Much of the world is well aware of recent protests about the unaccountable and unelected global officials of the World Trade Organization, the IMF and the World Bank as well as NAFTA, FTAA, MAI and GATS. Nonetheless, behind the scenes, our friends at at the Sierra Club, Friends of the Earth, and International Forum for Globalization and many hundreds others are hard at work trying to form yet another independent and unaccountable international body, with a budget two or three times larger than that of the IMF. Why?

1)   The eventual destination of the tax proceeds, estimated to be around $250 billion/year: How will they be administered? What will they be spent on, and by whom?
2)   The exchange rate mechanisms: are currency trades necessary? Can we do better in the Information Age?
3)   Its viability: TTI simply will not work. It may take the peaks off many of the small waves but taking the cap off the tsunamis will leave the bulk of their force intact. TTI will stop neither currency fluctuations nor currency crashes.
 

1)   Monetary and Banking reform; a new Bretton Woods
 

WHAT WILL THE TAX REVENUE BE USED FOR?

All the available literature by the TTI advocates, and there are very very many has insisted that the money is to go to “poverty eradication,” and “debt reduction,” of impoverished countries or “humanitarian needs” of some nature.
http://www.ceedweb.org/iirp/   etc.

AND HOW WILL THAT PURPOSE BE SECURED?

In Canada, on March 23, 2000, the House of Commons passed TTI legislation stating that “the government should enact a tax on financial transactions in concert with the international community,” giving the impression that the TTI will result in some international body like the UN or NATO. Or the WB, IMF or WTO. There is no mention anywhere in the legislation of spending the tax proceeds on “debt reduction" nor anything about "impoverished countries."
    The TTI legislation submitted to the US House of Representatives says the TTI, “....should be done in coordination with a large number of nations, in a fully transparent and accountable manner, with the revenue dedicated to urgent global needs." Already the waters are murky. The US legislation is talking about “urgent global needs,” while - again - making no mention of any kind of humanitarian aid whatsoever.
    The thing is that a banking crisis or currency crisis could be interpreted as an “urgent global need” and that presents a large problem, because it is the bail-out funds that actually encourage the speculators. Don't take my word for it; Alan Greenspan says the same thing. He calls it a “moral hazard.” Translation: Gamblers who are fully insured are free to take bigger risks, and the “Moral Hazard” is that they don't even have to pay for the insurance.
 

Ellen Frank  In Focus
http://www.foreignpolicy-infocus.org/briefs/vol4/v4n17cap.html
“In 1998 alone, speculators captured $130 billion in emerging market reserves and nearly $150 billion in bailout funds. When speculators shifted their focus from Asia to South America last year, the Clinton administration proposed making additional ‘bailout’ funds available with which to defend Latin currencies. Critics immediately pointed out that such a fund, far from dissuading speculation against currencies, would actually embolden speculators by rewarding them for attacking pegged exchange rates.”. . .  “The evidence that bailout funds that were intended to protect dollar pegs are, in fact, a lure to speculators is now irrefutable.”
 

IS THE IMF IN NEED OF FUNDING?

James Tobin: “Now they [the IMF funds] are certainly not big enough because the total size of the quotas of all the countries together in the IMF is about 150 billion dollars, which is nothing for a worldwide institution that's supposed to do what they are supposed to do.”
(UNESCO Courier, Interview by Sophie Boukhari, Ethirajan Anbarasan and John Kohut, Feb 1999 p46)

WHAT ARE THE CHANCES . . .
. . . That the Tobin Tax Profits will go to prop up the Currency Casino? Who but the closed cadre of individuals making TTI policy can say. It would be utterly naïve to suppose that $250 billion a year will not attract self-interested individuals, some of whom are already moving their talks out of the back rooms and into the newspapers.

