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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Well-designed tax could raise not insignificant amounts of moneyTransactions taxes are easier to impose than collect, because investors will do everything they can to avoid paying them. They and their bankers will invent new instruments not covered in the tax, or discover loopholes, or move their trading abroad. If they cant evade the tax, they will cut back on trading. Thats not necessarily a bad thing; the aim of a transactions tax is to change behavior as much as it is to raise revenue. But achieving both goals requires that the tax be carefully designed. One thing is clear: a transactions tax must be levied on the traders, not the trade; on the transaction, not the specific security. As Campbell and Froot show, a Swedish tax on brokerage services was easily avoided by doing trades in London and New York. But the U.K.s transactions tax was levied on changes in ownership, making it very difficult for British investors to avoid. Similarly, local taxes on the New York or Pacific Stock Exchanges, which have been proposed by troublemakers on both coasts, could be very easily evaded, but a national tax on U.S. resident buyers and sellers couldnt be. A tax on stocks alone could be avoided through trading options; a tax on registered securities could be evaded with custom over-the-counter deals; a tax based on legal domicile could be avoided by moving the legal headquarters to a taxless Caribbean isle. For once, clever lawyers could do something socially useful by drafting the transactions tax to foreclose those dodges. A broad, well-designed tax could raise not insignificant amounts of money. Dean Baker, Robert Pollin, and Marc Schaberg (1994) estimated that, based on 1992 trading figures, a modest tax of 50 bp on stock sales, a 1 bp per year to maturity tax on bonds (so that a 30-year bond would be subject to a 30 bp tax), and comparable rates on derivatives could raise $60 billion a year assuming no decline in trading, or $30 billion if trading fell by half. That would still leave the costs of trading stocks well below British levels, and Britain is not known as a place where the financial sector is underdeveloped. Baker et al. admirably proposed that the proceeds of the tax be used to finance education, military-to-civilian conversion, and environmental research and repair. More modestly, James Tobin (1995) has proposed a 0.5% tax on international currency transactions, to dampen exchange market volatility. People transacting real-world business would find the tax negligible, but those trying to profit from every quiver of every exchange rate would be inconvenienced. (If 0.5% isnt a high enough rate to do the trick, then it should be whatevers required to accomplish the task.) Tobin would tax only spot market transactions, exempting derivatives, arguing that prices are set in spot markets, and derivatives prices only reflect, they dont shape, the course of spot prices though he admits that hes not fully sure of this.8 Aside from dampening volatility, Tobin also would like to restore more national discretion to economic policymaking. I am not one, said Tobin, who thinks that the markets are always imposing upon any central bank exactly the discipline it ought to have. Markets, through ignorance, perverseness, or delusion, can impose policies on countries that are inappropriate to national circumstances, and Tobin thinks his tax might reduce this pressure. Attempts to evade the tax, he argued, could be managed by having it administered by the IMF even making compliance with the tax a condition of membership. Proceeds of the tax could be used for worthwhile international purposes funding the UN, the World Bank, and the IMF, for example. The latter institutions have contributed greatly to creating the borderless world Tobin bemoans, but liberals rarely seem to have problems with contradictions like this. Tobin has also argued for a similar tax on stock trades. Tobin lodged a dissent from the tame official recommendations of the Twentieth Century Funds (1992) Task Force on Market Speculation and Corporate Governance. The reports centerpiece was a long essay by Robert Shiller (1992) on markets excessive volatility, and the dangers of taking guidance on how to run real corporations from movements in their stock prices. But having raised that interesting question, the worthies on the Funds panel decided against a transactions tax, preferring instead a revolution in the consciousness of institutional investors the sprouting of a new culture of patience and self-discipline, as incredible as that may sound to any student of the markets. Over half the worthies were from finance, law, or the Fed; the balance were mainly safe academics. Nonfinancial corporations were conspicuously absent. Tobin wrote, politely, that the Task Force was wrong to give such short shrift to sand in the wheels of the financial markets (Twentieth Century Fund 1992, p. 23). Tobin never reflects on what social purpose shareholders serve but if he were the kind to do that, the Twentieth Century Fund would never have had him on their panel. Few things, aside from the threat of direct appropriation of their property, make Wall Streeters scream more loudly than the assertion that their pursuits are pointless or malignant, and that their activities should be taxed like a noxious effluent. Listening to those screams would be another positive benefit of a transactions tax. More radical than taxation is what Harry Cleaver (1995) has called the subversion of money-as-command. If, as Marx held (and Negri emphasized), money and credit are forms of social power and debt and fiscal crises are used to intensify the force of capitalist rule then the refusal of that relation would strike sharply at the orthodox order. Cleaver argued that Keynesian welfare state policies, through their excessive generosity, reduced the capitalists power and increased that of the working class; rising wages and benefits during the Golden Age also contributed to this. Among the virtues of this line of analysis are that it politicizes apparently technical aspects of budget-making, and clarifies the importance of the New York fiscal crisis in introducing the era