Globe and Mail: Global bank tax? More like a tax on customers
By Neil ReynoldsThe G20 – or rather, in this instance, the G20 minus Canada – wanted to impose a global tax on banks. Finance Minister Jim Flaherty quietly said that Canada, for its part, would do no such thing.
“Canada will not go down the path,” he said, “of excessive, arbitrary or punitive regulation of the financial sector.” Mr. Flaherty, unequivocal and unapologetic, marked an important advance in Canada’s slow, incremental return to economic maturity. It stands as Canada’s finest hour – in the last few weeks, at least.
Confronted with Canada’s dissent, the G19 caved – proving again the power of one when it holds firmly to principle. Canadian banks did not contribute to the market meltdown. Since they didn’t, they should not be treated as though they did. Let the G19 impose the tax as it wished. Without it, Canadian banks would gain competitive advantage and, all else being equal, would extend Canada’s growing reputation for fiscal integrity.
It goes without saying, of course, that the global bank tax was not exactly what its proponents said it was. The proposed G19 tax, in somewhat different guise, traces back to Nobel Prize-winning economist James Tobin’s proposed global currency tax of the 1970s. In turn, the Tobin currency tax traces back to John Maynard Keynes’ proposed Wall Street speculation tax of the 1930s.
Regardless of the differing formulas, the purpose of all such taxes is precisely what Prof. Tobin (who died in 2002) said it was – “to throw sand in the wheels of the financial markets, to end the dictate of the financial markets.”
When French President Nicolas Sarkozy grandly proclaimed “the return of the State” the other day, he was expressing the same strategic objective that motivated Louis XIV: government control of the financial markets – and the final taming of the shrewd.
For his part, Prof. Tobin described himself explicitly as “a disciple of Keynes.” But, as many contemporary Keynesians forget, Mr. Keynes himself – when it mattered – was himself a disciple of dictatorships. In his essay Keynes, the Man, U.S. libertarian economist Murray Rothbard recalls that Keynes was an enthusiastic supporter in the 1930s of Sir Oswald Mosley, the founder of British fascism, and that Keynes consistently championed the fascist economic model. Writing in 1939, in the foreword to the German edition of The General Theory of Employment, Interest and Money, his manifesto, Mr. Keynes conceded that his economic theories “adapt more easily to the conditions of a totalitarian state … than to the conditions of free competition.”
