in the “real” economy, domestically and internationally. The modest rate of taxation conceals the high levels of return that could be expected (some $410bn globally on one estimate)….
Read it all. [Please note that the FT subscriber only link is there.]
Another note: Alert blog readers may recall that Rowan Williams’ arguments here are not new but they have been stated a number of times before.
A further update: I see Ralph Nader is in the Wall Street Journal making a similar argument for the Financial Transaction Tax.
“Investment” in the “real economy” to be determined, that is, by government planners. Look at the current bankruptcies of US “green” government investments to see how well that’s working.
I pretty much stand by what I said earlier when Williams banged on about the Tobin [Robin Hood] tax:
[blockquote]One of the reasons why London became a major financial center is that Mrs Thatcher got rid of the 1/2 percent Stamp Duty on such transactions and in doing so encouraged international banks to come to London, bringing their business, employing our people and making the UK the world’s fourth largest economy at that time.
Not content with wrecking the institutions of the Anglican Communion, with this pontification, The Druid makes his contribution to the decline of the viability of London as a financial center.
Shut up Rowan, or get a job and see what real people have to deal with. You are a menace.[/blockquote]
The problems in this instance are:
1. The protesters have not been asking for a Robin Hood tax – insofoar as they have a coherent set of demands, they center around the pain people are suffering at the moment with loss of jobs, support for educational fees, high prices particularly of basic food utilities and transport, and the perceived excess and greed of bankers’ and company directors bonuses. There are of course some extreme Trotskyists such as these events always attract, but that does not seem to be the agenda most of the young and educated people who have turned up to protest are advocating, and hardly something the Church should be supporting.
2. The Church, particularly in the City of London, is there to serve ALL the people, including the vast majority who work in the financial services, insurance and banking areas which produce the salaries, not just of a few at the top who receive high remuneration, but the vast majority of those who work in London are dependent on this sector which produces the wealth that keeps the economy of the South East going. We don’t mine, manufacture, or engineer much in the South-East, but we do have one of the world’s three financial centers and it is that on which the prosperity of this country depends, it is what took us out of the doldrums of the 70’s back to becoming a confident prosperous country, and financed the rebuilding of our infrastructure. It is the London financial center which employs, resources, pays tax, and in addition supports the church in the City of London, including the restoration of St Paul’s which has just been completed, moreover the church is engaged quietly in many initiatives in the City, evangelising, witnessing and discipling in the financial sector. The Church is right in there witnessing at its heart, something you would not know from what the Archbishop writes.
3. Notwithstanding our success, we are losing business to other financial centers already: from a situation 10 years ago when our taxes were among the lowest, our employment costs competitive, our legal system supportive, and we were the fourth largest economy in the world, a decade of Blair and Brown have brought us close to our knees financially, lumbered with debt, uncompetitive in taxes, employment costs, and living costs; burdened with regulation and an unfriendly government environment, we have plunged down all the measures including losing our position as an important economy. This is the background against which the intervention of the Archbishop has to be seen.
4. Now to the Archbishop’s proposal, the Tobin Tax. The basic problem with this is that it makes financial transactions less competitive, without actually dealing with issues of greed or the economy which the protesters are complaining about. Moreover, with the financial services sector consisting of computers and software, and a mobile workforce, unless there is a worldwide tax at the same rate, something the Far East has already said it will never support, the effect of the West, or worse, Europe bringing in one is that the European business WILL leave London. The only thing keeping financial business in London is its convenience for Europe and its cost structure, and some buildings, most of which it rents rather than owns and which it could move from virtually over night. The fact that the Vatican or other European nations might come on board with a Tobin Tax is neither here nor there – the financial center in Europe is not in France, Germany, Vatican City or Milan, much less Athens, it is in Britain. All those pontificating about regulating and taxing financial services are doing so about the financial center they do not have – they are indeed seeking to regulate for Britain, and it is Britain which will pay the cost of their easily spoken principles. If they wreck the financial viability of financial transactions in Europe, it is virtually London alone and the British economy they will wreck, virtually the only one which is taking seriously trying to get on top of the current economic problems. It is not just me saying this – see here and here.
5. What was called for, was a Christian engagement with the issues raised by the Protesters, a listening ear, and witness to the Gospel, and an exploration with the Protesters of the answers it may provide them – in short an opportunity to talk about our faith and the answers it provides to a better alternative for a caring, and redeemed community. Not what has happened at all – Giles Fraser who got the church into this mess has been put back in as a liason with protesters, and as usual without listening, the Archbishop has jumped on the bandwagon, not listening to anybody, except himself, and taken it as an opportunity for giving his tired old socialist views, supposedly speaking for the rest of us in the Church.
Instead of engaging with an opportunity to speak to a new generation of the unchurched with the redeeming message of Jesus Christ, the church has wheeled out a daft old Marxist and put him up outside St Paul’s as a scarecrow to scare off the bankers from London.
Penny for the guy?
Thank you for those excellent considerations, Pagaentmaster.
