In 1972, Nobel Prize-winning economist James Tobin suggested his now famous currency transaction tax as a way to manage the volatility of exchange rates. He believed that governments were not capable of adjusting to massive movements of funds across foreign exchanges without causinghardship to their people and sacrificing their economic policy objectives. By imposing a small tax (he suggested something around 0.5 per cent) on each exchange of one currency into another, volatility would be reduced as would the effects on national economies.
The idea of this tax was then seized upon as a means of providing revenue for dealing with poverty and environmental issues throughout the world. It appears that the Pope has become a supporter. In a document entitled Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority, released Monday by the Pontifical Council for Justice and Peace, the Vatican recommends “taxation measures on financial transactions through fair but modulated rates with charges proportionate to the complexity of the operations.” Pretty much what Tobin suggested 40 years ago.
The council went even further to recommend a central world bank that “regulates the flow and system of monetary exchanges” to help restore “the primacy of the spiritual and of ethics … and, with them, the primacy of politics—which is responsible for the common good—over the economy and finance.” These instruments would “nourish markets and financial institutions … which are capable of responding to the needs of the common good and universal brotherhood.”
So will we find Benedict XVI camping out with the Occupy movement? Probably not, but his heart seems to be with them.
