Category: Thinking

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Thinking

Is the Tobin tax an idea whose time has come and gone? Discourse, power and politics in global economic governance

Update: This story from the Guido Fawkes politics blog suggests the regulatory capture has a more direct route: a promise to veto the tax from the UK Prime Minister to an exchange boss who stood to lose from the FTT. Over dinner, naturally. 31-March

Further to my post on ‘Who’s afraid of the financial transactions tax?’, here’s my full essay on the risks of regulatory capture by private interests in this area.

 (the bank lobby)

Introduction

This is an essay about the failure of an idea in the face of private power. It begins with a brief history of the idea of a financial transactions tax. It then explains how the modern concept came to be a rallying call for activists and several politicians during the ongoing financial crisis.

It examines the economic merit of the European Commission’s conception of the tax, but finds little agreement among scholars and institutions. Despite this lack of agreement, it finds a highly disparaging narrative of the tax in the popular press and in political discourse, particularly in the United Kingdom, which, when coupled with the unrealised nature of the tax, despite the idea’s decades-long existence, suggests that the discourse of the tax has been shaped to reflect its more negative aspects.

To explain this, the essay examines the political situation at the global, regional and national levels, using the Group of Twenty (G20), the European Commission (EC) and the UK as case studies. Here the essay makes a case that there is a significant danger of regulatory capture of these political institutions by the banking lobby.

It uses Doris Fuchs’ tripartite definition of power to show how financial institutions exercise control over political institutions, then uses Walter Mattli and Ngaire Woods’ model of regulatory capture to compare the G20, EC and UK. In this case, it finds that the EC is the institution least susceptible to capture. The essay concludes by considering the case of the financial transactions tax as symbolic of the lack of political action in the face of the power of global private interest, which presents grave problems for global governance.

Summary in tasty bitesize pieces:

  1. The idea of FTT was developed by economists keen to avoid some of the dangerous ‘animal’ elements of the markets, long before it was adopted by campaigning bodies like the (excellent) Robin Hood Tax Coalition. President Sarkozy of France is the only OECD leader vehemently in favour of the tax.
  2. There is no conclusive evidence of the economic effects of such a tax, which is strange because…
  3. UK and European politicians have been at loggerheads over whether this tax will damage the City of London
  4. So if it’s not clear what the economic effects will be, why are certain politicians so opposed to it?
  5. It might be that private power has altered the discourse on the FTT – due to the financial services industry’s instrumental, structural and discursive power.
  6. The EC is the least susceptible institution to ‘regulatory capture’ – unsurprisingly, it’s gone the furthest towards implementing an FTT. The G20 and the UK government can be said to face private capture – and they’re generally opposed to the tax.
  7. This is a worrying case for the quality of global economic governance – there is a risk that nothing will change post-financial crisis – and that at the global political level, private power rules the roost.

Full essay and bibliography (or view it here)

Mild disclaimer – this essay was written in late December 2011. I just never got round to posting it here. I’ve updated it briefly to include Sarkozy’s statement that France will go ahead with the FTT, whether Europe does or not. But there may have been other relevant events I’ve missed. The essential argument about private sector power remains true.

Flickr credit: JimNix

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Thinking

The next generation MDGs or SDGs – it’s not what, but how

The Millennium Development Goals were supposed to be met by 2015. There have been some successes, some failures. Whether the goals actually caused the improvement in some of the indicators is unknowable, but Claire Melamed and Andy Sumner argue that they certainly changed the debate, and that they changed aid spending and political priorities. 

And the thousands of people assembling at Rio+20 this summer will be discussing the idea of sustainable development goals, with the idea of merging social, economic and environmental goals. At Rio they’ll have to agree on some basic priorities. But post-Rio, agreeing on indicators to measure performance on these goals is not going to be easy.

But in all the talk about what should follow in the second round of MDGs or SDGs, nobody’s grasped that the world has changed since the late 1990s when the first goals were drafted.

First – are goals the most appropriate tool for what we’re trying to achieve? See Melamed and Sumner again for a thoughtful range of questions on this subject.