http://www.ahram.org.eg/weekly/2000/466/ec8.htm
Al-Ahram Weekly 27 Jan. - 2 Feb. 2000, Issue No. 466, Cairo  “New Economic Realities” By Ismail Serageldin
    “[We should] agree up front that the proceeds of the Tobin tax go into a fund — to be managed by the IMF and the World Bank — whose sole purpose would be to fight the currency crises that plague the international system today. The beauty of this proposal is that it would remove the temptation to fund good international causes.”
    “This proposal would link the size of the fund to the size of the markets. The larger the markets the larger the fund becomes. It would be accessible only by a decision of all the countries of the world, represented as they are on the boards of the IMF and the World Bank. It would also add credibility to the interventions of the international financial institutions. It would complement the necessary call for added IMF surveillance in this time of rapid movements and the blurring of the boundaries of conventional instruments of borrowing and equity finance all over the planet.”

and

 from: Laurent JESOVER, 31 Aug 2001, [ATTAC CHAT] Jospin didn't adopt the Tobin Tax
“Jospin did mentioned the TT but to say that maybe it would be an idea to see if it is possible to have it studied in an Intl organization. Fabius, his finance minister already mentioned that the IMF would be a good intl organization to study it... and why not for financing it.”
Inviting the involvement of the IMF into the planning process is to invite a take-over. This is a dangerous plan.
 
 

WHY NOT A TREATY?
 

50% of currency trades are made by the US and UK. A simple treaty between eight countries would be able to tax over 85% of currency trades.

From Alex Michalos, “Good Taxes” Dundurn Press, 1997, p.27
Breakdown of trades:
London 32%, New York 18%, Japan 10%, Singapore 6.5%, Hong Kong 5.5%, Switzerland 5.3%, Germany, 4.5%, France 3.6%, Australia 2.4%, Denmark 1.8%, Canada 1.7%, Netherlands 1.4%, Sweden 1.2%, South Africa 0.3%, Bahrain 0.1%, Other OECD countries 8.1%, Other 1.1%
 

The questions regarding the eventual use of the TTI revenue could all be avoided if the TTI was conceived as a treaty — with all the language clearly spelled out —  to which signatory nations simply agreed, and signed on, ... or rejected.  But even though the Attac organization also maintains the International Treaties Organization, this option appears not to have been considered. Michalos (1997) does not address the subject. Why not?
    The most logical reason for avoiding a treaty is that tax avoidance could be accomplished by traders, by simply moving operations to the next country not involved in the treaty. But, watch carefully here, the same option is open to those who would avoid the tax by moving to tax havens which is, in fact, the first argument in Michalos’s chapter Arguments Against Taxing Financial Transactions.  Michalos responds (1997, p 41).  The solution:
    “ ‘Since about 80% of global FOREX trading is carried out in seven countries, ... An agreement among the seven on a uniform Tobin tax would suffice to keep the offshore relocation threat a relatively distant one.’ (Felix 1995, p. 43; Tobin 1996, p.xiv)”

So we come full circle: a treaty is unsatisfactory but an “agreement” will be necessary to the system and sufficient  to support the whole works.
    There is an air of painting the roses red in this TTI proposal. There seems to be no limit to the number or amount of contortions and convolutions allowed in order to focus on the symptoms rather than the cause of the problems: the foreign exchange system is fundamentally flawed, and the currencies being used are not designed to withstand those exchanges.
 
 

AND HOW WILL THIS NEW INTERNATIONAL ORGANIZATION BE STRUCTURED?

For one example, here is how the IMF and World Bank are structured, in Bretton Wood's own words:

“Each country is formally represented in each institution by a Governor (normally the Minister of Finance or of Overseas Development), but in practice almost all decisions are delegated to an Executive Director, an official who is posted to Washington for about 3 years. Whilst 180 countries are now members of the IMF and World Bank, there are only 24 Executive Directors. Voting power is allocated according to the amount of money contributed to the Bank, which in turn depends on the country's economic strength. For example the UK has a voting share of about 5.5 per cent and the US nearly 20 per cent. The President of the Bank is, by convention, a US citizen and the Managing Director of the IMF is a European.” See: http://www.brettonwoodsproject.org/faq.html
 

So, while the US and UK have 25% of the vote, plus managerial control, 156 of the smaller countries, bearing the largest risk, as history has already proved, have no vote at all.  Modeling the TTI organization after the UN, WB, IMF or WTO, seems an unwise choice, but historically most probable.  Unfortunately the US/UK make up 50% of all currency speculation — they are likely to demand a very loud voice in the proceedings in this as yet undefined organization.
 

