Free Money

Currency across borders


French Prime Minister Lionel Jospin, a likely presidential candidate in his country's 2002 elections, has thrown his support behind a plan to tax all currency speculation transfers originating in Europe. In August, Jospin told a group of young Socialists that France should propose the tax to the European Union.

The Tobin Tax—named after Nobel Prize-winning economist James Tobin, who came up with the idea—is championed by a coalition of anti-globalization groups and trade unions. They worry that a free market for capital threatens to destabilize the world's weaker economies—a hotly controversial issue since the Asian tigers collapsed in 1997, beginning with a rush to dump Thai bahts.

"It's a relatively simple idea. There is a market for currency speculation, and in fact, this speculation contributes to the sterilization of real economies," says Pierre Tartakowsky, secretary general of the Association for the Taxation of Financial Transactions for the Aid of Citizens. "The idea was to reduce the amount of capital flight by a slight tax on-profit realized by the transactions."

Though no numbers have been formally discussed, proponents have

suggested tax rates ranging from 0.1 percent to 1 percent. Considering that more than $1.5 trillion in foreign exchange transactions take place each day, the levy would translate into hefty revenues. According to Tartakowsky, the European Parliament would spend the money on projects to assist developing countries.

The plan's many critics argue that it is difficult to distinguish between currency speculation and legitimate transfers of money from international corporations, and that it is almost impossible to implement the tax successfully unless it is levied worldwide.

At a September meeting of the European Commission of Economic and Finance ministers in Liege, Belgium, the ministers agreed to a feasibility study on the tax. But some officials were outspoken in their criticism. "I didn't understand one minister who was in favor of the Tobin Tax," Jean-Claude Juncker, Luxembourg's prime minister and finance minister, told the French daily Liberation.