Tobin tax

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pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

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So in most countries controls become an incentive for corruption, and different people are treated differently by the law. 252 Tobin tax One proposed capital regulation that has achieved popularity in recent years is the so-called Tobin tax, named after Nobel laureate economist James Tobin, who first suggested it. The Tobin tax is a low tax of 0.05–0.25 percent on all currency exchange, which is advocated by the ATTAC movement among others. The idea is to slow down capital movements and make investors think twice before allowing capital to cross currency exchange boundaries. It’s argued that in this way harmful speculation and major exchange crises could be avoided. Criticism of the Tobin tax has focused on the impossibility of introducing it. In practice, all countries would have to agree on it; otherwise transactions would go through nonsignatory countries.

Perhaps nearly the entire world economy would end up using U.S. dollars. But there is a more serious objection to the Tobin tax: even if it were possible to introduce, it would be harmful. This tax would actually be more harmful to the financial market than regulations by individual countries. The only effect of the latter is to reduce inflow in the country opting for them, whereas a Tobin tax would reduce turnover and the possibility of external financing all over the world, even for countries in great need of such financing. Obstacles to the movement of capital fence it in where it is already—in the affluent countries—and the Third World is the loser. The Tobin tax, therefore, is not really a tax 253 on capital but a tariff that makes trade and investment more expensive. Advocates of the Tobin tax claim that it need not have this effect, because it is so low.

An investor may perhaps partially finance a project, recoup some of the money in profits, increase the investment if it is successful, transfer earnings to other parts of the operation, add capital, buy components from abroad, and so on. With every little transaction taxed, the total cost of the Tobin tax will be many times greater than the low cost suggested by the percentage figure on paper, and so doing business in one’s own currency and in one’s own region will be more profitable. This will lead to a general reduction of the return on capital, and it will cause capital-starved countries to have less access to capital and, consequently, fewer investments. Interest rates will rise, and borrowers will have to pay more for their loans. The adherents of the Tobin tax say that what they really want to get at is sheer currency speculation, not productive investment. But the idea that there is some hard and fast boundary between useful investments and ‘‘useless speculation’’ is completely wrong.


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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Despite these setbacks, the antiglobalization movement did not wholly abandon the idea of the tax, and it retained minority support in Europe and the United Kingdom. The 2007–2009 global financial crisis also brought renewed attention to the Tobin tax idea. In November 2010, the European Commission announced that it supported a financial transactions tax (FTT) at the global level, but a financial activity tax within Europe. Apparently, Germany and Austria support the FTT, but others may not agree. The FTT would be pushed to assist development aid and climate change within the G-20 forum. Among emerging markets, Brazil, Venezuela, and Argentina have also displayed support for some form of a Tobin tax. Support for the Tax Is Found in an Unlikely Location Strangely enough, the idea of the Tobin tax seems to have resonance in the United Kingdom. First among its supporters are charities that are interested in raising revenue to fund aid for development.

He does not want the banks to improve their capital ratios by shrinking their balance sheets. He believes that such actions will only impede the recovery of the global economy and set the stage for more capital erosion through loan losses. Andrew Sheng offers the case for a Tobin tax to finance global public goods. He reviews the origin of the idea in the 1970s and the recent proposal of it by Lord Adair Turner of the Financial Services Authority in London. Sheng says that the world is caught in a collective action trap that encourages a race to the bottom for financial regulation and taxation. He believes that a Tobin tax offers many advantages, including money to finance global public goods, increased data availability on financial transactions, and a tax on bank profits to reduce the bonuses that encourage speculative activity. Sheng estimates that the global value of foreign exchange turnover is $800 trillion and that the value of stock market trading is $101 trillion.

Lewis Carroll, quoting Alice in Wonderland on one of her many predicaments: “Why sometimes I believed as many as six impossible things before breakfast!” 4. Jean-Claude Trichet, “Special Commentary,” Bild am Sonntag, December 27, 2009. 5. Nout Wellink, “The Group of Governors and Heads of Supervision Reach Broad Agreement on Basel Committee Capital and Liquidity Reform Package” (press release, Basel, Switzerland, July 26, 2010), http://www.bis.org/press/p100726.htm. 18 THE TOBIN TAX: CREATING A GLOBAL FISCAL SYSTEM TO FUND GLOBAL PUBLIC GOODS Andrew Sheng The Tobin Tax: Sand in the Wheels of Speculation In the early 1970s, when the US dollar abandoned convertibility against gold and ushered in the era of flexible exchange rates, Yale economist and later Nobel Laureate James Tobin suggested a tax on currency trading to “put sand in the wheels of currency speculation.” As he put it, “The tax on foreign exchange transactions was devised to cushion exchange rate fluctuations.


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The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

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It could also raise a lot of money — a tax rate of 0.5 per cent would raise $150 billion a year world-wide on one estimate.6 Free-market critics of a Tobin tax rely on the argument that it would be hard to enforce because either traders would switch their business to the sort of haven like the Caymans or Bermuda that would be bound to opt out of the tax, or they would devise new financial mechanisms to get round that tax, such as new types of derivatives. The counterresponse is that the bulk of foreign exchange trading by reputable banks would not leave London or New York because of the expense and bother, although even sympathisers admit the Tobin tax would have to be virtually universal and cover every form of foreign exchange transaction. The probable outcome would no doubt be somewhere in between.

Notes 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. See Financial Times special survey, Financial Times, London, 28 October 1996. OECD Financial Market Trends, June 1996. Prime exponents of the wrong-headed approach are Paul Hirst and Graham Thomson, Globalisation in Question. Libération, 14 August 1996. Financial Times, London, 22 October 1996. An Evaluation of the Tobin Tax, Paper presented by Philip Arestis and Malcolm Sawyer at the London Business School, September 1996. For a rehearsal of all the arguments, see The Tobin Tax, ed. Mahbub ul Haq et al., 1996. See The Independent, London, 2 September 1996. Auerbach et al. in Tax Policy and the Economy, ed. Summers and Bradford. Making Democracy Work, Princeton University Press 1993. Printed in Managing the World Economy, ed. Peter Kenen. In Kenen, op cit. In The Virtual Community. Chapter Nine.

The report concluded that Jean-Claude Trichet, the Governor of the Bank of France and symbol of the economy’s subjugation to the financial markets, had lost the support of some members of the government and was in danger of finding the current of politics running against him.4 There is a strong current arguing in favour of taming the markets and continuing to run big budget deficits. Its proponents do not accept the restrictions on policies set by international investors. Members of this school of Globalism and Globaloney 179 thought sometimes call for a tax on foreign exchange deals — the so-called ‘Tobin tax’ after Nobel Laureate James Tobin — to bring the markets to heel. Its supporters are mainly left wing, but it has orthodox financial support too. For instance, Wilhelm Nölling, a former Bundesbank Council member now teaching at Hamburg University, has argued that it would ‘Make speculators think twice before attacking defensive walls erected by central banks and governments’.5 The idea is that such a tax would throw some grit into the machinery of foreign exchange speculation.


pages: 363 words: 92,422

A Fine Mess by T. R. Reid

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It’s also known as an FTT, standing for “financial transactions tax” or “financial trading tax.” This FAT tax is also widely called the “tiny tax,” which seems unlikely but actually makes sense. The financial trading tax that is about to take effect in the European Union has been dubbed the “Robin Hood tax,” because it takes mainly from the rich. In the academic literature, economists generally refer to a tax on financial transactions as a “Tobin tax,” in honor of the American economist James Tobin, a professor at Yale and a Nobel laureate in economics who began preaching the virtues of this form of taxation in the 1960s. When Bernie Sanders went around the country calling for taxes on financial trading during the 2016 presidential campaign—he said the revenue from this tax would finance his plan for free tuition at all public universities—he referred to his version of the FAT tax as the “Wall Street speculation tax.”

(But the Securities and Exchange Commission still imposes a fee—essentially, it’s a tax—on stock trading, known as the Section 31 Fee, to finance its regulation of security markets.) Italy, France, Switzerland, South Korea, and Taiwan all tax stock trades. Some countries put a tax on bond purchases and foreign currency exchange. About a dozen countries have bank account taxes; when you deposit money to your account, or withdraw it, the government takes a small portion of it in tax. Another common form of the Tobin tax—in fact, the type that James Tobin himself initially championed—is a tax on foreign currency transactions. In Brazil, for example, when you convert your dollars into reals, or vice versa, there’s often a tax, ranging up to 6%, in addition to whatever fee the bank wants to charge. One key problem with a FAT is that investors can carry out financial transactions almost anywhere today, and so they tend to buy stocks and bonds, or trade currencies, in the countries that don’t tax those trades.

