Social Policy in Ontario

Finance Minister Jim Flaherty missed no photo-op last weekend as he hosted the G7 finance ministers in Iqaluit. Watching Flaherty climb onto dog sleds, crawl into igloos and wolf down seal meat, Canadians got little sense of something else he was up to: obstructing worldwide momentum for a tax on financial speculation.

The idea of curbing financial speculation by imposing a tax on financial transactions has been attracting support from reformers ever since it was proposed in the early 1970s by Nobel Prize-winning economist James Tobin.

Tobin’s idea was ingenious: impose a tax so small (as little as 0.05 per cent) that it would have no impact on serious investors making long-term investments, but would amount to a million pinpricks in the flesh of those engaging in high-volume, quick-turnover speculative activities – like the ones that have turned financial markets into wildly gyrating, high-risk casinos.

So it’s hard not to love the Tobin tax: it could raise billions of dollars globally a year by hitting financial speculators while leaving genuine investors unharmed – like a miracle cancer drug that leaves the healthy surrounding tissue undamaged.

But if the idea of a financial transaction tax has always been a crowd-pleaser, these days it has the potential to go viral, given the extent of the public anger over reckless financial speculation in the wake of the Wall Street meltdown.

Long resisted by Wall Street, the Tobin tax – or its new broader version, the financial transaction tax, sometimes called the Robin Hood tax – is now winning approval in the corridors of power. Since last fall, the governments of Britain, France and Germany have all indicated support.

Even the U.S., which had been resisting, now seems willing to at least consider it, after former central banker Paul Volcker recently emerged as Barack Obama’s key adviser on financial reform, pushing aside Treasury Secretary Tim Geithner. Geithner is hostile to the tax; Volcker sees some merit in it.

But the Harper government opposes the tax, partly because of Harper’s anti-tax ideology, and partly on the grounds that Canada’s banks weren’t reckless like Wall Street banks.

So what? Canada is still suffering badly from the recession triggered by Wall Street’s recklessness. Clearly, if we’ve learned anything, it’s that a Wall Street crash can devastate economies around the world, including ours.

Past efforts by reformers – including a strong contingent of Canadians – led to a UN-sponsored international academic conference on the Tobin tax in Halifax in 1995. If governments had gotten on board then, we might not be in the economic mess we’re in today.

Yet with some of the world’s leading governments finally onside, Ottawa is emerging as an obstacle – just as it has in international efforts to tackle climate change.

If ever there was a moment for this sort of far-reaching financial reform, that moment is now, while Main Street still has the whiff of the Wall Street meltdown fresh in its nostrils.

This June, leaders of G20 countries will meet here in Toronto. A financial transaction tax is expected to be on the agenda.

What a tragedy that, as this rare opportunity approaches, we are saddled with the small-minded, Bay Street-beholden Harper government.

Will we be doomed again to watch the Harperites stage photo-ops of themselves, this time hugging the CN Tower and straddling cannons at Old Fort York, while the rest of the G20 struggles to rein in reckless financial markets?

< http://www.thestar.com/opinion/article/762427–mcquaig-tory-chill-freezes-out-tobin-tax >