Financial Transaction Tax – An Interview with Barbara Unmüßig
You are fighting for the enactment of the FTT, which is a sort of value-added tax (VAT) on financial dealings. What do you hope it will achieve?
The FTT will tax all classes of financial assets: shares, bonds, derivatives, bills of credit, etc. A big part of the speculative market would be unviable with this tax and disappear from the market as a result. Even a minimal rate of say 0.5 percent would generate billions for public coffers, and it would bring the instigators of the crisis to task for their deeds. The money from the FTT has to then be used for social and environmental compensation as well as other global activities.
After the last G20 summit in Toronto a global FTT looks very unlikely. How realistic or effective do you think the FTT would be in Germany and within the EU?
Yes, it looks unlikely that a global FTT will be introduced. The USA doesn’t want it and neither do the UK and the financial heavyweights in London. Developing countries like Brazil aren’t interested either. The debate in the coming months will be focused on the European Union and then on the countries in the Euro Zone. Finance Minister Schäuble has expressed a commitment to it. What is still unclear, however, is how the FTT will be set up. What effects will it have on the European and global financial markets? How high will the tax be? How will the money be collected? If the political will is there, then the answers to these difficult technical questions can be answered.
The causes of the crisis were less the short-term currency speculations (which the FTT is aimed at) than the credit-financed gambles that were taken. What additional measures would you recommend for better regulating the financial market. What options are there on the domestic level?
We need a financial sector that first and foremost serves the real economy. A much smaller banking sector would be a sufficient first step. There is also a lack of competition. The big banks are rushing into the speculative market and inventing new financial market products all the time in order to maximize profits. “Too big to fail” is a fitting phrase for this massive problem at the banks. But they are behaving irresponsibly as a result and leaving the taxpayers with job of paying their financial and social debts. An FTT will slow down the financial market. Regulation also has to improve, including serious bank supervision and controls but also the ban of certain financial products. The new agency in the USA for protecting consumers from financial products is a good approach.
Initiatives like “Attac” see the FTT as a “Robin Hood tax”, a tax against poverty. But what does money alone do to fight poverty? Development aid is constantly criticized because it so often achieves close to nothing, especially in the poorest countries.
The financial crisis laid waste to a number of development successes in poorer countries. The World Bank estimates that more than 100 million people have dropped below poverty lines as a result of the crisis and not because of their own debts. In addition, the debt-burdened public coffers would save a lot of money on money transfers to those developing countries. Most industrial countries are already waffling on their commitments of more money to fight poverty and climate change. Overcoming poverty and promoting climate-friendly growth cannot be achieved by increased aid alone. The work of the different departments needs to be synchronized, and soon: stabilization and growth, climate protection, trade, tax policy, migration, and elimination of corruption. Those things are all related.
Unfortunately we are still a long way from that. What is important is that the financial transfers to developing nations are closely analyzed. Who is the money helping? Is it really an environment- and society-friendly version of climate protection? Is it helping the poor or the elite? Not everything that limits CO2 emissions is good for the environment or society. Massive sugarcane fields for bioethanol takes away land for growing food products. Nuclear energy is not an answer to our energy and climate crisis. Super dams in the Amazon and China are displacing millions of people, often with help of aid money. More money for poor countries must be linked with clear social and ecological requirements and with reforms of the institutions. The development aid sector is drastically lacking in organization and clarity.
conducted the interview. He is a freelance author in Munich.
Translation: Kevin White
Copyright: Goethe-Institut e. V., Online-Redaktion