Gradually, though, they started doing their trading through exchanges in Berlin, or Paris, or New York; it was just as easy, as computer trading became the norm, and the Swedish FTT did not apply. With the volume of trading plummeting in Stockholm year after year, the Swedes finally gave up and repealed their tax, in the hope of keeping some of the business at home. In the aftermath of the global Great Recession of 2008–9, there has been renewed interest all over the world in some kind of Tobin tax. Amid the global downturn, governments everywhere had to use general tax revenues to bail out big banks and investment houses; now they want to impose some kind of tax on the financial industry that will pay for the next round of bailouts, if needed. Some economists argue as well that a well-designed tax could reduce volatility in securities markets and thus make financial crises less likely. Accordingly, national tax agencies and the big finance organizations like the World Bank and the IMF have launched new studies of the FTT.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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This would eliminate all the difficulties and distortions created by differences in national currencies, at the price, of course, of subjecting all nations to a single monetary policy. Judging this scenario a political impossibility, he advanced an alternative solution. What we need, he famously argued, was “to throw some sand in the wheels of our excessively efficient international money markets.”26 His specific recommendation was a tax on international currency transactions, a “Tobin tax,” as it has come to be called. Tobin was in a distinct minority, however, and his plea fell on deaf ears against the background of the post–Bretton Woods zeitgeist. Belief in the efficiency and inevitability of global capital mobility remained strong. The world economy would have to suffer more damage before Tobin’s views would receive a sympathetic hearing from leading economists and regulators.27 The waves of financial crises that buffeted countries who left themselves at the mercy of international capital markets produced severe damage indeed.

These measures, which go well beyond American proposals and would apply also to any American firm that wants to do business in Europe, unleashed a flurry of U.S. lobbying in support of British efforts to water them down.11 Similarly, the European Parliament approved broad regulations governing credit rating agencies in April 2009, drawing complaints from U.S.-based credit rating agencies about the additional costs the new requirements would impose. The French and Germans, joined this time by the British, have pushed for a global tax on cross-border financial transactions (a variant of the Tobin tax we saw earlier), only to be rebuffed by the American administration. Finally, Europeans have taken a much harder line on bankers’ bonuses than Americans. On other issues, it is the Americans who have led the way while the Europeans have resisted tighter controls. President Barack Obama has endorsed the so-called “Volcker rules,” which would impose ceilings on bank size and prohibit banks trading on their own account.

It is striking in each of these cases how positive the OECD view was on the likely effects of capital flows, just months before financial crises struck. 25 As estimated by the Bank of International Settlements. See http://www.forex-brokerage-firms.com/ news/currency-markets-rises.htm. 26 James Tobin, “A Proposal for Monetary Reform,” Eastern Economic Journal, vol. 4, nos. 3–4 (July–October 1978), pp. 153–59. 27 Lord Turner, chairman of the U.K. Financial Services Authority, raised an outcry in August 2009 when he expressed support for a global Tobin tax. This was the first time that a major policy maker from the United States or Britain, the two leading centers of global finance, has come out in favor of the tax. 28 Luc Leaven and Fabian Valencia, “Systemic Bank Crises: A New Database,” International Monetary Fund, Working Paper WP/08/224, September 2008. 29 Guillermo A. Calvo, “Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes,” in his Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy?

When the Money Runs Out: The End of Western Affluence by Stephen D. King

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See, for example, ‘MIP Scoreboard’, at http://ec.europa.eu/economy_finance/ economic_governance/macroeconomic_imbalance_procedure/mip_scoreboard/ index_en.htm (accessed Jan. 2013).   2. J. K. Horsefield (ed.), The International Monetary Fund 1945–1965: Twenty Years of International Monetary Cooperation, vol. 3: Documents (International Monetary Fund, Washington, DC, 1969), at http://www.imsreform.org/reserve/pdf/keynesplan.pdf (accessed Jan. 2013).   3. See, for example, Helmut Reisen, ‘Tobin Tax: Could It Work?’, OECD Observer, 231–2 (May 2002), at http://www.oecdobserver.org/news/archivestory.php/aid/664/Tobin_ tax:could_it_work__.html (accessed Jan. 2013).   4. Of course, if the offending country refused to play ball, the political ramifications would be enormous.   5. See C. Tiebout, ‘A Pure Theory of Local Expenditures’, Journal of Political Economy, 64.5 (1956): 416–24.   6. Daimler-­Benz has operations all over the world.   7. I’m not thinking here of the financial middlemen who hope to receive large bonuses.   8.

In other words, the risk associated with imbalances lies not only with the debtor nations, which may be forced into painful austerity, but also with those creditor nations that may not be able to get their money back. One way to deal with this problem is simply to restrict the scale of cross-­border capital flows with the reimposition of capital controls. That, however, would prevent capital from flowing to those parts of the world producing the highest returns, leaving poorer nations particularly vulnerable. Another would be to impose a Tobin tax – in effect, a way of throwing sand into the works of speculative financial bets – on foreign exchange transactions. The likely result would be the creation of offshore foreign exchange hubs and the shift of financial business from London and New York to newly emerging centres in Asia and the Middle East.3 Imbalances would still exist, but they would simply be channelled through centres able to distance themselves from national – or even international – regulation.