BUT NOW THE TTI ORGANIZERS ARE PROMOTING A NEW UN ORGANIZATION

The UN, it might seem, is a step in the right direction from a totally independent body with a structure like the World Bank or WTO but still less transparent than an international treaty where all the details can be laid out in advance prior to a country's ratification. Even the UN is subject to manipulation from outside forces. John Bunzl has sent his observations in the form of citations:

From an article by Joshua Karliner which appeared in the Ecologist magazine, Aug/Sep 1999.
“... the well-respected United Nations Development Programme (UNDP) has begun a new programme of co-operation with some of the world's most destructive corporations - all in the name of 'developing' the Third World. The joint programme is called the 'Global Sustainable Development Facility (GSDF) - 2B2M: 2 Billion People to the Market by 2020. So far, 16 multinational corporations are paying $50,000 each to sign on as sponsors.  The purpose of the 2B2M/GSDF project, in the UNDP's own words, is to 'create sustainable economic growth and allow the private sector to prosper through the inclusion of two billion new people in the global market economy'.”

And

From “Big Business - Poor Peoples” by John Madeley, Zed Books, 1999.
    “In the early 1990s some Western governments were intent on closing down UNCTAD [the United Nations Conference on Trade and Development whose mandate was to help poor countries with their trade and development efforts] unless changes were made. The organization was even given some perks, such as taking over responsibility for running the UN Commission on Transnational Corporations from the defunct UNCTC. Following the setting up of the World Trade Organization in 1994, Western leaders recommended that UNCTAD's role be reviewed; this review effectively took place at the ninth UNCTAD conference in 1996. UNCTAD remains in business although with a very different mandate. Its chief task now seems to be one of smoothing the path for TNC investment in developing countries.”

And

From John Bunzl, personal correspondence:
    “As to the UN, I think 'democratizing' it is a bit of an oxymoron at this stage... you can't have a fully democratic and empowered UN unless nation states are prepared to relinquish some of their sovereignty to the UN (i.e. revoking article 2:1 of the UN charter). But at the same time, nation states have no justification for relinquishing sovereignty until some kind of world parliament is in place.”

(2)     Are Currency Trades Necessary?

James Tobin: (UNESCO Courier again)
    “China doesn't have full convertibility, except of Chinese currency earned by foreigners in trade. You cannot convert Chinese currency into dollars or francs or yen just to move funds around. They have strict financial control very much like the controls that France had in 1945-46 right after the war. In fact, France had exchange controls of some kind until the middle of the 1980s. China receives a lot of direct investments from overseas without having convertibility of capital funds from one currency to another. It's not essential to have that.”
    You cannot get much clearer than that. The truth is “it's not essential to have” currency markets “just to move funds around.”

The fact is that the fundamental law of fiat currency trading is: rich countries win, poor countrys lose. That is because, while poor countries produce commodities, they simply cannot compete with rich countries who have now stripped out their industries, and simply produce credit money. A commodity producer cannot compete with a money producer.
    Furthermore, at any time, the corporations in rich countries — certainly in the US — stand ready to buy out companies in countries whose currencies have been devalued. The currency market fluctuations assure that will happen, and there will be bargains galore.
    But notice that the same opportunities are not available to poorer countries. Even if the currency of the US or Europe dropped, the “bargains” are nowhere to be found because, relative to the poor countries, they are still expensive. Besides, the currencies of the rich countries will never fall to the extent that say, Mexico or Brazil did, because the currency market is, essentially a popularity contest - investors operate in “herds” and they tend to buy what some economists call “hard currencies” (an oxymoron if there ever was one), so the yen, the dollar, and the pound will always have the true believers to prop them up, while the peso, the real, and the bhat will not.

