Financial Transaction Taxes and the Social Consequences of Contemporary Financial Markets: working paper

The Financial Transaction Tax is a socially progressive proposal supported by economists and global leaders. It is by design an instrument to deal with the pressures of transnational finance activities. Unprecedented global financial dysfunction has caused widespread social pressures. Pressures on civil society have arisen by governments using taxpayer funds to bail out private institutions and to stimulate debt ridden economies. Civil society and public sector resources have been drained in an attempt to strengthen private sector accounts. Banking and financial system dysfunction has spread rapidly from the United States to Europe, and to a lesser extent, Australia. The International Monetary Fund estimates debt levels in the G7 countries to be $US30 trillion. As a direct consequence of the resultant global credit squeeze, wholesale unemployment has occurred across civil, industrial and resources sectors with millions of workers now facing unemployment, or underemployment, as a protracted recession envelopes developed global nations. For global citizens, the horizontal linkages which often integrate communities are being replaced by vertical ties binding the individual to the state. Outcomes from unregulated financial markets are severely impacting on nation states and their global civil societies. Two economies have merged in parallel throughout the developed world. The first, the real economy' has been struck a severe blow by the global crisis; the second, the shadow economy‚ÄövÑvp, has re-emerged as a dominant force with daily global currency trades of over US$4trillion, underlying burgeoning derivatives markets. Calls by leading economists Krugman and Steiglitz, for a financial transaction tax have been unheeded. A global tax on financial trades would ameliorate some of the social damage from the present financial crisis and provide a framework and rationale to prevent further disruption. Recently global leaders such as David Cameron (United Kingdom), Angela Merkel (Germany), Nicolas Sarkozy (France), and, importantly, United Kingdom Financial Services Authority head Lord Adair Turner have called for a tax on global financial transactions as a response to allay considerable pressure from civil society.