Monday, 30 January 2012 INDEX

Nicolas Sarkozy's last ditch attempt to win re-election to the French presidency by promising a 0.1% share transaction tax could be a sign that the tide is turning. Those who like me believe in kondratiev waves and have long been waiting for the economic nadir to be reached, may find this encouraging. This may be the sign.

After the Second World War people in Europe and across the world rejected the rapacious capitalism of the 1930s that had caused so much human misery and destruction to the fabric of society. In Britain a Labour Government introduced the modern welfare state, nationalised the basic industries that were seen as the backbone of society at the time and Conservative and Labour governments competed with each other to see how many council houses they could build!

This social confidence petered out in the 1960s with the so called individualism of flower power and drug culture. We had rooms full of students, each expressing their individuality but from a distance looking exactly the same as each other.

In the 1970s and 1980s with Thatcherism and Reganism there was the emergence of the lunatic assertion that there is no such thing as society and the creation of a world fit for small shopkeepers and B movie leading men. Labour and Conservative parties competed with each other to see how many industries could be de-nationalised.

The nineties and the noughties were decades of excess and unprecedented collapse: boom and bust on a previously unimaginable scale.

Inequalities multiplied with the richest taking an ever greater share of the pie, while the majority in America and Europe, got poorer. This was very much the story of the 1920s and 1930s.

A financial transaction tax will not damage investment, since long term investors like Warren Buffet will scarcely be affected. If you don't make transactions you don't have to pay the tax!

What it will do is tax churn, by that I mean the relentless speculation and financial manipulation carried out by banks and other cowboy outfits. Banking should be boring.

Tax the transactions enough and all the credit default swaps and financial derivatives become transparently a mugs game. Even the people who believed they could make a killing out of trillion dollar zero sum games, come to realise the process is fundamentally flawed.

And when you think about it every other transaction is taxed. When you buy a packet of baby food, or a house or pretty much anything else there is a sales tax. The only major exemptions are some forms of gambling and the stock market.

Tax all the transactions and you strike at the heart of the giant machine that has been grinding wealth and prosperity away from the mass of the people to an unelected elite. A tax on share transactions is a first step.

Britain, of course, has much to fear from a financial transaction tax. Much of the British economy is devoted to the City and finance. A British transaction tax could cost the economy dear if the city upped stumps and moved elsewhere. But the City is hardly going to move to Paris and if Sarkozy starts a trend it may be that there are fewer and fewer bolt holes for speculators who don't want to live in the Cayman Isles or Lichenstein.

And Britain also has much to gain. While a 0.1% transaction tax won't raise much in France (a billion euros perhaps), it would raise quite a lot in Britain and might make the current Government's doomed attempt to balance the financial books, a little more plausible.
Monday, 30 January 2012 INDEX