How do you determine who would use the revenue from this tax and how that money would be used?

     The national governments themselves might use some of the tax money or all of it. For many governments, it would be a reason, from a world point of view, to keep them from being tax havens where people would avoid the tax. If a small country in the Caribbean chose to try to become a tax haven, then it would be difficult to have a world uniform tax that would work so we would need to have them keep the revenue in order to levy the tax. Just that they would levy the tax – not what they did with the money – would be the important thing. I never said that the reason to have the tax was to raise revenue but to deter speculation and deter the trading in foreign exchange and excessive movement of funds for very short periods of time. If it does that it won’t collect as much revenue but the purpose is not to collect revenue.

Recent events in Asia, Russia and now in Brazil seem to be proving your point. Do you feel vindicated?

     I think so. On the other hand, I wouldn’t claim that the tax is the complete and universal solution to all the problems that we have been going through recently. It is definitely not going to prevent attacks on currency that is obviously overvalued. It is not going to take the place of a lot of other things that need to be done by governments. For example, the governments of Southeast Asia need to have much better banking regulations in their own countries, like bankruptcy procedures and so on.

Bernd Spahn has proposed a two-tier currency tax, or modified Tobin tax. Do you think his proposal is workable? (Editor’s note: click here for details on this proposal)

     If enough of them would agree, and if the right ones agree, it would be workable. Assuming that the international banks are not headquartered in, say the Cayman Islands, the transfers from the headquarters of banks to a Cayman Islands branch would be counted as taxable transactions. So you would have to pay the tax if you did that even though there isn’t a change of currency. So if the Cayman Islands won’t levy the tax, then anybody that transfers funds from the US or the UK to the Cayman Islands pays a tax as if they were transferring it into a foreign currency.

Gordon Brown, the UK Chancellor of the Exchequer is advocating for a permanent Standing Committee for global financial regulation. What do you think of this proposal?

     If it means trying to get some international agreements of what kind of regulation you ought to have for your financial markets and your financial institutions around the world in each country, yes, we sure need to do that. That doesn’t mean that they have to be internationally administered. It just means that we have to get countries to do what a modern government ought to do.

     I do think there is merit to the United States proposal to give members of the United Nations – in advance – a credit line so that they don’t have to be given credit lines in the midst of a crisis, subject to all the problems that occur then. Yes, without question, and conditionally, a lot more liquid funds should be available provided that they have met certain reasonable criteria about their own management of their own economies. This would be done while the sun is shining rather than when it is raining.

You must have felt like a lone voice in the wilderness when you first launched this idea in 1972. There seems to be a new wave of thinking now that has come around to your point of view. Do you agree?

     It certainly hasn’t done that in the United States. It may have done that in Europe. But throughout the whole East Asian crisis, and the general crises that have been occurring recently going back to Mexico, the Tobin tax proposal is never mentioned in the newspapers and in the discussion or by governments. From what I hear, it is mentioned occasionally by the IMF but in a negative way or, at least, in a very skeptical way. It is pretty much ignored by the financial press and in the financial community, by both public officials and in private investment banks. They don’t have any use for being taxed so they have basically ignored it. It is discussed more in Europe where it was approved by Miterrand and, later, attracted attention at the Copenhagen Summit. But it is certainly not by the financial parts of those same governments or by the Ministers of Finance or the Chancellor of the Exchequer who do not go along with those radical ideas. These people are very strong and they don’t want to pay more taxes and they don’t want to be meddled with.

     But there has been a shift of opinion, even in the United States, to believe that maybe some kind of slowdown or some kind of regulation to diminish the flow and ease the integration of markets all over the world is a good idea now. Rather than concentrating everything and making everything more open. There are more economists that say that now. Jagdish Bhagwati, a leading economist and free trader in commodity trade, does not apply the same principle to the movement of capital. So people are learning something. But, officially, our US Secretary of the Treasury still believes the solution is more of the same. More integration. More globalization. More deregulation. More openness of every country to financial dealings of elsewhere.

What is your prognosis for the global economy and the impact of globalization?

A lot of people agree that we need some reforms and a new financial architecture. A lot of people do agree that we don’t have the right international monetary set-up and that we need to think about what kind of international monetary system we want. The President of the United States said that we don’t know what to do and we need some good ideas. I don’t think he’s ever heard of the Tobin tax. So I was about to write him a letter!