L. 41 Knickerbocker Trust Company 131 Korea 14, 193, 195, 202–4, 205 Krugman, Paul 112–15, 117, 118–19 labour market 115–16, 252 productivity 53 Landes, David 26 Latin American debt crisis 216 Layard, Richard 114, 117 Lehman Brothers 30, 255 Leveson inquiry 148 Libor 126 life expectancy 47 liquidity 84, 90 liquidity trap 72 Liquidity Coverage Ratio (LCR) 83 Little Dorrit (Dickens) 138–9 living standards 11, 27, 158, 169, 180–1 belief in ever rising 13, 34 China 27 Indonesia 197 Japan 23 Korea 195 late 19th century 185, 186 Malaysia 198 post-Second World War 139 US 11, 163 loan-to-value ratios, mortgage 51–2 Long Depression 189–90 loss aversion 40–1 lotteries 164–5 Macroeconomic Imbalance Procedure (MIP) 233 macroeconomic policies 32, 60, 121, 181, 253 Japan 21 macroprudential rules 256 Madoff, Bernie 35 Mahathir Mohamad 198–201, 205 Malaysia 193, 198–201, 205 Malthus, Thomas 37–9 Manchester United 165–6 Marr, Wilhelm 189 Marx, Karl 57, 179–80 Mary Poppins 131–2 May Report 98 Megawati Sukarnoputri 197 Mellon, Andrew 106, 108 Mexico 158 Mieno, Yasushi 21 miners 103–4 Mississippi 163 mistrust creditors and debtors 141 cross-border 176 endemic 147–9 governments 140, 217–18 of money 219–21 and political extremism 227 monetarism 59 monetary policy 58, 68–74, 77–9, 87–9, 97, 111–12 a new monetary framework 245–50 see also Gold Standard; interest rates; quantitative easing (QE) Monetary Policy Committee 90–1 monetary unions 236–7 see also eurozone moral hazard 62 mortgage-backed securities 30, 65, 136–7 mortgages 51–2, 63–5 Napoleon Bonaparte 156 Napoleon III 182 National Bank of North America 131 national incomes 32, 49–50, 141–2, 247 Germany 33 Japan 32 UK 33, 110–11, 112 US 33, 70, 109, 115, 117–18 284 4099.indd 284 29/03/13 2:23 PM Index National Lottery 164–5 nationalism 228 the Netherlands 48 New Deal 108–9 ‘new economy’ of the 1990s 29–30 New Order (Indonesia) 197 New Zealand 187 Nicholson, Viv 50 Nigeria 19 Northern Rock 30, 51–2, 129, 255 Norway 158 Occupy movement 162, 170–1 Office for Budget Responsibility 33 Oliver Twist (Dickens) 43 Osborne, George 231 Overend, Gurney and Co. 131 painkillers 70–1, 89 ‘The Panic of 1873’ 186 Paul, Ron 93 Peasants’ Revolt 213 Pension Protection Fund (PPF) 172 pensioners’ voting patterns 88 pensions 47, 51, 75, 171–3, 174 per capita incomes 27, 49, 159–60, 163 Argentina and Germany 14 China 251 France 101, 105 Germany 101, 105 India 27, 251 Indonesia 197 Japan 21 Korea 202 Malaysia 198 UK 1, 44, 101, 105 US 14, 101, 105 Perón, Eva 16 Perón, Juan 16–17 Pew Center report 173 Pickett, Kate 159 Pigou, Arthur 59 policies and central bankers 65 fiscal 58, 66–7, 69–70, 77–8, 246–7 macroeconomic 21, 32, 60, 121, 181, 253 monetary 58, 68–74, 77–9, 87–9, 97, 111–12 new monetary framework 245–50 political extremism 226–9 politics and central bankers 78, 89–90, 91–5 and economics 24–6, 34, 102, 191–2, 217 and the eurozone 224–5, 237 and expectations 152–3 and income inequality 160–1 and lack of trust 147–8, 149 and monetary regimes 119–20 voters 50, 78, 88, 222, 242–4 poll tax 211 populations, ageing 78, 88, 250 age-related expenditure 48 generational divide 171–4, 241, 243–5 Germany 136 Japan 23, 25 Portugal 50, 146, 158, 191 precious metal standards 183–4 see also Gold Standard prices asset 73 commodity 77, 109, 116–17 rising 157 see also deflation; inflation property sector see housing markets protectionism 214–15 capital controls 16, 199–200, 201, 234 tariffs 16 Protestant work ethic 26, 28 public sector see governments public spending 49–50, 66, 142, 147–8, 203 government spending 58, 109, 119 social spending 45–7 quantitative easing (QE) 72–82, 84–6, 91, 97, 176–7 ratings agencies 234–5 rationing 114–15, 142–3 recessions 2 recovery from the Asian crisis 195–6, 204–5, 206, 208–9 UK in the 1930s 101–2 redistribution by stealth 90 Reform Acts 222, 242–3 regulation 125, 256 dangers of further 214, 251 dollar transactions 177 reduction 168 the regulatory trap 83–4 Statute of Labourers 213 renminbi (currency) 177 Réveillon, Jean-Baptiste 155–6 Ricardo, David 183–4 Richard II 211–12 ringgit (currency) 198 285 4099.indd 285 29/03/13 2:23 PM When the Money Runs Out risk and banks 255–6 creditors and debtors imbalance 234 and financial services 168 and rapid economic change 170 risk aversion 216 Roosevelt, Franklin Delano 107–9, 117–18, 119, 219 Royal Bank of Scotland 30 Royal Navy 99 Russia 117, 135 Rwanda 19 Samuel, Herbert 104 Saudi Arabia 117, 135 savers and banks 136 confidence 65 and illusions 137 and income inequality 162–3 and interest rates 90, 91, 97 and the subprime boom 133–4 schisms between debtors and creditors 174–7, 191 generational 170–4 income inequality 158–70 Schwartz, Anna 59, 106, 188 second-hand car market 123–4 Sierra Leone 163 silver standard 183 SIVs (structured investment vehicles) 129–30 Skidelsky, R. and E. 37 Smith, Adam 39–40, 207 melancholy state 42, 124–5, 159–60 Snowden’s budget 99–102, 105 soccer 165 social contract, between generations 244–5 social insurance 44–8 social security systems 12 social spending 45–7 Soros, George 200 South Korea 14, 193, 195, 202–4, 205 South Sea Bubble 29 space exploration 9–10, 35 Spain deficit 54, 134 and the eurozone 191, 235–6 exports 82 fiscal position 85 government borrowing 144 interest rates 146 political disenfranchisement 95 property bubble 140 suicide of Amaia Egana 153 spending government 58, 109, 119 public sector 49–50, 66, 142, 147–8, 203 social 45–7 stagnation 37–43, 50, 52–3, 158, 219 and political extremism 227–8 Standard & Poor’s 80 ‘stately home’ effect 221–3 Statute of Labourers 211, 213 sterling 98–106, 110 Stern Review 38–9 stimulus 3–4 and jobs 116 monetary and fiscal 30, 57–8, 181 Paul Krugman 112–15, 118–19 policy 32, 69–70, 82 political debate 205 prior to the financial crisis 67 stock markets 20–1, 30, 193 stock-market crashes 18, 61–2, 66, 99, 186 Straw, Jack 212 structured investment vehicles (SIVs) 129–30 subprime boom 130, 133–4 crisis 190 Suharto 196–7, 205 surpluses 66, 135–7, 204, 232–4 Sweden 158, 204 Switzerland 158, 184 Taiwan 14 Takeshita, Noburo 24 Tanzania 19 tariffs 16 tax avoidance 49, 211, 214 taxation ancien régime and the French Revolution 154–5 death duties 139 medieval poll tax 211 taxpayers 145, 170, 174, 215, 254 technological progress 2–3, 10–11 dotcom bubble 169 and financial industry wages 167 Industrial Revolution 38 Thailand 193, 195 Thaler, R. H. 41 Thatcher, Margaret 59 The Times 100–1, 148 286 4099.indd 286 29/03/13 2:23 PM Index Tobin tax 234 Tocqueville, Alexis de 151–2 training 254 see also education Treasuries 135, 240–1 Treasury View 100–1 Treaty of Versailles 103 trust 121–5, 147–9, 158, 177–8 and the culture of blame 161 declining between creditors and debtors 174–7 and the eurozone 145–6 and the financial industry 125–34 Tunisia 160 Turgot, Anne-Robert-Jacques 155 Turkey 158 Tyler, Wat 212 UBS AG 126 Uganda 19 UK (United Kingdom) 2008 devaluation 81–2 age-related expenditure 48 asset ownership 76 austerity 67–8 deficit 54, 134 economy 33–4, 112, 114–15, 116 equities 172 and the eurozone 214, 228 exports 82 government borrowing 144 growth forecasts 74 income inequality 160–1, 162 inflation targeting 60–1 interest rates 61, 71, 85, 146 liabilities 240 mortgages 51–2, 63 national income 32, 110–11, 112 per capita incomes 1, 44, 101, 105 precious metal standards 183 public spending 50 quantitative easing (QE) 84–5 social insurance 44–8 sterling in the 1920s 98–106 voters 88, 222, 242–3 unemployment 102, 104, 114, 116, 235 US Treasuries 135, 240–1 USA (United States of America) benefits 203 budget deficits 53–4, 118 Coinage Act, 1873 184–5 confidence in banks 125 Congressional Budget Office forecasts 52–3 debtors to China 139 deficit 134 demographic changes 15 dependent on serial bailouts 61–2 economy 115–16, 186–7, 190 education 12 and globalization 166–7 and the Gold Standard 187–8 government borrowing 71, 144 government debt 80 Great Depression 56, 106–10 growth forecasts 74 household debt 63 housing markets 30–1, 64, 136 income inequality 48, 160–1, 162, 163 interest rates 57, 61, 85, 105, 146 lack of trust 147 liabilities 240–1 life expectancy 47 living standards 11 national income 32, 70, 115, 117–18 per capita incomes 14, 101, 105 public spending 50 Utah 163 Venezuela 117 Volcker, Paul 59 von Mises, Ludwig 56–7, 60, 68 voters 50, 78, 88, 222, 242–4 Wadlow, Robert 23 wages executive pay 48 in the financial industry 167 warfare 209–14 Washington Consensus 192–3, 194, 199 Washington Mutual 30 Weber, Max 26, 28 Weimar Republic 55–6, 89 The Who 48 Wilhelm I 182 Wilkinson, Richard 159 Wisconsin 173 Wonga 137 work ethic 26, 28 Yellen, Janet 64–5, 113 Zimbabwe 78, 89 the ‘zombie’ trap 82–3 287 4099.indd 287 29/03/13 2:23 PM 4099.indd 288 29/03/13 2:23 PM

Global Governance and Financial Crises by Meghnad Desai, Yahia Said

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Asian financial crisis, bank run, banking crisis, Bretton Woods, capital controls, central bank independence, corporate governance, creative destruction, credit crunch, crony capitalism, currency peg, deglobalization, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, floating exchange rates, frictionless, frictionless market, German hyperinflation, information asymmetry, knowledge economy, liberal capitalism, liberal world order, Long Term Capital Management, market bubble, Mexican peso crisis / tequila crisis, moral hazard, Nick Leeson, oil shock, open economy, price mechanism, price stability, Real Time Gross Settlement, rent-seeking, short selling, special drawing rights, structural adjustment programs, Tobin tax, transaction costs, Washington Consensus

Beginning with the case of Chile, price-based capital controls were established in 1991; capital inflows were subject to a flat rate foreign-currency deposit in the Central Bank, reaching a peak value of 30 per cent. This was originally meant to last for only a three-month period, but was later extended to twelve months.37 There was an alternative to this deposit (also used in Colombia), which was to pay the Central Bank a sum equivalent to the opportunity cost of the deposit – this made it into a ‘Tobin-type’ tax, as it was equivalent to a fixed cost for certain types of external borrowing. By Tobin tax standards, however, this tax was very high (about 3 per cent for one-year inflows during booms in the capital market),38 and tended to fluctuate in response to changes in certain macroeconomic factors, such as international interest rates.39 This tax was aimed at having a counter-cyclical role, which is why it was raised during periods of rapid expansion, and lowered (even to a zero rate in both countries) when necessary (for example in the aftermath of recent financial crises).40 Furthermore, controls on capital inflows have not been limited to reserve requirements; for example, until very recently all inflows (including direct investment and portfolio flows) were subject to a one-year minimum stay requirement.

