Re: Broadening Employee Ownership Transnationally

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

Dear eotrans list

A Tobin tax, like leveraged ESOPs, provide a useful way to mitigate the 
inherent design defects in the current institutions of capitalism.  They 
both represent band-aid solutions and so can be useful to mitigate problems 
but not eliminate their cause.

The fundamental problem in the monetary system is the way money is created 
by central banks which are state monopolies who manage their monopoly money 
in inappropriate ways.  Decentralised private competing currencies as 
proposed by Hayek provide part of the solution and using money for which 
users pay a fee for its use, somewhat like a Tobin tax, to create a 
negative interest rate or an ecological form of money with a limited life 
is the real solution.  It is the monopoly distribution of credit which 
contributes to the concentration of property.  Tobin taxes do not cure this 
problem.  Eliminating the monopoly can.

I would argue strongly against justifying a Tobin tax by using it to 
finance employee ownership.  The best way to make employees owners is to 
stop over-paying investors.  That is to eliminate the perpetual, static, 
monopoly property rights provided to corporate stockholders by introducing 
ecological forms of ownership.  This form of ownership  introduces 
Ownership Transfer Corporations as described in my book and my other 
writings in the COG library.

Regards

Shann


>At the COG Meeting in Chicago in April, a number of basic ideas were
>presented on things that could possibly be done transnationally in order to
>reduce inequality and reduce poverty in the world. One item on that list
>was the establishment of an international fund based on the Tobin tax.
>What follows is information on such taxes.  Discussion about its merits is
>encouraged.
>
>What are Tobin taxes?  They essentially are simple sales taxes on currency
>trades across borders.  The original concept was developed and proposed in
>1978 by James Tobin, a Nobel Prize winning economist at Yale.  The idea has
>continually gained supporters over the years and the approach has been
>refined.  Tobin proposed that a small tax of between .1 and .5 percent on
>currency exchange transactions would serve two purposes.  It would limit
>the damage from excessive exchange rate volatility as well as raising
>significant revenue for global causes.
>
>According to available data, every day more than $1.8 trillion in currency
>exchanges moves across national borders.  By way of comparison, the trade
>in goods and services for all countries for an entire year is only $4.3
>trillion.  In other words, in just a few days, foreign exchange
>transactions exceed the entire annual volume of world trade in goods and
>services.  Of those currency exchanges, upwards of 90 percent of these
>transactions are of a purely speculative nature where investors simply are
>betting on whether currency values and interest rates will move up or down.
>
>These speculative transactions themselves often cause short-term
>fluctuations of exchange rates, leading to even more speculation and
>threatening the stability of countries whose currencies are being traded.
>There is overwhelming evidence that the lack of stability helps to cause
>financial crises with increasing frequency, witness the crises in Southeast
>Asia, Russia and Brazil in just the last few years.  In the past, central
>bank reserves were sufficient to combat speculation on a country's
>currency; now, the daily market volume created by the speculators dwarfs
>all of the world's central banks combined.  When a country cannot defend
>its currency, it effectively loses control of its monetary policy.
>
>The Asian currency crisis lowered the world growth projection for 1998 by
>one percent and increased worldwide unemployment by 10 million people.
>These kinds of crises have not only a direct economic impact, including
>exacerbation of global economic inequality, the reduction of which is a
>primary goal of the Capital Ownership Group and many other groups like us,
>but they also have the related impacts, which are both economic and social,
>of increased unemployment, price increases and disruptions, plant closures,
>poverty, human rights violations, diversion of resources from sustainable
>development and social upheaval which burden poor, indigenous and
>middle-income populations most heavily.
>
>Such effects are obviously not limited to the country whose currency is
>being speculated.  There is usually a spillover effect as they try to
>export their problems by often dumping their products on other countries'
>markets and leading to increased unemployment and wage pressures in those
>countries as well, witness the problems the Asian and Russian crises have
>caused in the United States steel industry.
>
>It is the opinion of those who support the concept of the Tobin Tax that
>this kind of excessive speculation could be curbed by a very small tax of
>between .1 and .5 percent on each cross border currency transaction. (There
>is apparently an alternate two-tiered version that was proposed by German
>economist Paul Bernd Spahn in 1996).  It is felt that such a tax reduces
>incentives for such short-term speculation while remaining small enough to
>leave longer-term investments essentially unaffected with the result being
>more stability in exchange rates and less disruption to the worlds' economies.
>
>While curbing the gambling type of speculation and allowing individual
>countries to have more control over their own currencies and their own
>internal monetary policies, such a tax would produce revenues that have
>been estimated at anywhere between $50 billion and $300 billion a year
>which could be utilized to provide urgently needed resources to fight
>global problems such as disease, poverty, hunger and other priorities or
>crises. There would obviously have to be priorities,  guidelines and
>safeguards accepted and adopted to avoid improper use or corruption.
>
>Of course, to be really effective the adoption and enforcement of such
>Tobin taxes should probably be done in coordination with a rather sizable
>number of countries.
>
>There is already support internationally for such a transaction tax.  The
>Canadian Parliament has passed a resolution; resolutions have been
>introduced in the European Parliament, the French Parliament, the British
>House of Commons and there has been substantive discussion of the issue in
>the parliaments of Switzerland and Germany, plus a chapter in the Finnish
>government rules. A resolution was introduced into the U.S. Congress on
>April 11, 2000 which called for enacting such a tax and for the U.S. to
>build support for and advocate this position at the World Bank and the IMF,
>as well as within other regional and international organizations, including
>the OECD, the G-8 and the newly established G-20.
>
>Certainly one possible use of some of the revenues generated by such a tax
>would be to create an international fund to be used to assist in the
>establishment of employee ownership in appropriate situations as a tool in
>the fight against poverty.
>
>The just released (September 12, 2000) World Bank report World Development
>Report 2000/2001: Attacking Poverty recommends mobilization behind three
>priority areas:
>                 Opportunity: Expanding economic opportunity for poor 
> people by stimulating
>                 economic growth, making markets work better for poor 
> people and working for
>                 their inclusion, particularly by building up their 
> assets, such as land and
>                 education;
>                 Empowerment: Strengthening the ability of poor people to 
> shape decisions
>that
>                 affect their lives;
>                 Security: Reducing poor people's vulnerability to 
> sickness, economic
>shocks,
>                 unemployment, etc.
>
>It is not very much of a stretch to see that there is a place for the
>promotion of employee ownership within these World Bank initiatives.
>Employee ownership provides employment, empowerment and because with
>participative employee ownership it has been shown that such enterprises
>are more productive, an increased level of security.

Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
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