Are you looking at my FTT?

This is the substance of the reply I’ve posted on Duncan Green’s blog, From Poverty to Power:

Let’s start with my original post. I didn’t actually say that an increase in taxes on wealth would be “more progressive and transparent” than an FTT. I said that it keyed more directly into a deeper logic. You can dismiss this as an “academic exercise” if you want to; I see the notion that there is a link between historical carbon emissions, the contemporary distribution of wealth and the need to finance adaptation in poor countries not as a “first best solution” to be pronounced in “lofty tones”, but rather as an important broad principle, from which could be developed some powerful political narratives. Historical responsibility is almost always framed in terms of nations, provoking a defensive response, and surely a new perspective that recognises and uses that fact that not everyone in the North has done equally well out of the history of energy intensive capitalist growth could be useful.

Paying for adaptation is going to be a long term issue, and having a campaign that (rightfully) grabs an opportunity (although more on that below) should not be a reason for banning an exploration of wider ideas. OK, so I used the Robin Hood Tax launch as a peg to hang my post on – but, hey, that’s blogging. If a campaign supported by everyone from Bill Nighy to Angela Merkel can be so threatened by some thinking around the issues from an ultimately sympathetic viewpoint, it’s not very robust is it?

Now let’s talk about the politics. You say you see a window for the FTT which isn’t there for a more direct tax on the wealthy. You could be right, but I think there are good counter-arguments. First, in the wake of the financial crisis, people hate bankers, not financial transactions. They want the bankers’ wealth taken away from them. They want financial markets regulated.

Second, and within that mood, increases in taxes on wealth are a real proposition. Despite his embattled political position, Obama is putting forward his proposal to reverse the Bush tax cuts for the wealthy in his Budget.

On the other side of the equation, the incidence issue of a FTT is not just a nerdy debating point for pointy-fingered people, but a potential political weakness. Its opponents could try to make much of the likelihood that the tax will be passed through to ordinary people. Don’t forget that, in addition to the speculators and the banks, a huge range of major companies rely on futures and options to hedge currency risk in international business and trade transactions – the hedgies will pass the tax on to them, and they’ll pass it on to us. Think what the Daily Mail could do with that if it wanted to.

Lastly, however the money is raised, I also think you shouldn’t underestimate the importance of the politics of spending it – the last bone picked with Owen Barder in your post. Last September, we polled over 3,000 people in marginal constituencies to test views on various climate-related policies. Sadly, financial transfers to fund adaptation and mitigation in developing countries had little strong support, which also appeared vulnerable to arguments that corruption will prevent money from reaching the people it should. As you say, Oxfam and others continue to work on the “quality of aid” (as you put it), but I wouldn’t see that as something you should do separately from making the case for a FTT.

I’d like to think that being in favour of an FTT and wanting to develop a wider narrative and additional policy ideas weren’t mutually exclusive. For the record I am happy to get on board the FTT campaign bus. I just don’t want to leave my brain behind.

To avoid a brawl breaking out, we’re drawing a line under this issue now, and moving on to other themes.



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4 responses to “Are you looking at my FTT?

  1. Duncan Green

    Wonderful video clip Matthew – IPPR should definitely adopt South Korean debating formats from now on. On your post, I stand corrected. Opportunism leavened by critical debate sounds about right. And yes, the incidence question needs more research, (we’re on the case). Our current position (see the Robin Hood Tax website is

    ‘The tax will apply only to wholesale, not retail financial transactions. So you won’t pay it when you change money on holiday, or nip into your local bank or building society. Since it is a very small tax on each transaction, it will mainly raise revenue from so-called ‘high frequency’ trading rather than long term investments. These transactions are some of the most short term and volatile, particularly automated trades generated by computerised algorithms. Many economists believe these are exactly the kind of trades that ought to be targeted – the ones described by Lord Turner as “socially useless”.

    But the tax will increase the costs of trading for all financial institutions to some extent. This will have a number of effects. Firstly, the profits of some financial institutions will fall. This is most likely in the wholesale banking sector, but the good news there is that changes in the cost of trading tend not to be passed on because the market is highly competitive. Falling profits will mean some job losses, mainly among highly waged currency traders and the like, and some lower dividends for the shareholders of those banks. The costs of the tax in the equities market would fall on the big managed funds who buy and sell shares. Both of these will have some knock-on effects on the wider economy, including pension funds, but the impact is likely to be small relative to the size of the swings in the various markets in which funds invest, and overall, the impact of the tax will be highly progressive – i.e. the burden will largely fall on those most able to pay.’

    and yes, the issue of whether the money would ever escape the clutches of northern treasuries to be spent in poor countries is the one that nags away at me.

  2. Just want to say that I have found this debate very interesting. More precisely, I was simply glad to see it taken up. Seems like you guys are putting real thought into the core of the problem — the progressive taxation of wealth in the context of the climate emergency. Kudos.
    I do with you guys signed you posts. Reading the lovely lines…

    “Historical responsibility is almost always framed in terms of nations, provoking a defensive response, and surely a new perspective that recognises and uses that fact that not everyone in the North has done equally well out of the history of energy intensive capitalist growth could be useful.”

    … makes me wish I could know who wrote them!
    Cheers, Tom Athanasiou

  3. hi i really enjoyed your post and i will be sure to read through the rest of your blog… I really appreciate the way in which you look at this subject, looking at this in a new light as they say.. bookmarked!

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