In terms of volume, net equity securities and ‘other’ investments, which up to 1995 represented a major component of total net private inflows, reacted quite extraordinarily to the imposition and strengthening of controls; in fact, they actually vanished from the scene altogether. However, in both instances, these disappearing acts lasted for just one year! So, the basic evidence on the effect of controls in Chile in terms of volume of inflows seems to tend towards significant but short-term effects. Of course, this phenomenon is not independent from the level that these price controls actually reached (which, as mentioned earlier, although high for a standard Tobin-tax level, were lower than those of Colombia, and, in practice, much milder than Malaysia’s controls in 1994); unfortunately, there is no sufficient data from which to construct a proper measurement for the relevant elasticity. 142 Gabriel Palma 5.0 US$ (1999) billions 5.0 2.5 2.5 0 0 Capital controls imposed Capital controls strengthened –2.5 –2.5 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Figure 7.18 Chile: net equity securities and other investment (IMF), 1988–97.

-S. 95 Smithsonian Institute agreement 44, 46 Index 161 South Korea 49, 97, 101–2, 117, 119, 137–9 sovereignty: monetary 58–9, 63–6; national 73–4 special drawing rights (SDRs) 46, 50–3 speculation in risky assets 37–40 Sprague, O. 35 stagflation 2, 13, 15 Stiglitz, J.E. 92, 152 stop-go policies 48 stress tests 62 structural adjustment policies 13–14, 48–9, 54 Summers, L.H. and V.P. 120 supplemental reserve facility 57 surveillance 47, 56, 59–65 Sweden 20 TARGET 52 Taylor, L. 15–16 technology stocks 25 Tequila effect 120, 143 terms of trade 55 Thailand 84–5, 101, 110–11, 114, 117, 130, 133, 139 Tobin tax 140–1 Triffin, R. 46, 53 uncertainty, financial 28 United Kingdom 52 United States 13, 29, 31, 35, 48; Congress 64–5; Treasury 43, 56, 66; see also Federal Reserve Wallerstein, I. 77 Wall Street Crash 12 Walras, L. 8–10 Washington Consensus 49, 56, 72, 125 White, Harry 44 World Bank 43, 55, 77, 80, 100, 104 World.com 6 World Economic Outlook 62 World Trade Organisation 77, 80, 100 worst-case scenarios 62


pages: 511 words: 148,310

Winning the War on War: The Decline of Armed Conflict Worldwide by Joshua S. Goldstein

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Albert Einstein, Ayatollah Khomeini, Bartolomé de las Casas, Berlin Wall, Black Swan, colonial rule, cuban missile crisis, Doomsday Clock, failed state, immigration reform, income inequality, invention of writing, invisible hand, land reform, long peace, microcredit, Mikhail Gorbachev, purchasing power parity, RAND corporation, selection bias, Steven Pinker, Tobin tax, unemployed young men, Winter of Discontent, Y2K

Ideas for radically changing the UN’s funding levels and mechanisms have foundered. The “Tobin tax,” proposed by the late Nobel Prize–winning economist James Tobin, would raise substantial funds to support the UN. It would apply a very small tax to international foreign exchange transactions, which constitute a very high volume of financial flows, trillions of dollars a day. Debate continues about how to implement such an idea, originally conceived as a way to dampen volatility and speculation in currency markets, as well as who would administer it and how the proceeds would be used. Proposals have included funding the UN, economic development in poor countries, global warming measures, or the creation of a kind of insurance fund against financial collapses. Britain, France, and Canada have all, at some point, supported some variation of such a tax. The Tobin tax could raise hundreds of billions of dollars a year, far more than would be needed to supercharge the current few billions devoted to peace operations.

The Tobin tax could raise hundreds of billions of dollars a year, far more than would be needed to supercharge the current few billions devoted to peace operations. But its economic effects are uncertain and it seems politically impractical. In 2001 it received the kiss-of-death endorsement of Fidel Castro. I would not want higher peacekeeping budgets to have to wait for grand schemes such as the Tobin tax to be agreed and implemented. AN INSTITUTION WORTH INVESTING IN It is not just the peacekeeping department that is worthy of dramatically increased support. The UN as a whole can make our world much more peaceful and healthy, if only we would let it. A former Australian foreign minister writes, “It is not widely appreciated just how many different roles are played by the multiple departments, programs, organs, and agencies within the UN system, how many of them have performed outstandingly for many decades, and how very little, comparatively, it all costs.”

