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Feb 25 2013

Needed: A Robin Hood tax on the banks

Across Europe, a movement has started to implement what is called a Robin Hood Tax that seeks to levy a small tax on financial transactions that would produce large amounts of revenue to pay for much-needed public services. The details can be seen here.

The Robin Hood Tax is gaining support. The European Parliament in December 2012 voted 533 to 91 (with 32 abstaining) in favor of the Financial Transaction Tax, which is the same idea as the Robin Hood Tax, and then last month the European Union gave approval to 11 countries to implement it.

Although there has been some support for such an idea in the US (by people such as by Nobel prize-winning economists Paul Krugman and Joseph Stiglitz), I am surprised that there has been no organized movement (at least as far as I am aware) that has been pushing for it. The European countries are way ahead on this.

The chief European exception is the UK, whose government seems to be as servile to the banking sector as the US, providing it with the same kinds of subsidies and bailouts that we in the US are drearily accustomed to. The Conservative government there is pushing for the same kinds of austerity measures that the oligarchy loves to advocate since it does not affect them in the least but instead causes massive suffering to ordinary people, as we can see in Greece, Spain, Portugal, Italy, and the UK.

You can be sure the oligarchy in the US that, like in the UK, is dominated by the financial sector will fight this vigorously. The very name ‘Robin Hood’ is sufficient to give the US oligarchy and its media lackeys the vapors.

That excellent British character actor Bill Nighy (who is not as well known in the US as he should be) is a supporter of the Robin Hood Tax and has taken part in the following spot that explains it. He captures the shiftiness of opponents perfectly.

18 comments

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  1. 1
    Counter Apologist

    It’s almost embarrassing that I know the actor from his performances in the Underworld series.

    Still, this is an absolutely brilliant idea. Too bad there’s almost zero chance of it happening here in the US. :(

  2. 2
    daved

    It would primarily put the brakes onto so-called high-frequency trading, where very large trades are made in a very short time to capture tiny price differences. Making a cent or two per share (if that) makes no sense if you are an ordinary investor trading a couple of hundred shares, but it can be big money if you trade hundreds of thousands of shares at a crack, and do it over and over and over.

    Proponents of high-frequency trading claim it improves market liquidity. It’s not clear that this is the case, and it does seem that the algorithms they use can lead to radical market movements. There was a case last year where the market averages suddenly plunged by 10%, as I recall, then recovered, all within an hour. These high-frequency trades are all done by computer (no human is fast enough to exploit the opportunities), and it looks as though a bunch of them all decided to sell at the same time. Though I don’t know if it’s ever been explained completely. It’s not clear that the mathematical wizards who come up with thus stuff fully understand it either.

  3. 3
    Marcus Ranum

    Proponents of high-frequency trading claim it improves market liquidity.

    Opponents of high-frequency trading point out that it increases market volatility and gives an unfair advantage to the traders who have fancy computers and networks designed to automate their trading.

    Shorter: high-frequency traders like it because it’s unfair.

  4. 4
    stonyground

    Sorry, but I find this a little more convincing.

    An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
    The professor then said, “OK, we will have an experiment in this class on Obama’s plan”.. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).
    After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
    The second test average was a D! No one was happy.
    When the 3rd test rolled around, the average was an F.
    As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
    To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that. (Please pass this on) These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:
    1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
    2. What one person receives without working for, another person must work for without receiving.
    3. The government cannot give to anybody anything that the government does not first take from somebody else.
    4. You cannot multiply wealth by dividing it!
    5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

  5. 5
    tfkreference

    I know what happened next: a student who was a Marine punched the professor. And the student’s name was Albert Einstein.

    As to the OP, a Robin Hood tax could be used to bail out the banks next time.

  6. 6
    daved

    @stonyground:

    Sorry, but I find this a little more convincing.

    Such stories are usually convincing to morons who think Obama is a socialist (he’s actually a Rockefeller Republican).

  7. 7
    PatrickG

    @ stonyground:

    That’s a nice little story. ass of the internet. Too bad it’s not only fake, but suffers from a lack of understanding of reality so profound that only the most dishonest or gullible people would cite it for any reason.

    I’m betting on the latter. Speaking of which, I’ve got a bridge I’d like to sell you….

  8. 8
    PatrickG

    And woops, I messed up my comment. Supposed to be “dragged out of the ass of the internet”. :)

  9. 9
    tfkreference

    @PatrickG: I read it as epitaph for stoneyground – works that way, too.

  10. 10
    tfkreference

    Epithet, not epitaph.

  11. 11
    Kimpatsu

    What one person receives without working for, another person must work for without receiving.
    So, just like the banks, then?

  12. 12
    lochaber

    wait, weren’t folks just complaining about all the straw getting used up recently?

  13. 13
    Ravi Venkataraman

    Is that what socialism means to you – that all get the same rewards irrespective of effort or ability?