Here is what people in India think about currency trading:
(From, Hindustan Times, January 12,1998, “Vulture Capitalism,” by N. C. Menon, Page 1):
http://www2.hindustantimes.com/ht/nonfram/120198/detopi01.htm
“If India had acquiesced in making its currency fully convertible, it could have been listed among the countries in crisis today.”
     And they are not amused by the IMF policies or the economic “liberalization.” It is the mobility of money that destabilizes banks in poor countries.
    “Massachusetts Institute of Technology economist Alice Amsden, an expert on South Korea, observes that only when the South Korean government, under pressure from international institutions, loosened controls on banks, did speculative pressures against its currency become a serious problem.”

Ellen Frank of Emanuel College echoes that sentiment in her article “Capital Flows and Exchange Rate Policy.”
http://www.foreignpolicy-infocus.org/briefs/vol14/v4n17cap.html
    Frank: “Full convertibility, however, has proven to be incompatible with exchange rate stability. Once countries lift controls on short-term capital movements and allow full convertibility of their currencies, the process of exchange rate determination is privatized as well.”

Nor are the people of India happy with the solutions.
    (Hindustan Times again) “Seoul is planning to use the bailout money to buy out Koreafirst and Seoul Bank. It will then clear the bad loans and sell the institutions. And who are the prospective buyers? Citibank and Chase-Manhatten.”
    “Under the regimen of the survival of the fittest, as Korea's plunging currency and stock prices play havoc with its economy, an average of 45 companies a day go under. But that might not be bad news for everyone. Transnational corporations are poised to sweep in and snap up many of these attractive assets. They are attractive because when the US corporations buy up the companies at rock bottom bankruptcy sale prices, they will find that Korea's debilitated currency will make the dollar wages of the Korean workers half of what they were in July.”
 

Do Northern Countries Promote Currency Trading Because It Is a Profitable Swindle?

(From the Hindustan Times again, citing James Tobin)
    Tobin: “It is hard to escape the conclusion that the countries' currency distress is serving as an opportunity for an unrelated agenda such as the obtaining of trade concessions for US corporations and expansion of foreign investment possibilities.”

Currency trading is Not Necessary; the Tobin Tax is Not Necessary. Currency controls are necessary.
 

(3)     THE TTI WILL NOT WORK AS PLANNED

The sad reality is that there are individuals and organizations who have, and will continue to have, the ability to cause the collapse of currencies even in large nations.

From, Tony Clarke of the Polaris Institute, Canada, in The Ecologist May/June 1999, “Twilight of the Corporation,” page 161:
    “The power of these speculators was dramatically illustrated in 1992 when financier George Soros, following a bet with then UK prime Minister John Major, sold $10 billion worth of British pounds on international Money Markets for a $1 billion profit and in doing so, single-handedly managed to force a devaluation of the pound and scuttle a new proposal for an exchange rate system in the European Union at the same time.”
    If one guy can alter the economic path of a G-5 nation as part an amusing parlor trick, imagine what could be done with some serious Money. The Tobin Tax would have cost Soros .05% of one billion dollars, or  $5 million in taxes and 995 million in profit. It is doubtful that the Tobin tax would be a very big deterrent to George Soros on financial grounds, and if his intent was to bring down the pound sterling then cost would not have been a deterrence
 

The main problem with the TTI is it lends credibility to something that is essentially unscientific. It makes people think that buying one currency with another is ok, it just needs a little 'regulation.' Such taxes point the finger in the wrong direction and they fund the wrong people.
    The TTI will not affect George Soros, but the next time somebody pulls the plug on Brazil, the politicians will be pointing at their safe and sane “regulations,” the economists will be “mystified” and blame the Brazilians, Chase Manhattan will get a few new banks. And the IMF will be in Argentina telling them to open up their currencies.

It might be worthwhile to review the goals of the Tobin Tax. Michalos, in his chapter Arguments in Favor of Taxing Financial Transactions (1997, p. 23 - 38) lists them.
    TTI promoters have created the impression that the TTI is some sort of silver bullet that by, a slight reduction in the number of trades, will cure, or at least drastically reduce, the banking instability and financial inequity that has been infecting the world for the past 30 years. In that regard we can eliminate  the below items 2, 4, 7, 8, 10, 11, 12, 17, 18, and 19 as being clearly irrelevant to the end goal. Of the remaining items (in bold type, below) all but the profitability aspect of #6, are specious, of little value or hugely speculative.

