Paul R. Epstein explains how a a levy on currency transactions could fund the clean energy transformation and healthy development.
Cutting public sector budgets, laying off state workers, emasculating health, education and support for infrastructure has become a global phenomenon. And the results are not pretty and not productive.
So concludes the United Nations in its annual report of the UN Conference on Trade and Development released on 7 September.
As President Obama calls for new means for job creation, the forces destroying jobs are aligning across this nation and across the globe.
Greece is a victim of these policies. While bailouts are aimed to bridge the current crisis, the conditions of the bailout – so called conditionalities – are the same policies that led it – and many other nations — into this crisis.
During the 1980s and ‘90s, spirals of inflation and speculation led many nations to borrow money. In turn, they were forced by the International Financial Institutions (The World Bank, International Monetary Fund and the World Trade Organization) to slash government employees and programs, and sell off public assets as conditions for more loans – to pay back previous loans. Such neck wrenching “structural adjustment programs” – appropriately nicknamed SAPs – flowed from the “Washington Consensus” of deregulation, privatization and liberalization (of movement of money as well as goods). Economic collapses came in Asia in the late ‘90s, then in US and Europe in 2008.
Another collapse is threatening, driven by debt, deficits and potential defaults.
But more of the same medicine – lay offs, budget cuts — is not going to help nations move forward. Many nations are rapidly dismantling governments on local, national and international scales. These policies are pushing Greece, Portugal, Spain, Ireland and Italy deeper into negative growth. The same structural adjustment policies in the US – on local and national levels – are also reducing the chances of recovery. Even the US Chamber of Commerce is worried about dismantling state structures and the dwindling support for infrastructure – ports, railroads, bridges, etc.
We face more failed states at the same time as weather extremes associated with a changing climate are challenging us all.
Deregulation of finance lies at the core of the chaotic state into which we are descending. Deregulation began in the early ‘70s when President Nixon cast the Bretton Woods rules asunder. And today, finance shows little sign of self-enlightened correction.
There is an alternative to more punishment. It involves mending the disconnect between finance and production. In addition to restructuring debts, new funds are needed globally to push and pull markets towards a new form of development – and given the rapidly evolving climate instability, we must start with the global need for clean energy.
Where can such funds come from, with nations strapped by debts and deficits?
The European Commission president, Jose Manuel Barroso, has called for new global funds drawn from a levy on currency transactions (the so-called Tobin Tax – after Nobel Prize winning Yale economist (deceased) who proposed it in the early ‘70s to slow down the spirals of speculation). A Tobin Tax would denationalize the source of funds — rather than extracting it from financially-strapped nations. European Central Bank president, Jean-Claude Trichet (on the way out) argues that, to be successful, the levy would have to be adopted globally. Sarkozy and Merkel raised the Tobin Tax after their meeting several weeks ago. A group that includes Columbia economist Jeffrey Sachs has called for such a levy to meet Millennium Development Goals — calling it a Robin Hood tax. And on September 1, 2011 nurses across this nation converged on 61 congressional offices in 21 states, calling for a Wall Street tax – on stocks, bonds, derivatives, currencies, credit default swaps and futures.
The current tally of wagers on relative currency values is $4 trillion a day (up from $16 billion daily in 1971). A few pennies levied on each hundred dollars exchanged would raise several hundred billion dollars annually and consistently to be invested productively for the coming decades.
Funds are the necessary component toward building a clean economy and such a transfer from finance into production would constitute a sound investment into our common future.
There is a precedent for such a shift. When high interest rates in the late ‘80s kept money in banks, lowering rates facilitated a shift of funds into the productive sectors – benefitting finance and industry.
A small tax on finance would address the runaway train of an unregulated, undisciplined global economy by slowing down the rapid movement of money in and out of nations that can destabilize economies – trades disconnected from the real economy. Reigning in the unregulated, unraveling of the global casino economy – and generating funds for clean and healthy development — is a two-fer with enormous promise.
Greece – the birthplace of western civilization — is in a sad state, and is being forced to suffer deeply for all our sins. Now Italy, over $2 trillion in debt, is joining Greece’s ranks. And cities and states across this nation are facing the same fate.
Structural adjustments to undo public services and infrastructure, is a self-defeating strategy. It undermines all other efforts to create jobs and stimulate economies. Greece’s fate is a lesson for governments at all levels in developed and developing countries.
We need a large pool of funds to drive the clean energy transformation and healthy development – and we need to stop dismantling the apparatus that provides the support for a thriving public sector.
A levy on financial transactions must be on forefront of discussions across the globe!
– Paul R. Epstein is co-author with Dan Ferber, of “Changing Planet, Changing Health,” published this spring by the U. of California Press. Epstein is Associate Director of the Center for Health and the Global Environment at Harvard Medical School