Interesting but Unworkable; City View
Byline: John Cranage
There's nothing like a recession for resurrecting the ideas of dead economists. As this column noted recently, John Maynard Keynes (1883-1946) is very much in vogue at the moment among those looking for arguments with which, finally, they hope, they can bury any lingering belief in supply-side theories. Sadly, world bankers have been handing interventionists plenty of ammunition.
Which is why the name of James Tobin (1918-2002) has re-emerged in the financial pages of newspapers that take coverage of economics seriously. That's because an idea he first formulated in the early 1970s as the Bretton Woods fixed exchange rate came to an end.
To counter the ensuing volatility, the American Nobel prizewinner floated the notion of a tax on foreign currency transactions as a way of enabling governments to prevent their economies being wrecked by speculators.
The "Tobin tax" found little support at the time, although Francois Mitterand was apparently keen on the revenueraising potential - as any French president would be. Its proponent was, after all, nakedly seeking to "throw sand in the wheels" of the global money-making machine by making short-termism unprofitable without damaging trade.
Tobin, it must be stressed, was no foaming radical: he wanted to alleviate some of the socially-damaging aspects of big finance while maintaining its benefits as a lubricant of growth. …