Not robbing the rich or helping the poor
If a ‘Robin Hood’ tax on financial speculation is so radical, why are world leaders paying lip service to it?
The premise behind the new campaign for a ‘Robin Hood tax’ on financial transactions could not be more simple: take from the rich bankers and give to the poor. That presumably is why the organisers of the campaign chose to name their proposed new tax after Britain’s favourite folk hero. But a more appropriate name would be to call it a black magic tax: wilfully deceiving the public about its character and aims.
According to the organisers of the campaign, a tax of just 0.05 per cent on speculative banking transactions could raise hundreds of billions of pounds every year. They argue that the revenue from such a tax could be used to fight global poverty, tackle climate change and stop cuts in crucial public services in Britain. Excruciatingly rich bankers would give a little and the most needy section of the public would gain a huge amount. The idea is conveyed in a short promotional video featuring Bill Nighy, a veteran British actor, who plays a bumbling banker who in less than three minutes concedes the overwhelming logic of the campaign’s argument (see the video below). Organisations backing the campaign include ActionAid, Christian Aid, Comic Relief, Oxfam, RSPB, the Salvation Army and the Trades Union Congress (TUC).
It should not take long for anyone familiar with the Robin Hood legend to start questioning the picture the campaign paints of itself. Robin Hood was an outlaw who was locked in an armed conflict with the authorities in the shape of the evil Sheriff of Nottingham, who in turn had the backing of Prince John, the ruler of England. Yet Gordon Brown, Britain’s present ruler, has said a tax on financial transactions is worth investigating, as has Adair Turner, the powerful chair of Britain’s main financial watchdog, the Financial Services Authority (FSA).
It has also received support from other influential figures such as the German chancellor, Angela Merkel, the French president, Nicolas Sarkozy, and President Clinton’s former economic adviser, Joseph Stiglitz. Far from being in conflict with the authorities, the Robin Hood tax campaign is actively colluding with them. Indeed, little has changed in that respect since I wrote an article on the idea of taxing big financial transactions back in 2002.
It would more accurately be called a black magic tax because it is using a classic magician’s trick to deceive the public: misdirection. For example, a conjurer might wave one hand around to divert an audience’s attention from what he is doing with his other. In the case of the Robin Hood tax, it is helping to reinforce the legitimacy of the ruling authorities while at the same time diverting attention from the real needs of the world’s poor. To understand how this works, let’s look at three flaws of the proposed tax:
It is about posturing rather than politics. It is unlikely the tax will ever be implemented. The idea of a tax on financial transactions, known as a Tobin tax after the originator of the idea, goes back to 1972. It has long enjoyed support from many of the world’s leaders. Gordon Brown, then Britain’s chancellor, gave a speech which was sympathetic to the idea as far back as 2001, in the wake of the stock market collapse the previous year. Originally the idea was for the tax to curb financial speculation, but the addition of a redistributive element, using the proceeds to help the poorest of the poor, goes back at least a decade.
Rather than being a practical measure to help the poor it should be seen more as a symbol of the supposed moral worthiness of the campaign’s followers. So the Robin Hood tax website has a green mask to download and use in a gesture similar to the white wristband of the Make Poverty History campaign or the red nose of Comic Relief. Indeed Richard Curtis, the film director who founded Comic Relief and Make Poverty History, is also a driving force behind the Robin Hood tax campaign. The campaign’s followers can passively hope for action while their national rulers make worthy speeches about the possible usefulness of such a tax.
It is about scapegoating bankers for the world’s economic problems. The campaign for a Robin Hood tax reinforces the idea that financial institutions, through their speculation, are singularly to blame for the recent economic crisis. Clearly, such an idea in turn elevates ruling politicians and state bureaucrats, because it helps to absolve them of responsibility for the downturn. From a politician’s perspective, the campaign against bankers has proved remarkably successful as it has diverted attention from the government’s considerable economic failings.
The authorities played a key role in creating the conditions in which the crisis emerged. They kept public spending high and interest rates relatively low in a desperate attempt to shore up a sluggish economy in the run-up to the crisis. In addition, the British authorities trumpeted the City of London’s role while failing to encourage substantial investment in the real economy. As recently as June 2007, Gordon Brown congratulated bankers for creating ‘an era that history will record as the beginning of a new golden age for the City of London’. The following year, the financial system was on the verge of collapse.
Even today there is little discussion in Britain about how to generate real growth. Instead the focus is on fiscal policy: exactly how large cuts in spending should be and when they should be made. Scapegoating bankers for economic failures relieves the government of pressure to attempt to restore some dynamism to the economy.
It is not about meeting the needs of the world’s poor. What the billions of people who live in the world’s poor countries need above all else is economic growth. The cumulative effect of such growth should be an economic transformation: turning what are now poor countries into rich ones. That way, the whole of the world’s population can have what most of those in the West take for granted, including access to air travel, cars, electricity, modern medicine and abundant consumer goods.
Yet none of the organisations supporting the Robin Hood campaign would endorse such a perspective. At best they support minimal growth in the poor countries to help alleviate the worst excesses of poverty. Some, such as the New Economics Foundation, are openly hostile to growth.
The real beneficiaries of the Robin Hood campaign are the authorities and the organisations supporting the campaign. For politicians and bureaucrats it is a convenient way to blame speculators, rather than themselves, for the economic crisis. It can also provide a focus to win support from the campaign’s followers.
No doubt the organisations supporting the campaign benefit from having a popular focus for their activities. In addition, if a transactions tax was ever introduced they would probably play a role in distributing the money. A substantial proportion of the finance disbursed by Britain’s Department for International Development is already channelled through such organisations as ActionAid, Oxfam and the TUC. (For example, see Funding for not-for-profit organisations and Partnership Programme Arrangements on the UK Department for International Development website.)
The Robin Hood tax campaign has nothing to do with meeting the needs of the world’s poor. It is a cynical trick designed to divert attention from the real problems facing humanity.
Daniel Ben-Ami is a journalist and author based in London. Visit his website here. His new book, Ferraris For All: In Defence of Economic Progress, will be published by Policy Press in June.
The Robin Hood tax campaign video
Previously on spiked
Mick Hume called time on banker bashing. Daniel Ben-Ami wrote that a charity Amex card made him see RED. David Chandler argued that development groups wanted Africans to adapt to poverty. Dolan Cummings reviewed The Girl in the Café. Brendan O’Neill welcomed us to the People’s Republic of Bono. Steve Daley wondered who’s pulling Africa’s pursestrings?. Or read more at spiked issue Economy.
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