You’ve seen repeated reports about ongoing discussions between the US and other members of the G-20 group of nations regarding the idea of a global bank tax. This bank tax will up for discussion when the G-20 leaders meet in Canada later this month, even though opposition to the proposed tax is very strong.
The US, Germany and Britain are keen on such a tax, because of the billions in bailout support they have handed over to their economically hard-hit banking sectors. The tax would allow them to take back some of that bailout money, and smooth over taxpayer anger about the size of the bank bailouts. Canada, Australia, China and other G-20 countries are not so enthusiastic about a global tax, since (they say) imposing such a levy would penalize their banks, none of which required bailouts.
There’s something missing from most media reports on the bank tax debate. It’s this: the G-20 countries that oppose the global bank tax wouldn’t actually mind if the US, Germany and Britain have to independently raise bank taxes to recoup the bailouts. Why? Because those countries hope and could benefit from such a move.
If banks find that a new tax makes London, Frankfurt and New York relatively more expensive places to do business, compared with say Toronto (Canada), Brisbane (Australia) or Shanghai (China), for example, then perhaps those banks can be persuaded to relocate jobs, subsidiaries, and offices from the US, Germany and Britain to lower-taxed jurisdictions. America, German and British job losses would become Canadian, Chinese and Australian gains.
You could call this the less of a “beggar thy neighbor” and more a “pillage thy neighbor” school of economics. As economic policy, it doesn’t amount to much, since it wouldn’t create wealth or even a single net new job – it just redistributes existing jobs and wealth elsewhere. This is silly given the speed and mobility of capital in our age.
To get the global economy moving again, we need much more than “pillage thy neighbor” from our leaders. The world needs a less predatory, more constructive, optimistic and, dare one say it, more economically educated approach to help bring about a truely sustainable global recovery. World leaders need to reject “pillage thy neighbor” and embrace policies more in line with, say, the spirit of President Kennedy’s famous 1963 speech at Arkansas’ Greers Ferry Dam.
President Obama hasn’t talked much in public about the G-20 bank tax debate. When he does decide to speak, he could quote a wise old Southern expression and point out that, as a recession-weary world searches for ways to shore up global economic growth, “pillage thy neighbor” amounts to “a dog that won’t hunt.”