    I don’t think there is one single definition of socialism. I think the most relevant definition today would be “social democracy” which focusses on a welfare state and unemployment benefits, this guaranteeing a minimum level of quality of life for everyone. This does not preclude anyone from accumulating wealth through their efforts.

    It seems that you are using the definition of social Marxism for socialism. Obama’s policies are not at all similar to social Marxism – for his policies include helping the rich banksters, an unimaginable thing in socialism.

    By the way, an anecdote is not evidence – please give us the source of your story. I suspect it is like one of thos Urban Myths.

  14. 14
    Ravi Venkataraman

    LoL

  15. 15
    M can help you with that.

    It’s funny — you could turn the whole story around, have a professor award grades based entirely on the income of the students’ parents, and it would be far more accurate as a satire of Republicans (and Democrats, honestly…just capitalists generally, Obama included) than your fractally wrong schtick.

  16. 16
    flex

    The unreflective Stonyground opined:

    1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

    You can legislate to reduce the impact the rich have on the poor by preventing gouging, collusion, and racketeering of basic commodities like food, clothing and shelter.

    You can legislate incentives for the rich to mitigate their greed; a 90% tax bracket may not increase the revenue to the state one dime if all executives voluntarily decide to limit their pay to below that level. But that money will go somewhere, and it will go into investments in businesses; like increased R&D, better benefits, and more employees with higher wages. Just like it did the last time we had a 90% tax bracket in the 1950’s.

    2. What one person receives without working for, another person must work for without receiving.

    The work done by a person who has purchased direct access to stock exchanges and sets up a computer to make trades for them is minimal. The janitor works harder. Your statement is not logically sound; but the janitor is working without receiving, and the stock trader is receiving multiples more simply because they had the money to spend to begin with.

    3. The government cannot give to anybody anything that the government does not first take from somebody else.

    The government gives services for the money it takes. The roads you drive on, the schools your children go to, the regulations which prevent people from dumping in your backyard, the police, fire, and judicial system is paid for by the money the government taxes from you. Your social security check is made up of money taken from somebody else.

    The only difference between what the government does and your purchase of a new wading pool at Walmart is that the government uses the money for public goods which no individual would pay for. This is why taxation is necessary. We all benefit, even if we don’t all agree on the details of how it is all spent.

    4. You cannot multiply wealth by dividing it!

    What are investors in businesses doing? They are dividing their wealth to invest in something which they expect to multiply their wealth for them. The money the government spends in infrastructure, police, fire, and judicial system benefit businesses far more than a dollar spent by a business on the same functions. Having a common police force reduces costs for a business by allowing it to operate without investing in security at all, or minimal security if it desires to. This is true for all government services, even with welfare.

    From a perfectly selfish point of view, a point of view which doesn’t care at all about other people’s ability to eat, you are safer if starving mobs are not roaming the streets. Some of us think that people are better served if they have opportunities to improve available as well, and government can provide those opportunities, but even if you think the government shouldn’t subsidize education or health care, you should really be on-board with the idea of welfare because you can’t stop a staving mob alone. No matter how much ammo you have.

    5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

    The facts are against you again, very few people remain on welfare for long. Regardless of this, if you want to reduce the number people being on welfare, you must provide them with jobs. Is there a third option?

    How do you create jobs? Provide incentives for businesses to create and retain jobs rather than a stock market which rewards businesses which cut jobs as a sign of ‘strong management’. Remove the incentives which hugely distort the transfer of wealth in this country into the hands of the financial industry, which doesn’t result in job creation.

    Raise the minimum wage so that workers who will spend every dime they make have more dimes to spend; basic economics mate, raise the demand and the supply with follow. Raise the supply without raising the demand and businesses fail.

    Your five best sentences are, undeniably, filled with a complete miss-understanding of basic economics, the role of government, or the reality of society. You are clearly living in a middle-class bubble because the wealthy rarely defend themselves with such inane platitudes and the poor don’t have the time to invest in such sophomoric repetition of completely debunked stories.

    I recommend the following reading:
    George Orwell’s, Down and Out in Paris and London (Animal Farm is too complex for you.)
    Barbara Ehrenreich’s, Nickel and Dimed: On (not) getting by in America
    Jared Bernstein’s, All Togeather Now
    I can’t think of any economics texts which are simplistic enough for your comprehension level, but maybe you should start with John Allen Paulos’, Innumeracy.

  17. 17
    thisisaturingtest

    Fantastic reply, flex. I have kind of a reflexive mistrust of folks like stony who think a complexity like economics can be reduced to the simplicity of an illustrative anecdote and a few bumper-sticker platitudes. Unfortunately, the number of people, like stony, who utterly rely on platitudes is much greater than the number of folks, like you, who are willing to do the work that you did to get below the surface of them. Kudos; I’ve bookmarked this page for your reply because I think you did such a great job.

  18. 18
    richardrobinson

    Wow, guys. I was totally convinced by stonyground’s shitty parable and self-serving bullshit rather than simple concrete numbers. Down with SOSHULIZM!!eleven!

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