Second – assuming they are – this time they’re likely to be global goals. They will be universal – applicable not just to poor nations. This time, environmental and social goals must be tackled alongside eradicating poverty. Or goals should be found that satisfy all three elements of sustainable development.

So we all have a stake in the goals, and we all have a responsibility to help meet them. Does it not follow that we all should have a say in them?  

Ergo – let’s crowdsource the next round of development goals.

Charles Kenny, top aid-protagonist at CGD, actually referred to the next round of goals as MDGs 2.0, without going into the 2.0 aspect. Ben Leo, of the ONE campaign, used the same phrase to argue that the poor must decide on the next round of MDGs. 

The debate is underway across twitter and the aid blogosphere. But it has to go beyond the experts, practitioners or academics. Everyone should be invited to think about the “future we want” and have the opportunity to contribute.

So, UN, this is your task. Your website frontpage says ‘it’s your UN’. The first line of the Charter says ‘we the peoples’. Let’s live this – get the world together online to start talking about what the next round of goals should be. Build a platform that allows for drafting, commenting, voting. 

This is an amazing opportunity for public participation and engagement with the goals. The greater the participation, the greater the buy-in from the global public, the greater the chance we’ll meet the goals next time. 

The UN could combine digital crowdsourcing with offline participation opportunities to host the world’s greatest participative agenda-setting event. This would help the UN position itself as the go-to platform for global participative governance. 

We’ve got 3 years to go.

(Start by following #SDGs and #MDGs on twitter)

Flickr credit: MT_bulli

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Thinking

Playing around with OECD health expenditure data (is US public health spending really higher than UK?)

The OECD has loads of data on health expenditure in the 25 or so countries that make up the wealthy and democratic countries.

Inspired by @bengoldacre‘s arguments with someone on whether the Swiss govt provided better value healthcare than the UK govt, I wanted to go look at data on public health spending (i.e. not including private stuff).

The first chart is thus pretty interesting, using IBM’s many eyes easy-visualisation tool…you should be able to play with this to get certain countries involved.

What’s crazy is that the US govt’s health spending seems greater than the UK. Even though we think of US healthcare as a private system and the UK as public.

 Public spending on health per capita (US$PPP)  Many Eyes

(or here cos that’s unreadable)

And Google Data Explorer is great too – I didn’t upload the OECD data set, but it looks like this is all health expenditure, public and private as a proportion of GDP.

What I really want to do is show the relative sizes over time in a snazzy Hans Rosling time-lapse bubble chart, but haven’t the time to keep playing. May return to this. Data is fun.

P.S. Me messing around with numbers is probably less useful than some experts doing it – see this presentation of US/OECD healthcare spending from the Kaiser Family Foundation 2011.

 

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Unrealised ideals: three global governance institutions that never were

Great new institutions created at vast international conferences are not exactly what global governance 2.0 is about. They’re still pretty interesting though.

Below is a deck I used for a history presentation, followed by a full essay, on three innovations in global governance that never were. I hope it shows the interesting interplay between state interests, individual passion and individual ideas, as well as how possibilities in this area are bounded.

While the world of 2.0 suggests that new institutions will be built from the ground up, by networks of people everywhere, there’s some good stuff to learn from looking back at ideas that went unrealised.

Thanks to my ace history prof, Dan Gorman, for leading me to various bits.

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Who’s afraid of the financial transactions tax? Why trialling the tax won’t lead to the end of the world

Following the G20 summit, there have been lots of ‘where next‘ briefs on the financial transactions tax. Sarkozy had talked it up before Cannes, but failed to deliver any movement towards it at the global level. It’s in the press again following the last EU Summit – the one where Cameron upset everybody – as the UK is standing in the way of the tax. The House of Lords is already complaining about it, despite being only days into their inquiry about it.

I’ve spent some time reading pretty much everything I can find on the FTT – economic and political stuff, and the EC’s proposal, and it seems to me like it can’t be dismissed as easily as Osborne, Boris Johnson, The Economist, the FT and surprise, surprise, the banking lobby suggest.