1.  “A lower volume of transactions would reduce the amount a central bank would have to spend to defend its currency.”
Response: When a bank in Asia has $200 million in reserves, and when there is a run on those reserves, saving a few dollars on the salaries of computer operators and clerks is unlikely to be a saviour. These are, in any case, costs which are built into transaction costs: incresed trading increases profits.
2.  It is “on the international agenda” as a source for “global funding...”
3.  The US would benefit because: “The principal purpose of the proposed tax is to expand autonomy of national monetary policies.”
Which policies are those? If there are policies that the TTI infringes and if this is a “principal” purpose of the proposal, maybe more than two sentences should be devoted to the  explanation. Generally speaking, US monetary policy as regards foreign exchanges are carried out quite successfully by the IMF and World Bank both of which the US dominates.
4.  To explore the “...number of different estimates of the amount of revenue that might be obtained...”
5.  Reduce “moral hazard” and “successive governmental bailouts.”
“Moral hazard” refers to risky activity by bankers; the TTI addresses this in only the most tangential way, if at all. Governmental bailouts will hardly be affected. When investors are permitted to move their money at will, they will do so, tax or no tax. When a currency is collapsing in Asia, a 50% tax would not stop the outflow. The notion that the TTI may have stopped the outflow of money and reduced the number of bailouts in Taiwan, Mexico or Brazil is the wildest of speculation.
6.  A profitable alternative to “control international capital mobility”
The text of this argument (p.27) begins: “Since there is apparently no groundswell of commitment to control international capital mobility with new regulations...” This indicates that the TTI promoters are fully aware that it is capital mobility which is the central villain in banking instability, and that they are intent on profiting from this condition rather than confronting the enforcers of capital mobility: the IMF, World Bank, GATS and FTAA, as well as central bankers in the US, Canada, and Europe.
7.  “Sin taxes . . . are generally accepted as good sources of government revenues...”
8.  It “...benefits those who pay as well as those who do not...” (the “benefits” are not detailed).
9.  It will “ ...contribute to the creation of a more “environmentally sustainable world-wide...” economy by reducing “export-led development.”
Again it is the IMF, World Bank, GATS and FTAA who are behind export-led development. How the Tobin tax, by reducing currency trades somewhat, will affect exportation is mysterious.
10.  Promote full employment policies in industrialized countries,” reducing neo-mercantilism which hurts poor countries.
11.  It is a “progressive tax.”
12.  It would be “electorally popular.”
13.  Increase “production of real goods,” by “decreasing volatility of exchange rates...”
As in #1, any savings to a country whose currency has been devalued, are likely to be so small as to be utterly irrelevant.
14.  It would encourage “investment research directed at long-term, rather than short-term.. ” investment. Noting the heard mentality of investors where “noise rather than information drives many of their decisions.”
This is a specious argument. It is the equivalent of claiming that a tax on gamblers in Las Vegas will force blackjack and poker players to look more closely at their cards. If there is an effect it would be measurable only in nanoseconds.
15. Will encourage “shareholders to monitor management.”
Equally specious. “The Myth that common stockholders controll the corporations is truly pathetic.” That’s what Molly Ivins had to say (Seattle Times, 22 Dec 1997) after the Securities and Exhange Commission took another bite out of shareholders’ rights. Nonetheless, whatever the  stockholder powers, they exist presently. Has there been any stockholder revolts against bankers’ and investment houses’ foreign currency trades? If so, look for that number to diminish upon the passage of the TTI because they can relax and assume the tax will act on their behalf.
16.  There are some (unexplained) “benefits” to “society and international financial system” via  “zero sum” games such as speculative trading, therefore the global casino should not be shut down altogether.
If these “benefits” are so great, then maybe a TTI is a bad idea altogether. I doubt that there is an exporter in Indonesia, South Korea, Argentina, Brazil, Russia, Turkey, Mexico et. al., who would speak on behalf of such benefits.
17.  It would make up “for tax revenue lost through evasion...” in other areas.
18. It would reduce Canadian “consumption taxes.”
19. It would replace the “hated” Canadian GST.
 

That’s it. So, the benefits of this whole project rests essentially on the $250b per year revenue.