Perhaps a cautionary tale is in order. The Archbishop says [based on what, his reflection does not give any support]:
[blockquote]The objections made by some who claim it would mean a substantial drop in employment and in the economy generally seem to rest on exaggerated and sharply challenged projections[/blockquote]
New York used to be a major center for shipping and shipowners; in particular it was a favoured location for many of the major Greek shipowners where they headquartered their operations, employing many people. In the early 1960’s John F Kennedy, proposed swingeing taxes on the foreign earnings of these foreign shipowners. The Greek Shipowners advised the US government, that if they brought these taxes in, they would move their residence and operations. The Kennedy administration ignored them, and brought the new taxes in, and the foreign shipowners left; the Greeks themselves came to London….and never returned. Save for a few domestic operators New York no longer has a shipping industry to speak of.
This is what will happen to the London Financial and Banking market if the UK government follows this foolish Archbishop’s advice. What is already happening as a trickle, will become a flood, and the UK economy, along with the ordinary families of the South East already on a knife-edge will pay the price.
If we lose our financial sector, it won’t come back – it is the Christian thing to do to encourage it, and the employment and tax income it brings to stay.
The archbishop outlines some reasonable proposals – ones that have been suggested by economists. And yes, the financial service industry might find it a bit inconvenient.
What has been the case is that the financial industry successfully helped change other economies. It helped to push out manufacturing in both the US and in the UK, jobs that could provide middle class wages, by making it easy to move capital. It helped ensure one of the reasons so many protest: as we’ve deregulated the banking industry wages have stagnated for the last 30 years, and individuals have purchased the goods more or less on credit.
If financiers were Christian, I suppose they would be a bit more generous. The scriptures have plenty to say about what Christ expects from the wealthy, but I don’t see many of them behaving in such a way. Certainly the scriptures question the moral worth, or at least the moral intuitions, of those being in such an industry in some sense (Ezekiel 18:7-9, Exodus 22:25-27). I would say that there is room for financiers who do so on the principle that providing resources for the people who actually make things is worthy enterprise. But over the last 30 years, that has not been the only purpose of the financial markets. The evidence is that there are plenty of people in the financial industry who merely lined their own pockets easily, swiftly, and don’t have to worry about any penalties for failing, for putting the world’s economy at risk.
Of course, there is, possibly an alternative. Let the market rule and Greece default. They can go to a cash economy and bankruptcy court.
#5 Hello John Wilkins
Do you have some cogent evidence to support your assertions when you say the financial industry:
1. helped to push out manufacturing in both the US and in the UK, jobs that could provide middle class wages, by making it easy to move capital; and
2. It helped ensure one of the reasons so many protest: as we’ve deregulated the banking industry wages have stagnated for the last 30 year.
What do they have to do with the issue of the Archbishop advocating for a Tobin Tax, assuming you were addressing that issue?
More on #5 John Wilkins
[blockquote]Of course, there is, possibly an alternative. Let the market rule and Greece default. They can go to a cash economy and bankruptcy court.[/blockquote]
I think there are a number of reasons why Euroland is making so much effort to make sure this does not happen:
1. For a sovereign member of Euroland to default is the unimaginable scenario which means that default of Italy, Spain, Ireland or perhaps even the UK becomes imaginable – indeed any of the countries with large public debt – when it becomes imaginable fear causes borrowing costs for those countries rise [Italy is already paying over 6%] and the fear becomes self-fulfilling.
2. It is the end of the Euro dream of a United States of Europe which France and Germany are so invested in – they will do anything they can to avoid this.
3. Default is no easy option for Greece – yes they can go back to the Drachma, but no one will lend to Greece – it will be in the position Argentina ended up in – runs on the banks, middle class poverty, economic stagnation and political instability.
4. Banks which have financed Greek debt, in particular French banks will be at risk and that could have unimaginable effects on other countries.
5. Greece is strategic as an Eastern bastion of NATO – one has to remember that it was subject after WWII to a vicious antagonism between monarchists and communists close to civil war, indeed the reason for the 1960’s Colonels’ Coup and the military and oppressive regime that is still within living memory. Under the surface of Greece, anarchist, communist and socialist strains are awaiting their opportunity and widespread protest if not civil war is certainly immaginable.
6. Greece is a regional power, and there will be knock on effects for the region if the banking and trading power defaults and this will affect the loans and trading relationships from Greece for the unstable and war-torn Balkan countries. In effect the Balkan question which is a long standing although currently quiet issue remains.
I suspect that is why Europe, and Britain for that matter are so very concerned.
In many ways this is a much greater danger than the Archbishop’s inopportune proposals to wreck London’s financial position.
Some more reaction to the Archbishop’s ill considered and ignorant Tobin Tax proposal:
Dear Archbish – do shut up – Jeremy Warner – Telegraph
City rejects Archbishop’s call for ‘Robin Hood tax’ – Independent
The archbishop gets his bank tax in a twist – The Economist
Did Robin Hood plunder the poor? – Financial Times letter