By Martin Thomas
The 'Tobin tax', now a widespread demand in the campaigns world-wide against neo-liberalism, was proposed nearly 30 years ago by the liberal US economist James Tobin.


The tax would be to be a small percentage levy on all foreign-exchange transactions.
A tax of just 0.1%, on all deals swapping dollars for pounds, yen for deutschmarks, or any other currencies, would probably yield about $150 billion to $200 billion a year worldwide. One third of all the world's foreign-exchange business is done in London, so if the tax went to national governments the UK would get $50 billion - more than enough to restore the welfare state.
By cutting the number of speculative foreign-exchange deals, the tax would also release resources - workers, computers, offices - currently used for this high-class gambling, to the tune of maybe $75 billion a year worldwide, or $25 billion a year in Britain
All these figures are from P Arestis and M Sawyer (Cambridge Journal of Economics, 1997, 21, 753-768), and they should be upped a bit to allow for expansion and inflation since 1997.
As a 'what if' exercise, exposing the humbug which squeals about the need to make "hard choices'' to cut benefits while vast cash-stashes circulate unscathed amongst the wealthy, the Tobin proposal is excellent. As a practical political campaigning objective, it has some problems.
First: Tobin's proposal is for a worldwide tax. A national government could impose such a tax off its own bat, but then the main effect would be to shift foreign-exchange dealing from that country to somewhere else. A national Tobin tax in Britain might yield about $500 million a year, still tidy money.
It is simply not true that the problems of capitalism can be fixed up by a particular tax on one particular segment of capitalist activity. The Tobin tax demand misdirects anti-capitalist feeling into a much narrower campaign against one sector of capitalism, and one which cannot produce the results claimed for it.
However, the labour movement would get such a tax only if we were strong and tough enough to overwhelm the great City financial interests who would fight to the death against the loss of London's $100 trillion a year foreign-exchange business, most of which would move off-shore in the event of a British Tobin tax.
And when we are strong enough to wrestle the bankers to the floor, I hope and trust we'll do more than say, "hand over 0.1%, then you can get up and resume profit making with the other 99.9%".
Similarly, anti second: when labour internationalism is tight enough to force financiers and their paid-for governments to their knees world-wide - as it would need to be to get a world Tobin tax - - then the strength must be used for more drastic measures than a 0.1% tax.
The Tobin tax is both too 'minimal' to be an ultimate goal and too 'maximal' to be a suitable immediate stepping stone.
Moreover, of course if we reckon on a world Tobin tax on world finance, then we should not reckon on Britain getting a huge share and leaving the poorest countries with pennies.
If' used for practical political agitation, the Tobin proposal is misleading, because it gives the impression that misery, poverty and cuts can be mended just by sucking up a little of the soup off the plates of the rich (just 0.1%) whereas, in fact, we will need to dispossess the wealthy much more drastically.