Here is the last argument in Michalos’s chapter Arguments Against Taxing Financial Transactions.  (Michalos, p 74)
    “20. Even if Canada introduced some sort of a financial transactions tax, there is little evidence that the revenue would be put to any better use than other tax revenue.” To this question the reply is “...One finally has to trust our limited democratic institutions and the common sense of ordinary people to muddle through...” because “...despair follows from pessimism...”

Two points: ..... three actually...
1   Can we extrapolate that, if Canada is the beneficiary of the TTI  revenue, then ALL the money will go to the country in which it was collected? Surely this cannot still be the case for that would mean that poor countries will benefit virtually not at all.
2   It is hardly “pessimism” to ask questions about the revenue; it is being realistic.  It would be naïve to suppose that such a sum of money could be collected into one spot and that ordinary people would not attempt to subvert it to their own purposes.
3   I am wondering what democratic institutions Michalos could be talking about here. The US is a democracy that accepts dollars as votes and only rich corporations and rich individuals have a vote. Europe and Canada are headed in the same direction.

    Are our NGOs democratic?
I have sent this article to dozens of NGOs who support the Tobin tax such as Friends of the Earth, the Sierra Club, Attac France, and War on Want and the response has been zero.  In fact I tried, in March 2001, to post a smaller version of this article at the Attac Chat list and it was blocked three times. I am now (5 September 2001) blocked from all posts at the Attac list. So where is the democracy I wonder.
 

The argument against the Tobin tax is not that it is somehow “wrong” but rather that it ignores the real problem: exchange rates and the mobility of money. Worse still is that if the T tax were passed is would essentially mask the real problems and permit banking instability to continue unimpeded.
That is to say: like the Moral Hazard, it would actually promote banking instbility. The time devoted to the TTI would be better spent exposing the real problems but instead the current efforts effectively masks them. It is a step backwards.
 

In 1976 Milton Friedman got the.. ahhh...  I almost wrote “Nobel Prize” there didn't I. But of course he didn't get the Nobel Prize for Economics, because there is no such thing. You can look it up in any Almanac, or see:
http://cepa.newschool.edu/het/schools/nobel.htm
    Anyway Friedman got his prize for saying (paraphrase) “MMMM-mmmmm free trade, the wave of the future.” Or something like that. If you really need the exact wording see:
http://www-hoover.stanford.edu/publications/digest/974/friedman.html
    Now I am just wondering here, Friedman is a trained economist, right? I mean he went to school; he studied and finished his degree, right? Somebody help me out here if I am wrong about this. What I am wondering is if he ever studied what free trade is in school because free trade is about mobility of raw materials, capital, labor and products. So how can it be that a prize-winning economist of any sort, can promote “free trade” without ever mentioning the mobility of the labor force? What school exactly did Friedman go to?
    Chakravarthi Raghavan puts it this way: “[about the past damage to poor countries caused by free trade] . . . this important condition is normally brushed aside in economic literature by assuming either perfect competition in commodity markets or perfect mobility of labour and capital once administrative barriers to trade are removed.”
http://www.twnside.org.sg/title/disinte-cn.htm

This is fundamental to Interstate Commerce, so revered in the US; they should know about these things. To prohibit a Texan from going to California to seek his fortune in the music industry might seem like a merciful idea but it would be a “restraint of interstate commerce.” Workers in the US and the European Union can go where the work is.  That is fundamental to free trade. But in the Global “Free Trade” Market they cannot.
    In the United States Molly Ivins (Seattle Times, Jan 11, 1999, B5) noticed that the Immigration an Naturalization Service (INS) got a revamping in 1996. More money; more power. Coincidentally this was the year after the WTO was formed in Uruguay. The INS budget was increased to nearly a billion dollars a year; more than the FBI, more than the Drug Enforcement Administration with their famous war on drugs, and more than Customs. Check bouncing is now a deportable crime for LEGAL immigrants. The INS now sports 15,000 armed officers with arrest powers. Says Molly, who noticed the focus of arrests on Asians, Africans, Cubans, Latin Americans and Haitians, “... you notice that immigrants from Europe or Australia do not seem to end up languishing in the hoosegow for years while the INS looks over their paperwork.” But Cubans do. A Cuban who bounces a check can now get a “life sentence” because they are not deportable, since the US does not have diplomatic relations with Cuba because of ... umm... Cuba's human rights abuses.

