Expose Sarkozy-Merkel Plan to Swindle Civil Society and Boost Big Banks

By Steve Clark

In Paris next month, French President Nicholas Sarkozy and German Chancellor Angela Merkel will urge the G-8 to embrace a “bank tax,” their version of a program that GlobalTalk (with credit to James Tobin) has advanced for many years.

While it is no surprise to GlobalTalk that the European banks and their fronting politicians are swinging toward a tax on commercial transactions, their program is a sham and should be rejected by progressive forces. It is simply another way to tax the public to funnel revenue to the big banks.

In contrast, the commercial transaction fee advocated by GlobalTalk would tax all electronic transactions – including the banking industry’s – and channel those funds to a new global problem-solving authority led by civil society and rooted in local communities worldwide. None of the revenue would go to the banks, themselves.

After nearly crashing the global economy in 2008, the big, global banks are now hounding governments into fiscal austerity. Forcing Iceland, Ireland, Greece, Portugal and Spain into near bankruptcy, these banks are also squeezing Germany and France who are the Euro’s biggest backers.

To get the banks off their backs, Sarkozy and Merkel now want to tax commercial transactions so interest, payoffs or guarantees due banks on treasury instruments, especially those of financially weakened European states, can be covered. Annually, these bills total hundreds of billions dollars.

Given the endorsement of Sarkozy and Merkel, the European banks obviously like this idea, despite its appearance as a tax on their own operations. Normally, they would never want government scrutinizing their domain, much less imposing taxes on it, but these are not normal times. After vastly overextending themselves in the credit binge of the last 40 years, they are desperate to recoup. While accepting government intrusion is a risky venture, they are used to dominating treasury policies and expect to limit their political exposure. Details of how the tax would operate have not been publicized, but the banks do not expect to pay any of the tax themselves. Rather, they expect to collect a tax on certain categories of electronic commercial transactions but not necessarily those in which they are a party. And, if somehow the banks’ own transactions are taxed, they anticipate passing this cost along to the other party via an open or hidden bank fee. While the European banks are committed to this plan, American and British banks have yet to sign on. That may come this May.

To generate positive PR for their proposal, Sarkozy and Merkel say that some of the revenues will go to aid “Third World development.” No doubt, they hope that NGOs, which have long suffered from a dearth of adequate funds, will jump at the chance to get some kind of new revenue stream, thus building momentum for the new tax. NGOs should not be so easily used and should resist the temptation.

It is outrageous that only a tiny portion of this revenue stream would go to global problem-solving, the real key to alleviating our world’s impinging social and ecological catastrophe. Though specifics were avoided, Sarkozy went so far as to suggest this development fund might amount to about $120 billion annually, an amount completely inadequate to address the world’s need. Moreover, it is less than a tenth of what a tiny but universal 0.25% transactions tax would generate. Presumably, the other ninety-plus percent would go straight to the banks.

Over the past four decades, the treasuries of western capitalist nations – especially, the U.S., Britain, Germany and France – worked hand-in-glove with the speculative explosion orchestrated by western banks. Since the financial collapse of 2008, operating on the principle that banks are “too big to fail,” these state treasuries have worked hand-in-glove to syphon funds from every possible source into bank liquidity and profit. Still, the whole system is barely hanging together. Hoarding is now the dominant program of the banks, and, unthinkingly (from the strategic perspective), they are crashing the global economy with their austerity demands on governments.

What is needed is quite the opposite, and it should not involve financial support for banks or for their pliant western treasuries. Rather, a new, global social contract needs construction, one in which a universal tax on the commercial transactions of the global economy is collected by the banking system and channeled to global problem-solving led by civil society and implemented by the global grassroots.

The next social contract must be global in scope and enshrine civil society as a full partner, much like organized labor was brought into the social democratic (New Deal) contract of the post-war era. Necessarily, banks and treasuries will continue to be key players, but the inclusion of civil society and the institutionalization of a local-global problem-solving revenue stream are critical to social and ecological survival in the epoch ahead.

The “Tobin Tax” or “Robin Hood Tax” has come a long way since it was first proposed in the 1980s by American economist James Tobin. It gained favor in the early 1990s but was lost in the speculation, greed and financial manipulation of the go-go era that followed. Now, the banks, Sarkozy and Merkel want to morph it into a program to further buttress finance capital and its mismanagement of the global economy.

Here at GlobalTalk, we are happy that the transactions tax has resurfaced, but it is critical to stress and highlight the political stakes this time around. It is time for progressive forces to coalesce in opposition to Sarkozy-Merkel’s camouflaged bank handout and demand the progressive alternative. Rather than continued reliance on the banks to pull the rest of the economy out of its doldrums, we should demand direct investment in local-global problem-solving through civil society and the global grassroots. This is the way to save the foundation of the global economy: our local communities and the environment.

It is time to make globalization work for people. Leverage Sarkozy-Merkel’s call for a transactions tax to demand a new social contract. Hold the banks accountable. Let them do their part, but don’t let them run the show. Empower civil society and the global grassroots.