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Journalism of Courage
It was,veterans of economic summitry noted,the kind of idea a French minister would once have floated simply to annoy Gordon Brown. On November 7th the prime minister used the meeting of G20 finance ministers in his native Scotland to set out four options for building a sturdier financial system. The most eye-catching was the hoary idea of a global tax on financial transactions. The revenue would serve as an insurance fund in case the banks required costly government bail-outs in future. Mr Brown did not invoke the name of James Tobin,the economist who proposed a levy on currency dealings in the 1970s. A disbelieving media did that for him.
Unless a Tobin tax were implemented worldwide,trading would move out of any country that enforced it. Some in Europe are keen on the levy but Mr Brown must have known that the Americans and others would kill the idea. It was also an extraordinary reverse from a politician who not only described the idea as having big problems and very substantial drawbacks when he was chancellor of the exchequer,but also showed no enthusiasm when Lord Turner,the chairman of the Financial Services Authority FSA,raised it in August.
Domestic political positioning is the other rationale behind Mr Browns proposal. Having spent so much of his time in government cultivating the City of London,Mr Brown now fears being seen as too soft on bankers. George Osborne,the Conservatives shadow chancellor,has recently sought to capture the public mood by promising curbs on bonuses in the financial sector. Tellingly,the Tories have only quietly opposed the idea of a transactions tax and have suggested other ways of raising money for an insurance fund.
A worry is that politicians zeal to outdo each others punitive line on bankers will go too far. Financial services remain a big part of the economy. Income and corporation tax revenues from the City paid for much of the spending splurge that Mr Brown began in 2000. Neither party has a persuasive vision of which non-financial sectors will drive growth in future,though both talk modishly of green jobs and yearn nebulously for Britain to start making things again. Common sense would suggest a calmer discourse on bankers. But there arent many votes in that.
