3071-The political economy of new slavery

206 Strategies for Change
what the well-known slogan refers to: “throwing sand in the wheels
without bringing the wheels to a halt”’ (Wahl and Waldow, 2001, p. 10).
Reducing exchange rate volatility
This has repercussions for the second objective of the Tobin tax, namely
to reduce exchange rate volatility. It can be argued that at a tax rate of
0.25 per cent there would be a 33 per cent decline in short-term speculation
that would lead to more stability. National economies would thus
be less likely to plunge into unanticipated crises.
Fighting currency crises
The third objective of the Tobin tax, is to fight currency crises. Moreover,
stable exchange rates are more conducive to trade and investment and
would also make debt repayment of both developed and developing
countries more predictable. As foreign trade and credit relations would
be more predictable, it is likely that we would detect a rise in foreign
direct investment (FDI), especially in developing countries (Wahl and
Waldow, 2001, pp. 7–10).
Giving governments control over policy-making
The fourth objective is to give greater freedom to national governments
in monetary and economic policy-making. In the current system,
governments have lost a huge amount of autonomy, on the one hand
because central banks no longer generate the same amount of capital
as private investors do, on the other because speculation is occurring
in relation to their currencies which forces them to act in accordance
with predictions about them (Moreno, 1997, p. 1). Most researchers
draw attention to the fact that, in reality, the autonomy that might be
restored would remain limited regardless of whether they see it as a
desirable outcome or not (Wahl and Waldow, 2001, p. 2; Frankel, 1996,
pp. 59–60). Maybe this is not an area where the efforts of the Tobin tax
proponents are likely to be most effective, which does not mean the tax
is not necessary, it simply means it is not a remedy for all problematic
aspects of international financial markets.
Dooley argues that ‘before we arm governments with another distortion
and charge them to “go forth and do good” we should carefully
examine the historical record of what governments have actually gone
forth and done...the record is not encouraging’ (Dooley, 1996, p. 102).
Whereas I am inclined to agree with Dooley, I would also argue that
‘leaving things to the market’ does not have such a great track record
either. The problem is a political one: we should be trying to establish