Pit Schultz on Thu, 27 Nov 1997 09:49:16 +0100 (MET)

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<nettime> global taxes, interview with James Tobin


James Tobin's answers

You proposed the Tobin Tax in 1978. Today, in a period of international
speculations and crisis, is it still valid and applicable?

That was an international tax on foreign exchange transactions, usually
called Tobin tax because I had suggested it in the seventies. It still might
be introduced, but who is against it?. The whole financial industry, I
think, including central bankers almost everywhere. Most economists either
pay no attention to it, or are not in favour of it, although that's
beginning to change, and it's beginning to be taken seriously by my own
colleagues, because of some recent problems like Mexico. And the European
banking system itself convinced quite a few people that it's not a good idea
to have the monetary system of the world depend upon the easy making of
transcurrency transactions by people who have a lot of money to move around.
Maybe the tax will happen. A new constituency in favour of it are people who
see in it a source of revenue for good international purposes. The UN and
the World Bank and other international agencies are wondering where the
funds are going to come from to finance their expanded activities, like
peace-keeping and so on. They see maybe some of them could come from this
kind of international tax.

But it's an uphill fight to get interested in this tax in places where
decisions might be made.

[Image] As a monetary systems expert, do you believe a single foreign
currency is possible, and when?

A world currency? I don't even see the possibility of a single currency for
the European Union in this century. If it were actually done, I don't think
it would work very well. You have to have a lot of harmony of institutions,
and more homogeneity in regard to living standards, in economies among the
regions of a community for which there is to be a single currency than you
even have in Europe. I could imagine a single currency for the original core
of the Common Market: Germany, France, The Low Countries but not for the
whole of Europe very soon. Certainly for the world as a whole it will need a
long long time. I would not expect to see that in my lifetime, or in my
children's lifetime for that matter.

It's a good idea. We have a single currency in the United States; it would
probably be better for Canada if they also had the same currency as the US
does. But we have that because we have a homogeneity of political and social
institutions, the same social security system, same pension system, easy
mobility of workers not just legally but culturally, socially, across
different regions, some responsibility in the central government for
relieving the economic distress of particular regions from time to time so
that we don't really need to have the possibility of devaluing the
California currency when California has a weak economy. But I don't think
that you want to give that up among the constituent countries even of
Europe, much less do you want to give it up among the different economies of
the world so soon.

It is often easier to make adjustments by changing exchanges rates rather
than by making economies agree to the exchange rates they already have.

[Image] Information society made global markets possible for finance, and
for industry soon. Collective imagination associates globalization with
being invaded by big corporations. What about the opportunities for niche
markets, for small and medium conpanies to launch their own new products?
Are they doomed?

By niche markets, you probably mean particular opportunities to step into
gaps of the market. I don't believe the big companies are covering the world
market. After all the companies that are now big were not there 20 years
ago. Microsoft is the biggest company in computer software, and it's new,
and many others are new too in that industry. Take the composition of the
Fortune 500; if you look at that list of the biggest companies in the US and
if you compare it with what it was 20 years ago, they aren't the same. The
big companies of those days have broken up, or they have been absorbed or
merged. I don't think the possibilities of finding a niche among the modern
corporations are over, by any means, but I don't pretend to be an expert on
specifics of this question.

[Image] You said you dislike the idea of direct democracy. Perhaps at the
national level that is true, but isn't the local direct democracy very
important, allowing scientists and experts to get involved in the issues
other citizens are concerned about?

I agree perfectly with this, in scientists, professional people,
businessmen, physicians, professors, etc. being involved in trying to solve
the problems of the localities where they live. It is particularly true for
people who live in American cities which are full of all the pathologies of
urban life to a disgusting degree. That participation is very different from
the kind of direct democracy that I was referring to, which consists of
casual votes on ill-defined questions, expecting the governing Council of
the city or the Congress of the country, or the Prime Minister or the
President to do what a majority in such a quick and ill-informed poll leads
to. There is a nostalgia in our country that goes back to New England
villages in which one hundred, two or three hundred people lived and which
had government by town meetings. That was direct democracy. Everybody would
come to the local parish hall and vote on the budget and so on, and many
times that happens still in some New England villages. But once you get
beyond a population of about 500 hundred, it doesn't work.

It is often said that market economy is successful because it works
somehow like natural processes - natural selection in biology, thermodynamic
equilibrium in chemistry and physics, for instance. Will information
technology make macroeconomics more like a science, more predictable?

I think computers are a great assistance to science and they are to social
sciences and economics also, largely because they make possible the use and
analysis of large data-sets, census of manufacturers, historical data which
were to big to be exploited for knowledge by the old techniques of
computation, etc. I do believe we can improve social sciences and economic
science, with an improvement in predictability, not only in the sense of
forecasting but in the sense of saying what will happen if you try to do
this or that to the system by government policy. I have some hope for that
result, so maybe I agree with you on that. But it is not easy to do, not
even with the help of these new research techniques because the idea of
evolution into an equilibrium system is an abstraction which may help us
understand sometimes, but it's not easy to think that it is the full story
of the way social systems work.


James Tobin

Nobel Laureate in Economics, 1981

James Tobin was born in Champaign, Illinois in 1918. In 1939 he graduated
summa cum laude in Economics from Harvard University, studying with
economists such as Wassily Leontief and Joseph Schumpeter.

In 1941 he moved to Washington, D.C. to work in a federal agency. Following
his military service, he returned to Harvard, where he received his Ph.D. in
1947 and for the subsequent three years did research as a Junior Fellow of
the Society of Fellows.

In 1950 he joined Yale University, where he taught until 1988, occupying a
variety of posts including director of the Cowles Foundation and his current
position as Professor of Economics Emeritus. He interrupted his academic
work only in 1961-1962 to serve as a member of President Kennedy's Council
of Economic Advisors in Washington.

An advocate of Keynesian economics, his professional interests include
macroeconomics, econometrics, monetary theory and policy, fiscal policy and
public finance, consumption and saving, unemployment and inflation.

In 1981 he was awarded the Nobel Prize in Economics for his work, especially
his development of a model for the way in which monetary variables are
determined, demonstrating the dependence of the demand for money on the
interest rate.

Among the many positions he has held, Tobin has been President of the
Econometric Society, the American Economic Association and the Eastern
Economics Association and has been a member of the National Academy of
Sciences since 1972. He has written or edited 13 books and more than 400
articles for both professional readers and the general public.


more links on global taxes:
http://www.globalpolicy.org/finance/alternat/  (especially /analysis.htm )
see also textes on 'digital economy' at http://www.telepolis.de

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