1 December 2011
Greed is Good! Gordon Gecko’s famous declaration in the 1988 movie Wall Street has echoed through time. Greed is now in the very DNA of the global economic system at the heart of the financial crises of the past 20 years. It has become an accepted marketplace ethic shown in the obscene salaries and bonuses paid to the corporate, cultural and sporting elites while the gap between rich and poor yawns.
The rage of recent ‘Occupy Wall Street’ protests around the world is merely the latest expression of disgust at an economic system that crushes the hopes of billions while rewarding a tiny elite which controls the economic levers.
Thousands have together vented their anger at the way the super-rich have taken over democracies and exercised disproportionate power over people’s lives.
Although the Christchurch earthquakes, the Pike River coal mining disaster and the Rugby World Cup have sapped so much energy, the international economic virus is alive and well here, too. The government’s opening of the books in October forecast economic hardship for the foreseeable future. As well, much of the infrastructure which has helped the poor to manage in an unequal world is being deliberately underfunded by a government still dedicated to failed neo-liberal economic policies.
Last month’s general election was fought largely on economic management. Spin governed with neither of the major players willing to tackle the underlying causes of global financial insecurity. Both major parties are locked into a system that has shown itself unable to change to meet the huge inequalities it creates and the desperate needs of the poor and the disenfranchised.
The system is unjust in its basic tenets, dysfunctional in its processes and unequal in its treatment of people. This is why billions still die from malnutrition and treatable diseases 50 years after major countries committed to the elimination of such scourges.
What can be done?
In October the Pontifical Council for Justice and Peace produced a lengthy analysis of corporate capitalism, market values and the global economic system. In a document entitled ‘Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority’, the idea of a financial transaction tax (FTT) or Tobin Tax was among recommendations it endorsed (www.catholicnews.com/data/stories/cns/1104173.htm).
In its damning indictment of the current economic corporate model, the document says, ‘The inequalities and distortions of capitalist development are often an expression not only of economic liberalism but also of utilitarian thinking: that is, theoretical and practical approaches according to which what is useful for the individual leads to the good of the community. This saying has a core of truth, but it cannot be ignored that individual utility – even where it is legitimate – does not always favour the common good. In many cases a spirit of solidarity is called for that transcends personal utility for the good of the community.’
Vatican analysts say economists warned in the 1920s against ‘giving too much weight, in the absence of regulations and controls, to theories which have since become prevailing ideologies and practices on the international level’.
The outbreak of the recent crisis is the result of such ideologies, the Vatican paper suggests.
This is the Vatican’s call for a radical overhaul of how we conduct economic life – for a restructuring of ideology whereby the common good, rather than individual gain, becomes the primary focus. It directly confronts the spiral of inequality and deprivation amid the abundance that characterises global capitalism and promotes some serious ways of dealing with the issues. One of them is the so-called financial transaction tax (FTT) or Tobin Tax called the Robin Hood tax in Europe where it has a huge following.
The Tobin ‘Robin Hood’ Tax
In 1972 Nobel Prize-winning economist James Tobin from Yale University floated the idea of a financial transaction tax (FTT) on every payment across borders. He suggested a simple tax of up to 1 percent on all financial transactions across borders. Backers of the scheme today advocate its introduction to a full range of financial markets, rather than just currency markets, as Tobin proposed. Up to $200 billion is estimated to be generated each year. cf Tobin Tax.org
Global poverty alleviation
The money gained would go into a special fund earmarked for such agreed goals as poverty alleviation, climate control, environmental protection and disease elimination – issues which individual nations currently cannot deal with because of their size and cost.
The Vatican statement condemns ‘neo-liberal thinking’ and ‘the idolatry of the market’ and recommends ‘taxation measures on financial transactions through fair but modulated rates with charges proportionate to the complexity of the operations’.
This is the essence of Tobin’s suggestion 40 years ago. It is not promoted as a panacea for current problems – only a complete restructuring of economic life accompanied by a radical shift in goals and values could attempt that.
The document further recommended a central world bank that ‘regulates the flow and system of monetary exchanges’ to help restore ‘the primacy of the spiritual and of ethics … and, with them, the primacy of politics – which is responsible for the common good – over the economy and finance’. These instruments would ‘nourish markets and financial institutions … which are capable of responding to the needs of the common good and universal brotherhood’.
Essentially the Vatican is calling for nothing less than an overhaul of the financial sector and a reprioritising of social goals. These goals have formed the content of the Church’s social teaching for the past several decades.
The Tobin Tax has won significant and wide-ranging endorsement. Last April the European Parliament approved a report backing the Tobin Tax. It joined groups like the World Council of Churches, the AFO-CIO block of US trade unions, more than 100 NGOs including War on Want, Oxfam and the Rain Forest Action Network.
The Vatican’s anointing of the Tobin Tax is another step forward. This tax sits at the heart of the gospel commitment to provide for the poor and marginalised. It resonates in a world which deals daily in trillions of dollars, much of it in the hands of speculators, financiers and international banks whose seemingly unaccountable dealings create huge injustice.
God’s justice demands a better distribution of wealth and resources. Properly implemented, the Tobin Tax would provide a practical and realistic method to redistribute wealth.
See also J and P group visits ‘occupiers’