President Barack Obama and other heads of state this week met at the UN Summit to discuss progress in meeting the “Millennium Development Goals”. In less than two weeks, world leaders will also meet representatives of the Global Fund to Fight Aids, Tuberculosis, and Malaria to pledge to fund healthcare in developing countries. Yet the global recession has made reaching these goals and financing the Global Fund more difficult. We need a new approach if we are to rise to the challenge and fulfill our promises.
There is a solution. The world’s largest financial institutions regularly buy and sell massive amounts of world currencies seeking to make quick profits. A tiny tax on these transactions, many of which are purely speculative, would raise billions of dollars to invest in key domestic and global priorities, such as fighting disease, climate change mitigation and adaptation, and protecting our children from poverty. It would also curtail some of the irresponsible behavior that contributes to global economic instability and market volatility.
In 12 years the worldwide currency transaction market has grown from $1.5 trillion to $4.0 trillion in trading per day. This trading is largely undertaken with borrowed money — for every $1 of their equity currency traders invest in the market, they borrow $100 to invest. These transactions are not building infrastructure or creating jobs. They are creating enormous wealth for a lucky few. Currency transactions, no matter how big the gamble undertaken, are not taxed. Families and workers, who are all too familiar with paying taxes on their essential needs, continue to shoulder the burden of funding government.
Before I came to the US Congress, I was a banker — a bank I started grew into a billion-dollar business. I know the power and importance of banks to local, national and global economies. Yet I also know that transformations in the financial sector have moved too much of the activity out of socially productive investments and into speculative, short-term bets on markets.
The idea of a financial speculation tax is getting consideration in many corners of the world, and not a moment too soon. When the UN Summit kicks off next week, an international financial speculation tax to fund the Millennium Development Goals should be at the top of the agenda. Tapping into some of the enormous wealth that international currency traders create for themselves to pay for pressing international needs is the right thing to do.
Sixty nations, including France, Britain, and Japan, have publicly supported taxing currency transactions as a way to fund global development. In the United States, I am pushing for the adoption of such a proposal. This is one of a number of financial transaction taxes which could transform our capacity to tackle poverty.
We are dangerously close to stepping back from core promises we made to world leaders to scale up investments in the fight against HIV/Aids and to support major development priorities. Nothing less than our credibility as world leaders is at stake. Meanwhile, at home there are pressing needs to fund job creation and support our children.
In July, I introduced the “Investing in Our Future Act”—a bill that would create a tiny tax of 0.005 per cent on wholesale currency transactions, to be invested in key domestic and global priorities, such as fighting disease and climate change mitigation and adaptation abroad and providing affordable child care to families in the United States. The imposition of a small tax is a minor inconvenience to a large financial institution, but is a major step toward meeting our commitments to our children and to impoverished communities around the world.
Currency markets are the world’s largest financial markets—dwarfing US stock trading and daily trading in treasury bonds. They are also now highly organized through electronic clearing and settlement systems that allow traders to place huge bets on small changes in the value of currencies throughout the course of the day. The vast majority of trading is conducted by a handful of big banks. This is an international sector that could use some stability and could contribute toward a healthier and more just and peaceful world.
I hope the UN Summit, opening on Monday, will challenge countries to adopt such a tax on financial transactions. This is an idea whose time has come.
Rep Pete Stark
Representative Pete Stark is a senior member of the US Congress, Chairman of the House Ways and Means Health Subcommittee and founded Security National Bank in California.