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© Hazel Henderson, April, 2001
TAXING THE GLOBAL CASINO
Some years ago, I editorialized that the currency traders in the global casino should be assessed a small percentage on their trades. Every casino takes a percentage for the house. Why not the biggest, now that global currency trading is in excess of $1.5 trillion daily?
I helped re-ignite this debate (started in 1974 by Nobelist James Tobin and endorsed in 1989 by none other than Larry Summers – a former US Treasury Secretary) at the World Summit on Social Development (WSSD) in Copenhagen in 1995 with the report I co-edited with Inge Kaul and Harlan Cleveland, The UN: Policy and Financing Alternatives. This report covered all kinds of innovative ways to fund development by charging global corporations fees for commercial uses of our global commons: the Earth’s oceans, air, electromagnetic spectrum, satellite parking orbits in space and taxing abuses, including currency speculation and pollution.
The over 100 heads of state who attended WSSD were interviewed by hundreds of journalists who had received our report about these issues of using such fees and fines to promote sustainable human development. A few courageous ministers, including Canada’s Lloyd Axworthy, braved the ire of IMF and World Bank opposition and the tantrums of US Senate octogenarian Jesse Helms. They opined that the time had come to debate such issues. Many questioned the devastating impacts of globalization a la the “Washington Consensus” and how widening poverty gaps could be addressed by the provision of global public goods.
Many civic society organizations (CSOs) began the task of lobbying recalcitrant politicians on the need and feasibility of taxing currency speculators – whose activities accounted for 90% of these $1.5 trillion daily flows. They pointed out that even a tiny (.01%) would yield $50 billion per day – and help stabilize these turbulent markets. By 1997 CSOs were proved correct, as the “contagion” of the Asian crisis battered other currencies around the world.
The G-7 tut-tutted about the need for a “new global financial architecture,” more transparency and rules for the world’s stock markets. They blamed Asia’s “cronyism” while overlooking the same in Washington, London, New York and Frankfurt. Private banking and financial players urged governments to bail them out. Central bankers worried about the “moral hazards” of this since speculative investors might then take even bigger gambles.
The UN General Assembly weighed in with its own report on the need (popularized by Jubilee 2000 and other CSOs) to write off unrepayable debts with relief for the most heavily indebted countries. They cautioned the IMF not to demand such conditionalities as the opening of loan recipient countries’ capital accounts. Malaysia had taught the world that IMF prescriptions for opening up economies could be challenged successfully. Indeed IMF prescriptions had exacerbated the problems of Indonesia, Thailand and other Asian countries. The clear winner was China – whose non-convertible currency held its value throughout the Asia crisis – and to this day.
Fast-forward to Geneva 2000, the follow-up summit to assess progress on poverty reduction, unemployment and social exclusion started at WSSD in 1995. CSOs were still in the forefront, with much credible research on how currency- exchange taxes or fees would work.
CSOs lobbying had paid off. A majority of governments’ delegations supported further study of all the various proposals for collecting such fees on currency trades. The debate in Geneva was no longer about whether, but when such fees would be collected on currency trades – as they are routinely on many other financial transactions.
A big impetus was the G-7 and OECD report in early 2000 on money-laundering, tax evasion and other financial crimes abetted by the huge volume of global financial flows. Offshore “tax havens” from the Cayman Islands and other Caribbean resorts to Monaco, the Channel Islands and Switzerland were blacklisted. Sanctions threatened to cut them off from the computerized global transaction and settlement system, SWIFT.
This undercut the main arguments of the IMF, World Bank and other financial opponents of currency exchange taxes. If money-launderers and criminal activities could be tracked by existing financial trading systems by adding appropriate computer software – then of course, fees or taxes could be collected in the same way.
Now, the debates among Geneva 2000 CSOs were about how the taxes would be collected, whether by national governments (to fill holes caused by capital flight and tax-dodging) or by central banks (to beef up their currency stabilization funds to ward off speculators). The issue was how to disburse the funds that such currency exchange taxes would make available for development.
In November 2000, the UN held a historic meeting with CSOs under the auspices of its Financing for Development initiative. The innovative proposals of CSOs over the years since 1995 were summarized, including an international currency exchange tax; ending the IMF’s push to force developing countries to open their capital markets; regulation of capital markets and hedge funds; ending attempts to revive the OECD’s investor-favoring Multilateral Agreement on Investment (MAI) which CSOs defeated in 1999); burden-sharing by commercial banks in any bail-outs of investors; broadening the debt relief under HIPIC and more debt-cancellation – with the option of groups of such countries using bankruptcy mechanisms similar to Chapter 9 of the US Bankruptcy code (which allows bankrupt municipalities to retain all social services) and many other sensible reforms.
The next round of this epic struggle of CSOs to reform the global casino will take place in the upcoming Prep Com for the Financing for Development summit, New York, April 30-May 7, 2001. A full-blown UN summit in 2002 is expected since no government, acting alone, has the courage to face down the might of global finance – whose game is to divide and conquer.
Market players still threaten any government trying to protect its currency from speculators and its people from exploitation. The “punishment” is taking their business elsewhere or the “discipline” of the “free market.” It’s time to stop these corporate and financial power games – and cooperatively design that new global financial architecture – too long piously advocated by finance ministers. The UN’s Financing for Development initiative provides the opportunity to create an equitable global financial system geared to serve all people within a transparent framework of international law. See you in 2002!
HAZEL HENDERSON, author, futurist and consultant on sustainable development. Her latest book is Beyond Globalization: Shaping a Sustainable Global Economy. www.hazelhenderson.com