April 27, 2010 –– In preparation for the upcoming June 2010 G8 meeting in Muskoka, Ontario, Canada’s Minister of International Cooperation, Bev Oda, met with other G8 development ministers in Halifax, Nova Scotia, Canada, April 26-28, 2010.. Greenpeace and other environmental groups want the G8 and G20 to take action on climate change.
On the crucial question of financing emissions reduction and adaptation in the developing world, it’s a showdown between Robin Hood and the Great Vampire Squid… and so far the Vampire Squid is winning…
The Robin Hood Tax
Coming out of the debacle of the Copenhagen climate conference last year, one of the few hopes for progress in 2010 has been that the rich developing countries will ante-up funds to stop greenhouse gas emissions and adapt to climate change impacts in the world’s poorest regions (think about the drought-ridden African Sahel; the low-lying coastal areas of Bangladesh; the South Pacific islands; and the fast-melting Canadian Arctic).
The question of course is ‘where does the money come from’? It can come from public, taxpayer sources amongst the rich industrial countries, or it could come from private more ‘innovative’ sources…
One of the most popular proposals for funding is the Financial Transaction Tax (FTT) – also known as the ‘Robin Hood Tax’, which would apply to all market transactions by financial institutions. At a rate of just 0.05% (that is fifty cents on every thousand dollars), the FTT would generate nearly $650 billion per year globally. It would NOT apply to ordinary consumer transactions like retail banking, or payments for goods and services, so it would not impact on poor people.
Environmental groups such as Greenpeace have joined forces with development groups such as Oxfam to support a Robin Hood Tax on the world’s bloated financial institutions.
Tax revenues would fund Official Development Assistance (ODA, i.e. foreign aid) as well as much-needed climate finance. There’s something in it as well for governments who want to backstop an uncertain global economy. It’s no accident that even the International Monetary Fund (IMF) and key countries in Europe (UK, France, Germany and Italy) have supported versions of an FTT.
U.S. economist James Tobin
The FTT is not something new. Set the way-back machine to Halifax in the summer of 1995, when [then] G7 leaders met and discussed a version of the Tobin Tax to try to slow down international currency speculation that had resulted in the great Mexican Peso crisis of 1994.
The volume of speculation in bond and equity markets, not to mention currency is so huge, that even a miniscule “turnover tax” can generate huge amounts of cash. US economist James Tobin came up with the idea in 1972, and suggested it was a good idea to “throw some sand in the gears of financial markets” to discourage sleazy speculative trading. Not a bad idea given recent events…
The Great Vampire Squid
In a memorable turn of phrase, last year Rolling Stone Magazine called the infamous US investment bank, Goldman Sachs, “a great vampire squid wrapped around the face of humanity”.
In 2008, the US government bailed out financial institutions to the tune of $700 billion, and despite being centrally responsible for the crisis , Goldman Sachs paid out over $20 billion to its employees. In April 2010, US regulators filed fraud charges against Goldman Sachs, essentially for creating and promoting funds designed to fail, and then betting that they would fail. Goldman Sachs makes vampire squids look like friendly little critters. Just a few days after Goldman Sachs cost investors $12 billion by accidentally failing to mention that they were being investigated for fraud, the company gave out $5.4 billion in bonuses to its employees.
Fighting climate change & the Vampire Squids
So here’s why the Robin Hood Tax is so great… it penalizes the sleazoid, bottom-feeding, scum-sucking, rip-off artists like Goldman Sachs, who spread their slimy tentacles in the “big casino”… the short-term traders, the investment managers, the currency traders, the big investment bank. By disproportionately taxing these bunko artists, the Robin Hood Tax is an instrument of economic efficiency! It reduces volatility and helps to make the market work the way it should! Even the IMF agrees! Secondly, the Robin Hood Tax can also generate revenue to fight climate change, AND support a fair expenditure on development aid (Official Development Assistance – ODA). In 1968 former Liberal Prime Minister Lester B. Pearson headed an international commission and recommended donor countries provide foreign aid equal to 0.7% of their Gross Domestic Product (GDP). Canada has never achieved that worthwhile objective, and the current level is only 0.33%. The Robin Hood Tax can save the climate, feed the world’s hungry, and put a leash on greed-head investment bankers. What’s not to like?
Lester B. Pearson
Climate finance – quit stalling! So we know that Robin Hood can supply the necessary cash for climate action, by taking from the greedy and giving to the needy.
United Nations Secretary-General Ban Ki-moon has established a High-level Advisory Group on Climate Change Financing with 19 members, chaired by U.K. Prime Minister Mr. Gordon Brown.
The group is expected to make a recommendation to the next UN climate meeting in Bonn, May 31-June 11. The final decision would then be delayed until the annual climate change conference to be held in Cancun, Mexico, November 29 – December 10, 2010.
But if the G8 countries are serious about climate change, that commitment could be made in Bonn, with a final decision in Huntsville next June.
Canada as usual is lagging behind as one of the few industrial countries that has not made any specific financial commitment. Canada’s contribution should be about 3% of the $30 billion 3-year Fast Start Financing (about $300 million per year).
right: White House aid Michael Froman; centre: Canadian sherpa Len Edwards
There have also been several high-level finance meetings in Washington. On April 19, 2010, White House aid and G8 sherpa Michael Froman and US climate negotiator Todd Stern hosted the Sixth Meeting of the Leaders' Representatives of the Major Economies Forum on Energy and Climate (MEF).
Froman apparently started discussions with the question, "What is the outcome we are all seeking in Cancun?" The answer is not clear. The MEF statement “noted the importance of moving forward promptly with “fast start financing” ($30 billion USD over three years 2010-12 was proposed in the Copenhagen Accord) …but tragically no mention was made of the Financial Transaction Tax as a way to raise the cash.
Flaherty fails on finance front
Canadian Finance Minister Minister Jim Flaherty contributed prominently to yet another do-nothing meeting. Flaherty hosted fellow MEF finance ministers at the Canadian embassy on April 22nd (ironically Earth Day). Britain, France and Germany all championed the Robin Hood Tax, but Flaherty spoke out loudly against it… and sadly he was joined by Japan and the US.
The Harper government is promoting a maternal and child health agenda at the G8 (but no funding for abortion mind you!). Maternal and child health is important, but the problem is that Harper and Flaherty are simply trying to steer the G8 and G20 away from other important issues that are more controversial – namely the Robin Hood Tax, fighting climate change and increasing foreign aid.
It’s time for action at the G8. We have not seen anything yet.
Dave Martin is a Policy Adviser for Greenpeace Canada.