Cold War: Holsti 1991: 47, 87, 95, 143, 217, 281, 307. 279 First plank: Boulding 1978: 109. 280 In 2009, six civil wars: Uppsala/PRIO data; Harbom and Wallensteen 2010a. 285 Mai Mai: Reuters 2010. 287 List eleven: Harbom and Wallensteen 2010b; see also Harbom, ed. 2010. 289 Zone of peace: This zone of peace is considerably larger than that envisioned by Singer and Wildavsky 1996 as including only developed democracies; see also Ramsbotham, Woodhouse, and Miall 2005: 62. 289 East Asia bears: Stein Tønnesson, Personal communication, September 2010. 289–90 Germany and Poland: Kulish 2007. 290 Chávez: Romero 2008. 290 Sherlock: Doyle 1894: 22, 26. 290 All is not rosy: Kal Holsti sees more gradations in zones; see Holsti 1996: 148; see also Kupchan 2010; Deutsch et al. 1957. 290 Terrorism kills: Mueller 2006a; Human Security Report Project 2007. 291 Hobbes: Hobbes 1651/1996: 88–89. 291 Spill over: Collier 2007b: 126. 291 The conditions favorable: Hegre and Sambanis 2006. 292 Most robust: Doyle and Sambanis 2006: 34. 292 Best predictor: Fearon 2008: 293. 292 Saakashvili: Chivers and Schwirtz 2008. 292 One study estimated: Cited in Mack 2007: 526; see also Stewart and FitzGerald 2001a: 2. 292 Tax revenues: Collier 2009: 206. 293 Why aren’t the rest: Regan 2009: 23–24, 35. 293 Conflict trap: Collier et al. 2003: 1, 101–03; Collier 2007b: 7, xi. 293 Also keeping countries: Collier et al. 2003: 104; see also Collier 2007b: 27. 293 In both marginalized: Collier et al. 2003: 107; Collier 2007b: 35. 294 Development in reverse: Collier et al. 2003: 2, 106; Collier 2007b: 27; Collier 2007a: 211; see Stewart and FitzGerald 2001b: 230–32, 240–41. 294 About three-quarters: Collier 2007b: x, 17. 294 Two independent statistical: Collier 2007a: 200–02; Fearon and Laitin 2003. 294 Primary commodity exports: Wood 2003b; Collier 2007a: 205; Ron 2005; Lujala, Gleditsch, and Gilmore 2005. 294–95 Resource curse: Drelichman and Voth 2008; see Ross 2008. 295 Botswana: Collier et al. 2003: 126. 295 Review of fourteen studies: Ross 2004; see Ross 2006, Fearon 2005; Ross 2008. 295 More complex results: Hegre et al. 2001; see also Mansfield and Snyder 2005; Gat 2010: 89; Ottoway 2007: 603, 604; Fortna and Howard 2008: 294. 295 In very poor countries: Collier 2009: 20–21, 49. 295 Caused more misery: Harff and Gurr 2004: 1, xii. 296 Tsunami: Gurr 2000: xiii, 203, 204, 211. 296 At the root: Gurr 2000: 3, 195; Collier 2009: 51, 56; see also Lake and Rothchild 1998: 5–6. 296 Somalis: Keller 1998: 278. 296 Most ethnic wars since 1960: Gurr 2000: 197, 223, 203. 296 275 sizable groups: Harff and Gurr 2004: 3–5. 296 Relationship between ethnic divisions: Wood 2003b: 251–52; see Collier 2007a: 201–213. 296–97 Fractionalization. . . . mobilization: Doyle and Sambanis 2006: 37–39. 297 Political repression: Collier 2007b: 23, 25; Fearon and Laitin 2003. 297 Norwegian: Buhaug and Gleditsch 2008: 230. 297 Confidence building. . . . minimal representation: Rothchild and Lake 1998: 203 209, 210. 298 Irregular war creates zones: Kalyvas 2006: 11–12, 88, chapters 3–5. 298 Warring parties use violence: Kalyvas 2006: 12, 111, 145, 45, 46, 28, 27. 298–99 But only the local: Kalyvas 2006: 89, 92. 299 Dominant but incomplete: Kalyvas 2006: 14, 59, 174. 299 Cycles of denunciation: Kalyvas 2006: 147–49, 167, 330, 332, 338, 333. 299 Not a war, but a disease: Antoine de Saint-Exupéry, quoted in Kalyvas 2006: 334. 299–300 These personal motives appeared: Des Forges 1999: 10, 11, 90. 300 Rational economic agents: Collier 2007a: 216; 198, 199; see also Hultman 2008. 300 Control warlords: Shawcross 2000: 29. 300 War reporter: Hedges 2002: 20, 22. 300 Some researchers take: Regan 2009: 9, 19–23. 301 And individual motives: Wood 2003a: 2, 12, 18, 227–28. 301 Feasibility: Collier 2009: 135, 132, 133. 301 Diaspora communities: Collier 2007a: 210; Collier et al. 2003: 162–63. 301–02 Wars end in different ways: Licklider 1995; Toft 2009: 6, xi, 5. 302 The central issue: Walter 2002: 3, 4, 6. 302 Peacebuilding trumps: Doyle and Sambanis 2006: 48, 45, 5. 302 In Central America: Peceny and Stanley 2001. 302 Hills of Bangladesh: Fortna 2008: 50–55. 303 After a war: Collier 2007a: 211–13. 303 Regarding economic growth: Collier 2007a: 215; Collier 2007b: 27. 303 In recovering economically: Collier et al. 2003: 166. 303 Two points of intervention: Collier 2007b: 177–78. 304 Not to take anything: Francesch et al. 2008: 19; see also Fisas 2010. 304 Continue jockeying: Durch 2006b: 595; see also Stedman 2002. 305 Blunt fact: Kennedy 2006: 98. 305 High-value commodities: Durch 2006b: 595. 305 Pieces of a mirror: Hedges 2002: 119. 305 Striking similarities: Krippner and McIntyre 2003: 4; see also Shay 1994. 305 Spent fifteen years: Hedges 2002: 3, 38, 40. 305–06 One way to deal: Cohen 2001: 1, 5, 6, 119. 306 Denial is literal: Cohen 2001: 7, 103. 306 Atlacatl: Cohen 2001: 135–36. 306 Denial is always partial: Cohen 2001: 22, 11, 117. 307 Truth Commission: Cohen 2001: 227. 307 What are missing: Doyle and Sambanis 2006: 19. Chapter 12 308 The second largest: Erlanger 2009. 310 Surprisingly resilient: Shawcross 2000: 299; Kennedy 2006: 110 ; Bellamy, Williams, and Griffin 2004: 8. 311 In assessing the UN’s: Pérez de Cuéllar 1997: 16–17, 36–37. 311 Pushed to the wall: MacFarquhar 2009a; see Banerjee 2008: 187. 311 Flag is not enough: MacFarquhar 2008. 311 Plane was shot down: Shawcross 2000: 403, 38. 312 Tobin tax: Diehl 2008: 113; Castro 2001. 312 Australian: Evans 2008: 176. 312–13 Permanent missions: Prantl 2006: 75; Data from globalpolicy.org/security/data/tabsec.htm. 313 Plane of his own: Traub 2006a: 221. 313 No enforcement. . . . race against time: Shawcross 2000: 34, 45. 313 Power and prestige: O’Brien 1962: 64. 313 Pretension and grandiosity: Babbin 2004: 196. 313 In late 1954: Traub 2006a: 11. 314 Test of the authority: Urquhart 1993: 336. 314 Considerable freedom: O’Brien 1962: 269. 314 Sensible notion: Weiss 2009: 180. 314 U.S. public opinion: Worldpublicopinion.org 2007: 9–10, 5. 316 Military policy expert: O’Hanlon 2007: 323, 321, 328, 319–28. 316 RAND: Dobbins et al. 2007: 4–5, 258, 6, 256. 316 Once war starts: Doyle and Sambanis 2006: 43. 317 Ounce of prevention: Urquhart 1972: 524; Annan 2002: 2, 11 ; Stares and Zenko, 2009. 317 $200 billion: Cited in Annan 2002: 1–2. 317 Early-warning: Carnegie Commission 1997: 43–48; see also Edwards 1999: 109. 317 As Annan notes: Annan 2002: 1, 19, 35, 27. 317 Annan complains: Annan 2002: 45; see Melander, Möller, and Öberg 2009. 317–18 OSCE: Ramsbotham, Woodhouse, and Miall 2005: 127–29, 110–12. 318 Cost $11 billion: Zartman 2005: 203, 204. 318 Medical researcher: Hamburg 2002: x; Stanford Prevention Research Center n.d. 318 Hamburg went on: Carnegie Commission on Preventing Deadly Conflict 1997; Hamburg 2008; Hamburg 2002: 308. 319 State Department poll: Ruggie 1996: 33. 319 Who do you think: Traub 2006a: 8, 16. 319 During the Reagan: Pérez de Cuéllar 1997: 9, 10, 12. 319–20 After 1994: Ruggie 1996: 7. 320 Jesse Helms: Traub 2006a: 131–35; see also Shawcross 2000: 33. 320 Richard Holbrooke: Traub 2006a: 136–38, 143. 320 Tone shifted again: Traub 2006a: 153; see Bolton 1994; Weiss 2009: 2; Doyle and Sambanis 2006: 2. 320 Obama Administration: MacFarquhar 2009b; UNA-USA 2010. 321 State-centric: Weiss 2009: 2, 19. 321 192 units: Garrett 1999: 30. 322 Personal setting: See Long and Brecke 2003. 322 Limits to sovereignty: Holsti 1996: 191. 323 World’s business: Evans 2008: 5, 11, 175. 323 Breakaway Georgian: Malcomson 2008: 13. 323 Security Council, however: Bellamy, Williams, and Griffin 2004: 3; see also Garrett 1999: 67. 323 UN Charter says: See Donnelly 2003: 243. 324 Humanitarian intervention: Thakur 2007: 399; Mingst and Karns 2007: 109–10; Garrett 1999: 4, viii; see also Zartman 2005: 1. 324 Came to a head in Kosovo: Donnelly 2003: 258, 259. 324–25 Long predates: Garrett 1999: 9; Bass 2008: 3–8. 325 Profoundly national. . . . 1990s: Wheeler 2000: 1, 8; see also Donnelly 2003: 179, 242 ; Seybolt 2007: 270. 325 Annan supported the concept: Quoted in Traub 2006a: 100. 325 Potential weakening. . . . driven more: Wheeler 2000: 285, 300. 325 G77: Traub 2006a: 101; see Marten 2004. 325 Set up the commission: International Commission on Intervention and State Sovereignty 2001. 325–26 In 2008: Albright 2008. 326 Despite the resilience: Kennedy 2006: 77; O’Brien 1962: 3; Pérez de Cuéllar 1997: 3. 326 Trick-or-treat: Rubinstein 2008: 1–2. 326 Symbolic. . . . moribund: Rubinstein 2008: 3. 327 International Day: UN 2008.

