The idea of a Tobin tax is suddenly popular amongst many who have long opposed it. This interest from the magicians running the global economy could act to prevent discussion on other much needed reform.

Many people have called for a Tobin tax for years. It is seen as a neat way to raise billions of dollars for social causes and help control the instability and greed lurking in the global economy. A Tobin tax was originally conceived as a tax on the buying and selling of currencies, with the intention of reducing speculation and bringing stability to the world economy. The idea has now been revived in the form of a finance transaction tax (more than just currency exchanges as suggested by Mr Tobin). This latest incarnation intended to put a stop to a reckless banking system.

NGOs and civil society have long supported the idea, but the dominant institutions and governments of the global economy have dismissed it.  But the current economic and financial crisis is pushing the idea to the top of the agenda. Adair Turner, a central figure in the UK financial sector, has spoken in favour – see past EG4H newsletters – along with various European governments. And now UK Prime Minister Gordon Brown has also come out in support. The G20 have even asked the IMF to explore the feasibility of such a tax.

So what lies behind the interest in a Tobin tax? Specifically, why are people and institutions so long resistant to a Tobin tax now talking about it seriously?

One response is that it is quite simply a good idea. It has the potential to raise billions of dollars and would help control a finance industry that has floated free of ideas of needing to benefit wider society. There are undoubtedly many with influence in the global economy who were genuinely shocked by the failure of old ideas that led to the current economic crisis; they are perhaps sincerely prepared to reach for different ideas.

But Gordon Brown promoting it? The G20 asking the IMF to look into its feasibility? These aren’t exactly people or institutions famed for re-examining old views and past decisions with an open mind.

A second response then to what lies behind the talk of a Tobin tax is that while it would be a radical reform, it may be a politically handy ‘trick’ to cover the lack of even more radical reform.

The magicians that conjured up the current global economic system and maintained the illusion it was effective -  the IMF, the G20, Gordon Brown and others – know something must be done.  Voters are angry and increasingly suspicious of those that who on watch when the economic crisis unfolded. So some change is inevitable. And a Tobin tax is a popular idea right now. Institutions like the IMF and Gordon Brown could see implementing the Tobin tax as a useful way of escaping a deeper scrutiny of the flaws in the global economy and how it is run. A Tobin tax could be implemented and the running of banks may change slightly, yet the unequal systems of trade and subsidy are left untouched and the major institutions of the G20, the IMF, the World Bank remain non-transparent, unaccountable and undemocratic . And the unequal system that perpetuates ill-health and poverty continues.

Exploration of the Tobin tax is welcome – whoever is doing it. Yet it feels like there is a danger of watching the Magician’s left hand and being dazzled by it– the hand that has miraculously produced the Tobin tax from its sleeve and is twisting it round and round. Meanwhile we are being tricked and distracted from what the right hand is doing. Or not doing. The right hand is not juggling ideas of transparency, accountability and democracy in the global economy or the ever-growing evidence linking the effects of the global economy to health.

Andy.guise@lshtm.ac.uk