of capitalist counterattack still in full swing as these words are written more than 20 years later. Restoring the welfare state is one line of action a bit boring, perhaps, but essential to any more radical projects, since nothing boosts the freedom of maneuver for nonelites like a hospitable safety net. A more radical version of the subversion of money is the organized, political refusal to pay debts, a technique that was used with great success in South Africa during the final assault on apartheid. Its hard to imagine the American masses, energized with revolt, collectively scrawling Non serviam across their VISA bills, but stranger things have happened. transforming corporations Finally, since most of this book is about the securities of large private corporations, thats where this chapter should conclude. The long-term goal should be to reduce the financial and governance role of the stock market with an eye towards its eventual elimination. Corporations should be placed increasingly under a combination of worker, community, customer, supplier, and public control. Of course, its easy to say that in a reasonable-sounding sentence or two, but the actual task, technically and politically, would be difficult as hell.9 The present fashion for putting more outside directors on boards, in the name of independent supervision, rules out union representatives, who are considered insiders (Blair 1995, p. 81). It also rules out firms significant suppliers and customers. This is the opposite of Japanese governance structure, with their elaborate cross-holdings and monitoring. That Japanese structure, with its cross-holding and monitoring mechanisms, seems like a promising model for a more socialized mode of ownership of larger firms (smaller ones could be run as cooperatives). Instead of a bank at the center run on profit principles, one could easily imagine a publicly owned one, run on social principles; various socialized groups would be organized around various publicly owned banks, operating under a broad, publicly drawn macroeconomic plan. The banks would collect money from individuals and institutions with spare balances, and lend them at low rates of interest to enterprises in their constituencies. Depositors, then, would be paid interest on the basis of these earnings. Firms would be governed by boards representing all these constituencies, with the bank exercising long-term supervision. The banks themselves would be answerable to a central bank, which would provide funds and direct investment according to democratically agreed on priorities. The need for outside stockholders, who provide little or no capital and less good advice, would be eliminated. I realize that this prescription something like market socialism is at once spotty and grandiose. But the point is not to provide an elaborate blueprint for a future society, in the style of John Roemer. Off-the-shelf utopias may be useful thought experiments, but theyre of limited political use, except maybe as long-term inspiration. A future society has to emerge out of this one, on the basis of experimentation and struggle. Ive outlined the fundamental principles of where I think we should go. Consider these closing pages fragments of a first draft for a project aiming to end the rule of money, whose tyranny is sometimes a little hard to see. notes 1. Obviously, capitalist internationalization, as practiced by multinational corporations, is something to be criticized. But purely localist critiques that view cosmopolitanism itself as dangerous are tinged with xenophobia, and frequently sentimentalize pre-existing local hierarchies out of existence. . One rationale sometimes offered for the slow growth rates is that the labor force will grow more slowly over the next seven decades than it has over the past seven; this is precisely the reason offered by the Trustees and the Systems actuary, Steve Goss. The economic evidence is, however, that a slowdown in labor force growth will be offset by an increase in productivity growth (Cutler, Poterba, Sheiner, and Summers 1990). Cutler et al. also argue that an aging population is a reason for a lower savings rate rather than a higher one the exact opposite of conventional advice. 3. This is not to argue that modernization is necessarily bad and that indigenous produc tion methods should remain unchanged for all time. But those willing to profit off the trend while basking in moral superiority should take some notice of the contradiction. 4. The NACDLF began lending in 1986. Between the end of 1985 and the end of 1995, there was a net growth of 19.6 million jobs in the U.S., an average of 164,000 per month, or about 8,000 per business day. Over the same period, housing starts averaged 1.4 million a year, or 5,700 per business day. 5. For more on Ben & Jerrys, and the failings of socially responsible business in general, see the fine series of articles by Jon Entine cited in the bibliography. Entines first claim to fame was his exposure of the fraud behind the Body Shop, another darling of the tender commerce crowd. . Failed, that is, if you think the goal of development is the emergence of poor countries from poverty. If the goal of development is to extract resources, money, and labor from the worlds poor, then development has been quite successful. 7. Social scientists love to speak of the intergenerational transmission of welfare depen dency the likelihood of welfare moms having daughters who themselves become welfare moms. They are less interested in studying the intergenerational transmission of privilege, but a sharp wealth tax would go a long way to reducing that elite form of dependency. 8. Since spot and derivatives markets are now so intertwined, its hard to imagine how they could be treated so differently for tax purposes. And if the aim is to change behavior as well as raise revenue, the exemption makes no sense at all. 9. This is not to say that Hilferdings idea that seizing a few big banks in the name of the people would lead to socialism was right. Relations within enterprises (i.e., genuine worker control) and relations between enterprises (meaning planned linkages that replace market/competitive ones) must also be transformed. |
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