Power Systems: Conversations on Global Democratic Uprisings and the New Challenges to U.S. Empire by Noam Chomsky, David Barsamian

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Chelsea Manning, collective bargaining, colonial rule, corporate personhood, David Brooks, discovery of DNA, double helix, drone strike, failed state, Howard Zinn, hydraulic fracturing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, land reform, Martin Wolf, Mohammed Bouazizi, Naomi Klein, new economy, obamacare, Occupy movement, oil shale / tar sands, pattern recognition, Powell Memorandum, quantitative easing, Ralph Nader, Ralph Waldo Emerson, single-payer health, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, Tobin tax, union organizing, Upton Sinclair, uranium enrichment, WikiLeaks

On the other hand, consensus can go too far, like any other tactic. I think the criticism that Occupy hasn’t come up with actual proposals or demands is just not true. There are lots of proposals that have come out of Occupy. Many of them are quite feasible, within reach. In fact, some even have mainstream support from places like the Financial Times, things like a financial transaction tax, which makes good sense. That’s the former Tobin tax, put forward by the economist and Nobel laureate James Tobin, sometimes called the Robin Hood tax. Yes. A financial transaction tax would make a big difference in some countries, if it were done properly. The absolute refusal to tax the superrich is another part of the Republican catechism. Going after that—and dealing with radical inequality—makes perfectly good sense. So does creating jobs.

Humanitarian Law Project, 70–71 Syria, 63, 95, 106 Taft-Hartley bill, 40 Taiwan, 9, 21, 169 Taliban, 15–16, 98, 100 taxes, 38, 75–76, 82, 159 cuts, 41–42 Tobin, 76 Tea Party movement, 28 technology, 9, 145–46 television, 67, 102 terrorism, 14, 21, 96, 109, 114, 139 against Kurds, 89–92 military detention and, 70–73 9/11 attacks, 14–16, 139 theory of mind, 132 Tobin, James, 76 Tobin tax, 76 torture, 37, 89, 92, 109, 145 totalitarianism, 64, 79, 158 trade, 9, 87–88 deficit, 9 Trans-Afghanistan Pipeline (TAPI), 17–18 Trilateral Commission report, 150, 151 Truman, Harry S., 24 Tunisia, 44–45, 48–49, 53, 67, 112–13 Turkey, 51, 89–94 human rights violations, 89–92 -Israel relations, 92–94 Kurds, 89–92 Turkmenistan, 17 Twitter, 105, 145 UNASUR, 161 unemployment, 22–23, 38, 66, 76 United Arab Emirates, 8, 15, 49 United Auto Workers, 25 United Nations, 46, 50–52, 115, 162, 163 universal genome, 129 universal grammar, 126–29 universities, 150–53, 165–68 corporatization of, 152, 167–68 sports, 165–66 uprisings, 44–64 Arab Spring, 44–55, 60–64, 67, 112–13, 168 Egypt, 44–49, 60–64 Libya, 50–54 Vietnam War, 1–3, 15, 31, 64, 97 visual system, 141 voting, 81, 84, 117–18 Wallerstein, Immanuel, 77 Wall Street Journal, 54, 169 Walmart, 9 war, 13–18, 20 crimes, 114–17 Warfalla, 50 Washington, George, 3 Weathermen, 74 Weimar Republic, 25, 27–29 Weisskopf, Victor, 149, 154 welfare, 82–83, 84, 87 Western Sahara, 46 “When Elites Fail” (Chomsky), 22 Wiesel, Elie, 94 WikiLeaks, 99, 107–13 Wilson, Woodrow, 13, 23 Wisconsin, labor demonstrations in, 40–43 Wolf, Martin, 78 Wolff, Richard, 88 women’s rights, 79, 150, 177 World Bank, 47 World Trade Organization, 107 World War II, 5, 7, 56, 57, 115–16 Yemen, 49, 114 Yglesias, Matthew, 59, 63 YouTube, 104 Zaire, 17 Zinn, Howard, 1, 22, 78 About the Authors NOAM CHOMSKY is the author of numerous best-selling political works, including Hegemony or Survival and Failed States.


pages: 593 words: 189,857

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

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Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, selection bias, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

In November 2009, mired in a tough campaign for reelection, Brown had his political advisers reach out to David Axelrod to try to get the administration to support a global tax on financial transactions. The so-called Tobin tax was a perennial populist favorite, conceived as a way to reap revenues from financial interests and discourage financial speculation. It had been tried in many countries, and the United States even had a very small tax on equity transactions to help fund the SEC. But Brown’s proposal would have been easily evaded by sophisticated investors, would hurt mostly retail investors, wouldn’t raise much revenue, and would have no effect on speculation. I told Axelrod we couldn’t support it. He wasn’t eager for the President to endorse a global tax increase, anyway. Later that month, Brown and I met privately before a G-20 summit in St. Andrews, Scotland, and he again pitched the Tobin tax. I told him we couldn’t back it, but we were open to other ways of recovering the costs of financial rescues.

I said we were already considering a tax on bank leverage, which we thought would be much more effective in discouraging risky behavior as well as raising revenues to make taxpayers whole. I tried to make it clear I wanted to help him avoid a public conflict with the United States, but he wanted a Tobin tax. Later that day, I sat for an interview with Sky News, the British version of Fox News—also owned by Rupert Murdoch, consistently hostile to Brown and Labour. They asked if I would support Brown’s financial transaction tax, and although I expressed support for his broader objective of getting the financial industry to pay for its rescues, I said we wouldn’t back a Tobin tax. This set off a press frenzy; Brown’s top adviser told Axelrod that I had delivered “quite a hard slapdown.” Brown called me to complain that I had embarrassed him on right-wing TV, but I had warned him where I stood.

Brown called me to complain that I had embarrassed him on right-wing TV, but I had warned him where I stood. He said he really needed me to support him. I again said I couldn’t do that. Brown’s people pressured the White House to walk back my public statement, and my team in Washington asked me if I wanted to clarify it. “Clarify what?” I asked. There was no realistic prospect of a global Tobin tax. It certainly had no chance without our support, so we became a convenient villain. President Sarkozy later told a group of world finance officials in my presence: “We could do it if it wasn’t for Tim!” But even the continental Europeans couldn’t agree on one for Europe. Many G-20 countries would end up embracing the better-designed bank leverage tax that we proposed in the United States to cover the expected losses in TARP. But we got no traction in Congress, even among Democrats, even though we called it a “fee” to try to avoid anti-tax hysteria.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, Plutocrats, plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

It turns out that, among the benefits of the computer age, are not only video games, but also the easy tracking and taxation of the gigantic fortunes of the world’s billionaires. People wanting to conceal income from authorities would then find it no easier to move money undetected around the world than to travel without a passport. Checkmate. Support the international implementation of a Financial Transaction Tax, sometimes referred to as the ‘Robin Hood Tax’ or the ‘Tobin Tax’ The idea of curbing financial speculation by imposing a tax on financial transactions was first proposed by John Maynard Keynes in 1936 during the Great Depression. His purpose wasn’t raising revenue, but rather deterring financial speculation; as he put it: ‘mitigating the ‌predominance of speculation over enterprise’.35 A variation of Keynes’s idea was proposed in 1972 by Nobel Prize-winning economist James Tobin.

Cecchetti & Enisse Kharroubi, ‘Reassessing the impact of finance on growth’, conference draft of paper prepared for the Reserve Bank of India’s Second International Research Conference, Mumbai, February 2012. ‌41 Dean Baker et al., ‘The Potential Revenue from Financial Transaction Taxes’, Working Paper no. 212, Center for Economic Policy Research, December 2009. ‌42 Ron Suskind, Confidence Men: Wall Street, Washington and the Education of a President, 2nd edition (New York: HarperCollins, 2011), p. 365. ‌43 Heather Stewart, ‘Robin Hood tax: 1,000 economists urge G20 to accept Tobin tax’, The Guardian, 13 April 2011. ‌44 Warren E. Buffett has described his concept of the Ovarian Lottery on a number of occasions, including a lecture at the University of Florida School of Business, 15 October 1998. ‌45 Lily L. Batchelder, ‘Taxing Privilege More Effectively: Replacing the Estate Tax with an Inheritance Tax’, Discussion Paper, Hamilton Project, Brookings Institution, June 2007. ‌46 Ibid. ‌47 Institute for Fiscal Studies, The Structure and Reform of Direct Taxation (London: Allen & Unwin, 1978). ‌48 The Commission on Taxation and Citizenship, Paying for Progress: A New Politics of Tax for Public Spending (London: Fabian Society, 2000). ‌49 Ibid., p. 286 ff. ‌50 Bruce Ackerman & Anne Alstott, ‘Why Stakeholding?’