My favourite paper is this essay from James Matheson at the IMF. He essentially reviews all the economic modelling arguments about what happens when you introduce a tax – does liquidity dry up and destory the markets? do the transactions all move elsewhere, thus meaning you raise no money anyway? are the costs of the transactions all just passed on to pensioners anyway (my favourite argument by the banks – great work guys)? – to find that there is no conclusive answer.

The UK’s version of the Robin Hood Tax website is extremely good on this stuff too, making the ecconomics readable and in some places pretty entertaining:

“Talk to a banker or hedge fund master of the universe about financial sector taxes and they’ll apparently have to call you back from their Blackberry en-route to the airport, the rest of the company in tow, quite prepared to never set foot in the country again to avoid your unnecessary meddling…”

The UK already has a transaction tax on shares: stamp duty. It raises several billion pounds a year. It doesn’t seem like it adversely affects market behaviour, or penalises any particular sector of society. In Hong Kong and Taiwan the income from these taxes represents between 1 and 2% of their GDP. We don’t hear them complaining terribly.

So if it’s not going to be the end of the world, let’s trial it (as HMT did with the bankers bonus tax) and see what happens. I don’t know if this is possible. It doesn’t seem crazy.

At some point I’ll post up my full essay, about how the FTT represents a good example of regulatory capture by private interests. Mmm..private interest.

Flickr credit: Torcello Trio

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Understanding world views on climate change: #COP17 and Twitter visualisation

 cc UNclimatechange

The Durban Climate Change Conference, or #COP17, is the biggest event in global governance right now, attempting to get the world to deal with the toughest global challenge.

The conference faces all the classic global governance problems: world leaders not leading cos they’re not world leaders, they’re national leaders…how to harness the voices of a thousand NGOs and private actors…how, in essence, to bring appropriately democratic politics to the issue of climate change. 

The first step is just to be able to understand the public view – but it’s a global constitutency we’re talking about – everyone is affected by climate change.

In the context of global governance 2.0, Twitter has the potential to become, if it isn’t already, a global parliament – certainly on the debating side. Obviously Twitter doesn’t make global law, but it’s where ideas happen, its where people demonstrate what they believe, etc.

So how do you begin to make sense of all the thousands of tweets?

Cnn-ecosphere

cnn-ecosphere.com

CNN are trying – with this astonishing visualisation, called ‘Ecosphere’. It’s geekily beautiful and might help us understand the central themes of the conference. But at the moment each of the large branches, formed by the most-used words in tweets including the tag #COP17, is a fairly obvious descriptive word – Durban, Africa or Climate Change. That doesn’t tell you a lot. And it’s pretty hard to navigate to individual tweets. It might have been more useful to provide some kind of sentiment analysis – simply whether people are saying positive or negative things.

 

It’ll be interesting to see how the ecosphere changes across the next few days, especially if individual nations are named and shamed or a central sticking-point arises. If the same descriptive keywords continue to monopolise the visualisation, however, it’ll be of limited use.

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How do you solve a massive mapping problem in Somalia? With massive 2.0 solutions of course. @refugees

This story about UNHCR crowdsourcing is pretty damn awesome. Found via Firetail’s weekly briefing.

UNHCR – the UN’s refugee agency – wanted to know the location of informal settlements in a corridor of land in Somalia. With this information they could better plan for large movements of people. But, not surprisingly, access to Somalia isn’t easy. So they look to satellite imagery.

They partnered with a range of techie types to crowdsource a solution for analysing a vast quantity of imagery provided by DigitalGlobe.

Using a tech platform already realised, a volunteer geography professor got his undergraduate class to carry out the human work – tagging the images where they saw settlements.

Eventually they ended up with 168 volunteers who took 5 days to process nearly 4,000 satellite images – tagging 250,000 settlements. 

This is a great example of global public service delivery managed by the global public. Talk about participatory global governance. Or about 2.0. Or about a revolution.

The project is detailed here, and information on the technology behind the human work here, from Patrick Meier at iRevolution.

I’d love to hear from UNHCR staffers on the results of this work.