When the labor force is locked in by passport and visa laws, we do not have free trade. When refugees are turned away because they are “economic migrants” it is sheer quackery to suggest that money and merchandise should move freely without borders in the name of free trade.
    To argue against this thesis is to argue in favor of lying, deceit and duplicity... but that's just what today's economists argue. As one recent critic put it, for example, “Now let’s examine the impact of removing passport and visa laws: squarely in the hip pocket.”
    What our critics always ignore is that the other solution — the easier solution  — is to stop promoting the fundamentalist free trade dogma of the IMF, the World Bank, GATT, NAFTA, FTAA, MAI, GATS etc. That is, if our critic cannot bring himself to opening up the borders then the obvious solution is to stop the lying and duplicity. And since we do not in fact have free trade then all of the other trade policies become equally questionable.
    Yet the policies of these institutions always remains the same: austerity policies or structural adjustment policies, like user fees for essential services like primary health and education or abrupt increases in the price of water in the name of market 'reforms,' more layoffs, less government spending on social programs, less credit for small farmers and small businesses, more privatization, pressure to export, slashing of workers' rights and environmental standards, liberalization of trade policies — all of these policies have nothing to do with “free trade” because “free trade” does not exist. The policies are clearly aimed to produce higher profits for multinational corporations. And none of these trade organizations have shown any willingness to open their meetings to discuss matters such as these.

The question remains: if economists are willing to lie about free trade then where does the doctrine of deceit stop?   For more on that topic try:
http://www. prospect.org/archives/V11-7/galbraith-j.html
"How the Economists Got It Wrong"
James K. Galbraith

also, The French Economics Students Revolt:
post-autistic economics newsletter (in English)
http://www.paecon.net
 
 

BUYING THE WORLD
With money pulled from a hat.
 

“The trade deficits started modestly in 1975,” wrote Richard Stimson (Playing with the Numbers: How So-called Experts Mislead Us about the Economy  1999) and here are some late figures on that.”

        1995    $180 billion
        1996      186 b
        1997      198 b
        1998      298 b
        1999      372 b
        2000      409 b

To date the US has now bought a modest 3 trillion dollars worth of the world's finest commodities with money conjured up with the help of a magic wand. Today the US is buying the globe at the rate of over a billion dollars a day.
And the best part is that you can conjure up and lend US dollars from nothing, but you get paid back in uranium, gold, copper, oil, grains, vegetables... all sorts of nice things. The question remains unanswered: why do southern countries fall for this stuff?

This link may help explain things:
In Focus: Multilateral Debt Burden by Soren Ambrose
“Key Point: The IMF and the World Bank are 'preferred creditors' who gain power over impoverished countries as the amounts owed to them increase.”
http://www.foreignpolicy-infocus.org/briefs/vol5/v5n04debt.html
And what will happen when the poor suckers in the South figure it out? Well, then we go to Plan B: Star Wars.
“The U.S. Space Command, set up by the Pentagon in 1985, describes itself in  “Vision for 2020” this way: 'US Space Command dominating the space  dimension of military operations to protect US interests and investment.”
Some would question the term “investments” when money in the US is simply invented by “credit.”
http://www.space4peace.org
From Karl Grossman, professor of journalism at the State University of New  York College

Since 1980 the US has bombed Syria, Lebanon, Nicaragua, Iraq, Sudan, Yugoslavia. What do these countries have in common? They are all non-members of the WTO. Nicaragua joined later. As Gore Vidal observed: “The United States is always at war; perpetual war for perpetual peace.” And it looks like the wars of the  future will be fought against non-WTO members.

THE BOTTOM LINE
Poor countries producing commodities cannot compete against rich countries producing credit money.
 

From the Ecologist magazine, Dec 2000/Jan 2001, Vol 30 No. 9, p. 28
“There have been currency crises in 87 countries since 1975.”