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

One reform suggestion that has been widely discussed is a tax on the value of all financial transactions. Levied at a low rate, such a tax would have little impact on the profitability of long-term investments but would kill the attractions of high-frequency trading, which depends on blisteringly fast arbitrage and microscopic price variations. This idea is often called the ‘Tobin tax’, after James Tobin, the American economist who proposed it in 1972,1 and has received wide support in the European Union. If a Tobin tax could be administered on a basis that was universal in its geographical scope and applied in non-discriminatory fashion to all forms of financial instrument, it would have considerable attractions. But if, as seems inevitable, there are some financial jurisdictions that do not impose the tax – and there is at present no possibility that even the USA would do so – and if, as also seems inevitable, there is no practical way of imposing the tax on a non-discriminatory basis between derivative transactions or other complex instruments and transactions in the underlying securities, the tax is likely to have more undesirable side-effects than benefits.

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62


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Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Doing so threatens the ability of S to extract rent from the public. b. Later, E changes his view, thereby withdrawing the prior threat. c. Still later, E is paid large amounts of money by representatives of S in exchange for services that do not appear particularly onerous. For example, let E = Larry Summers and let S = the financial services industry. In 1989 E was (a) a supporter of the Tobin tax, which threatened to reduce the rent extracted by S. This threat was apparently later withdrawn (b), and in 2008 E was paid $5.2 million (c) in exchange for working at the hedge fund D. E. Shaw (an element of S) for one day a week. However, it is naturally more difficult to witness the negotiations in which specific threats were appeased with specific future payouts. This is a problem that also bedevils Public Choice theory, in which it is likewise difficult to show exactly how a particular politician is remunerated in exchange for threatening businesses with anti-business legislation.

Once the security apparatus was mobilized across more than eighteen different sites across the country in the space of a few days, Zuccotti Park was cleared on November 15, 2011, and the movement essentially collapsed. While brave activists had proven willing to invent new forms of civil disobedience, much of their tweeting and blogging tended to reveal a reversion to themes already promulgated by the usual suspects covered in this volume. When not openly appealing to a lost world, like the “Take Back the American Dream” motif, they would propose “reforms” dating back to the 1980s, such as the Tobin tax on financial transactions, or a “fairness doctrine” for political ads, or an ineffectual public financing scheme for election campaigns. Mostly in the heat of Occupy, disputations over the crisis and financial sector were dominated by backward-looking ambitions and nostalgia for a happier and more prosperous time. Slogans like “We are the 99%” seemed to be calculated so as to be overly inclusive, confusing expansiveness with democracy, and therefore ineffectual.

Andrews Standard & Poor’s Standing Committee on Individual Financial Conflict of Interest Stanford University Starbucks Starr Foundation State Department State Street Bank Steil, Benn Stein, Jeremy Stewart, Jon Stiftung Marktwirtschaft Stigler, George Stiglitz, Joseph about on agnotology on behavioral economics Bhagwati on on economic crisis on EMH on Fannie Mae and Freddie Mac Freefall on macroeconomics Meme Wars Morgenson on on neoclassical orthodoxy on neoliberalism Nobel Prize winner orthodox economics profession on on orthodoxy public profile of “reject the EMH” option on Third Way on “welfare loss,” zombie thought Stratospheric Particle Injection for Climate Engineering project (SPICE) Strauss, Leo Strauss-Kahn, Dominique Structured Investment Vehicle Stulz, Rene Summers, Lawrence about clash with Rajan compared with Shleifer on Council of Economic Advisors DeLong on on “enrichment,” influence of as member of Harvard Corporation named as Rubin’s replacement in Predator Nation as president of Harvard University Quiggin on on Tobin tax Sunstein, Cass Super Sad True Love Story (Shteyngart) Surowiecki, James Suskind, Ron Swagel, Phillip Swan, Elaine Swiss Institute of International Studies (Schweizerisches Institut für Auslandforschung) Szekeley, Al T Taconic Capital Advisors Taibbi, Matt Talbot, Margaret Taleb, Naseem TARP (Troubled Asset Rescue Plan) about Adams on appropriation explained influences on public justification of bailout Wall Street economists on Tax Policy task force Taylor, John B.


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How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

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banking crisis, basic income, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, creative destruction, David Ricardo: comparative advantage, death of newspapers, financial innovation, Francis Fukuyama: the end of history, full employment, happiness index / gross national happiness, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, lump of labour, market clearing, market fundamentalism, Paul Samuelson, profit motive, purchasing power parity, Ralph Waldo Emerson, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, Veblen good, wage slave, wealth creators, World Values Survey, zero-sum game

In his Agathotopia (1989), Nobel Laureate James Meade reckoned that a subsistence income, equal to unemployment benefit, for all citizens could be financed through a combination of capital taxes and profits from state-owned but privately managed investment trusts. It would be set to grow in line with national income.19 Others suggest that the sale of pollution permits, like carbon credits, based on environmental impact, would be enough to finance a basic income of €1,500 in the EU.20 Taxes on capital transactions—known as Tobin taxes—are another potential source of income. In 2001, two American professors, Bruce Ackerman and Anne Alstott, put forward a costed plan for capital endowment based on a tax on private wealth.21 A small step towards a capital endowment for all was Gordon Brown’s “baby bond” scheme, the Child Trust Fund, which he set up as Chancellor of the Exchequer in 2001. This was to have provided a tax-free bond worth up to £800 for every newborn child.* It could have become part of a much larger scheme pooling revenues from social security taxes, capital and transaction taxes, and profits from state investment trusts.

This is most clearly exhibited in the ever expanding financial services industry, the real driver of contemporary capitalism, and the most egregious source of personal and corporate enrichment. Adair Turner, former chairman of the UK Financial Services Authority, has called much financial innovation “socially useless.”40 From our point of view it is worse than that. It is a cause of the insatiability we seek to control. One way to rein in the financial sector would be to tax trades in financial instruments like derivatives. Such “Tobin taxes” would both serve to reduce the power of finance to dictate economic activity and provide revenue for socially desirable objects of public spending. Reducing Advertising The pressure to consume is inflamed by advertising. It is often claimed that the only effect of advertising is to make it easier for people to get what they want. Even if this were true, it would not meet our objective, which is that people should first of all get what they need, not what they want.


pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

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8-hour work day, banking crisis, barriers to entry, basic income, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, mass immigration, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, old age dependency ratio, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional

The Alaska Permanent Fund, established in 1976, was set up to distribute part of the profits from oil production to every legal resident of Alaska. It continues to do so. It is not a perfect model, since its governance can result in the relative neglect of the precariat or tomorrow’s Alaskans relative to today’s. But, like the Norwegian Fund, it provides the nucleus of a capital fund mechanism that could be used to finance a modest basic income, however it might be called. The precariat would also benefit from so-called ‘Tobin taxes’, levied on speculative capital transactions. There are arguments for believing that reducing short-term capital flows would be beneficial in any event. And then there are ecological taxes, designed to compensate for the externalities caused by pollution and to slow or reverse the rapid depletion of resources. In short, there is no reason to think a universal basic income is unaffordable. Internationally, the recent legitimation of cash transfers as an instrument of development aid is promising.