Ismail Serageldin, again
“Anyone who claims that the best system we can devise is one that allows the yen/dollar exchange rate to fluctuate from 120 to 80 to 120 — a swing of 50 per cent in each direction over an 18 month period — must be asked to think again.”
 

Never in the history of the world have so many countries had such unstable banking systems, and the cause is the foreign currency exchange market as well as the free movement of money globally. The cause of this is what some have called “high-tech” economics. Macro economics which says that currencies have nothing whatsoever to do with commodities.

Exchange rates are not determined by anything real like the value of labor or commodities. Like the stock market (anyone heard of a “bubble” lately?) values of currencies are determined by the herd mentality of investors where, as even Michalos noted above, “noise rather than information drives many of their decisions.”
    Values are determined by investors in New York, London, Singapore and Tokyo who bet on their favorite team. Does the dollar look good today? Then place your bets, gentlemen. If enough of the gents bet on a “hard” currency like the dollar, then the dollar goes up and they can celebrate their remarkable perspicacity with Cuban cigars and Russian vodka.
    This is like having the score of a baseball game determined by letting a gaggle of sports aficionados argue about each team's merits and then determining the final score based on the results of the debate, rather than what actually happened on the field.
In case you didn't catch that the first time: it's like letting the audience of the David Letterman Show determine the score of a baseball game, a week before the game, by screaming into the Applause-O-Meter ... and then calling the audience, “experts.”
    Now, if you imagine that one of the teams is made up of Southern and Eastern Players while the opposing team, as well as the aficionados, are of Northern and Western extraction, then the picture comes into sharper focus.  We do this after having passed through the “Age of Enlightenment,” and Tom Paine's “Age of Reason” and arrived at the information age unscathed.
 

The following is an extremely condensed version of the article “The Time Value of Money” BY  Bob Blain, Ph.D. Professor of Sociology at Southern Illinois University at Edwardsville. posted at:
http://www.siue.edu/~rblain/xrat94-5.htm
 

       (The original chart shows 74 countries)

                                    Exchange           Exchange Rate
                            Rate                 in Minutes
Japan                           45.61                     2.4
Switzerland                 46.65                      2.5
Germany                     45.71                       3.0
United States                1.49                       3.1
El Salvador                  12.61                    82.7
Honduras                       8.02                   259.8
Bangladesh                  50.92                   415.5
 

FIRST COLUMN: Exchange Rate This is the country's exchange rate in 1995 - that is: $1.49US will buy you 145 Japanese Yen, or 8.02 Honduran Lempira.

SECOND COLUMN: Exchange Rate in Minutes This is the amount of time, on average, a citizen in each country spends to earn that amount of money. That is: for 2.4 minutes, a Japanese worker can buy 415 minutes (nearly 8 hours) of Bangladeshi time via the currency exchange casino.

Economists have no problem with this state of affairs. As Richard Stimson said in his book, “Probably more economists agree on the issue of free trade than any other question.” But there is a niggling question here, and Blain puts it this way:
“Are these differences due to differences in productivity? If that were so, we should expect the products of the most productive countries to be cheaper, not more expensive, than the products of less productive countries. Instead, exchange rates make the products of the supposedly most productive countries more expensive than those of the least productive countries. It is directly opposite to what fair price would dictate.”

The above is by no means the definitive article on exchange rates, but it demonstrates that there are simple means available to examine and determine fairer exchange rates.  If all the NGOs who are working on the Tobin tax, devoted their efforts to solutions to this problem humanity could be looking at some lasting and equitable results by now.
 

SOLUTIONS
 

(1)    REFORM: LASTING REFORM, EGALITARIAN REFORM

On 18 August 2001 the Financial Times of London featured a ‘Back to Bretton Woods’ call from within the highest echelon of power, by the top New York banker, former U.S. Ambassador to France, and Democratic Party influential, Felix Rohatyn.

Let’s start over and this time let’s do it democratically and scientifically.
 
 

© 2001 copyright, J. Walter Plinge, France
Distribute freely if unaltered, including credits, and not for profit or print media.

J. Walter Plinge
b.ob@accesinternet.com
 
 

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