(Maltby) 138 Canada 79, 114 capital funds 176–7 Capitalism and Freedom (Friedman) 156 care work 61, 86, 125–6 careers, leisure 129 cash transfers 177 see also conditional cash transfers (CCTs) CCTs (conditional cash transfer schemes) 140 Cerasa, Claudio 149 Channel 4, call centre programme (UK) 16 charities 53 children, care for 125 China 28 and contractualisation 37 criminalisation 88 deliberative democracy 181 education 73 immigrants to Italy 4–5 invasion of privacy 135 migrants 96, 106–9, 109–10 old agers 83 191 192 INDEX China 28 (Continued) Shenzhen 133, 137 and time 115 wages 43 youth 76 see also Chindia China Plus One 28 Chindia 26, 27–9, 83 see also China Chrysler Group LLC 43 circulants 90, 92 Citizens United vs Federal Election Commission (US) 152–3 civil rights 14, 94 class, social 6–8, 66–7 Coase, Ronald 29 Cohen, Daniel 57, 66, 69 collaborative bargaining 168 collective attention deficit syndrome 127 commodification of companies 29–31 of education 67–72 and globalisation 26 labour 161–2 of management 40 of politics 148–53 re- 41–2 conditional cash transfers (CCTs) 140 see also cash transfers conditionality 140, 175 and basic income 172–3 and workfare 143–5, 166–7 connectivity, and youth 127 contract status 35, 36, 37, 44, 51, 61 contractors, independent/ dependent 15–16 contractualisation 37 counselling for stress 126 Crawford, Matthew 70 credit 44 crime 5, 129–30 criminalisation 14, 145, 146 crystallised intelligence 85 cultural rights 14 de Tocqueville, Alexis 145 de-industrialisation 5, 37–8 debt, and youth 73–4 Delfanti, Alessandro 78 deliberative democracy 180–1, 182 denizens 14, 93–102, 105, 113, 117, 157–8 Denmark 150 dependent/independent contractors 15–16 deskilling 17, 33, 40, 124 developing countries 12, 27, 60, 65, 105–9 disabled people 86–7, 89, 170 discrimination age 84–5 disability 81 gender 60, 123 genetic profiling 136–7 and migrants 99, 101–2 disengagement, political 24 distance working 38, 53 dole (UK) 45 Duncan Smith, Iain 143 Durkeim, Emile 20 economic security 157, 171, 173–6 The Economist 17–18, 33, 52, 137 economy, shadow 56–7 education 10, 67–73, 135–6, 159–60 Ehrenreich, Barbara 21, 170–1 elites 7, 22, 24, 40, 50 criminality 152 and democracy 181 ethics 165 Italian 148 and the Tea Party (US) 151 empathy 22–3, 137 employment agencies 33 employment security 10b, 11, 17, 36, 51, 117 Endarkenment 70 Enlightenment 24, 70 enterprise benefits 11, 12 environmental issues 167 environmental refugees 93 Esping-Andersen, G. 41 ethics 23–4, 121–2, 165 ethnic minorities 86 EuroMayDay 1, 2, 3, 167 European Union (EU) 2, 39, 146, 147 and migrants 97, 103, 105 and pensions 80 see also individual countries export processing zones 105–6 Facebook 127, 134, 135 failed occupationality 21 INDEX family 27, 44, 60, 65, 126 fear, used for control 32 fictitious decommodification 41 financial capital 171, 176–7 financial sector jobs 39–40 financial shock 2008-9 see Great Recession Financial Times 44, 55, 121, 155 firing workers 31–2 Fishkin, James 180 Fletcher, Bill 170–1 flexibility 18 labour 23–4, 31–6, 53, 60, 61, 65 labour market 6, 120–1, 170 Ford Motor Company 42, 43 Foucault, Michel 88, 133 Foxconn 28–9, 43, 105, 137 see also Shenzhen France criminalisation 88 de-industrialisation 38 education 69 leisure 129 migrants 95, 97, 101–2, 114 neo-fascism 149 and old agers 85 pensions 79 shadow economy 56 Telecom 11 youth 65–6 fraternity 12, 22, 155 freedom 155, 167–70, 172 freelance see temporary employment freeter unions 9 Friedman, Milton 39, 156 functional flexibility 36–8, 52 furloughs 36, 50 gays 63–4 General Motors (GM) 42, 43, 54 genetic profiling 136 Germany 9 de-industrialisation 38 disengagement with jobs 24 migrants 91, 95, 100–1, 114 pensions 79 shadow economy 56 temporary employment 15, 35 wages 40 and women 62 youth and apprenticeships 72–3 193 Glen Beck’s Common Sense (Beck) 151 Global Transformation 26, 27–31, 91, 115 globalisation 5–7, 27–31, 116, 148 and commodification 26 and criminalisation 87–8 and temporary employment 34 Google Street View 134 Gorz, Andre 7 grants, leisure 180–2 Great Recession 4, 49–51, 63, 176 and education 71 and migrants 102 and old agers 82 and pensions 80 and youth 77–8 Greece 52, 56, 117, 181 grinners/groaners 59, 83–4 Habermas, Jürgen 179 Haidt, J. 23 Hamburg (Germany) 3 happiness 140–1, 162 Hardt, M. 130 Hayek, Friedrich 39 health 51, 70, 120, 126 Hitachi 84 Hobsbawm, Eric 3 hormones 136 hot desking 53 Howker, Ed 65 Human Rights Watch 106 Hungary 149 Hurst, Erik 128 Hyatt Hotels 32 IBM 38, 137 identity 9 digital 134–5 work-based 12, 15–16, 23, 158–9, 163 Ignatieff, Michael 88 illegal migrants 96–8 In Praise of Idleness (Russell) 141, 161 income security 10b, 30, 40, 44 independent/dependent contractors 15–16 India 50, 83, 112, 140 see also Chindia individuality 3, 19, 122 informal status 6–7, 57, 60, 96, 119 inshored/offshored labour 30, 36, 37 194 INDEX International Herald Tribune 21 internet 18, 127, 139, 180, 181 surveillance 134–5, 138 interns 16, 36, 75–6 invasion of privacy 133–5, 167 Ireland 52–3, 77 isolation of workers 38 Italy education 69 neo-fascism 148–9 pensions 79 Prato 4–5 and the public sector 52, 53 shadow economy 56 and temporary employment 34 youth 64 Japan 2, 30 and Chinese migrants 110 commodification of companies 30 and migrants 102, 103 multiple job holding 119–20 neo-fascism 152 pensions 80 salariat 17 subsidies 84 and temporary employment 15, 32–3, 34–5, 41 and youth 66, 74, 76, 77 job security 10b, 11, 36–8 Kellaway, Lucy 83–4 Keynes, John Maynard 161 Kierkegaard, Søren 155 Klein, Naomi 148 knowledge 32, 117, 124–5, 171 labour 13, 115, 161–2 labour brokers 33–4, 49, 110, 111, 167, 168 labour flexibility 23–4, 31–45 labour intensification 119–20 labour market flexibility 6 labour security 10–11, 10b, 31 Laos 112 lay-offs see furloughs Lee Changshik 21 legal knowledge 124–5 legal processing 50 Legal Services Act of 2007 (UK) (Tesco Law) 40 leisure 13, 128–30 see also play lesbians 63–4 Liberal Republic, The 181 Lloyds Banking Group 50–1 localism 181–2 long-term migrants 100–2 loyalty 53, 58, 74–5 McDonald’s 33 McNealy, Scott 69 Malik, Shiv 65 Maltby, Lewis 138 Manafort, Paul 152 management, commodification of 40 Mandelson, Peter, Baron 68 Maroni, Roberto 97 marriage 64–5, 92 Martin, Paul 141 Marx, Karl 161 masculinity, role models for youth 63–5 Massachusetts Institute of Technology 68–9 Mayhew, Les 81 Mead, Lawrence 143 mergers, triangular 30 Mexico 91 Middle East 109 migrants 2, 13–14, 25, 90–3, 145–6 and basic income 172 and conditionality 144 denizens 93–102, 157–8 government organised 109–13 internal 105–9 and queuing systems 103–5 and recession 102–3 Mill, John Stuart 160 Morris, William 160, 161 Morrison, Catriona 127 multinational corporations 28, 92 multitasking 19, 126–7 National Broadband Plan 134 near-sourcing/shoring 36 Negri, A. 130 neo-fascism 25, 147–53, 159, 175, 183 Netherlands 39, 79, 114, 149–50 New Thought Movement 21 New York Times 69, 119 News from Nowhere (Morris) 161 Niemöller, Martin 182 INDEX non-refoulement 93 Nudge (Sunstein/Thaler) 138–9 nudging 138–40, 155–6, 165, 167, 172, 178, 182 numerical flexibility 31–6 Obama, Barack 73, 138–9, 147, 148 Observer, The 20 occupations associations of 169–70 dismantling of 38–40 freedom in 162–4 obsolescence in 124 offshored/inshored labour 30, 36, 37 old agers 59, 79– 86, 89 old-age dependency ratio 80–1 Organisation for Economic Co-operation and Development (OECD) 27 origins of the precariat 1–5 outsourcing 29, 30, 33, 36, 37, 49 Paine, Thomas 173 panopticon society 132–40, 142–3 Parent Motivators (UK) 139–40 part-time employment 15, 35–6, 51, 61, 82 Pasona 33 paternalism 17, 29, 137, 153, 178, 182 nudging 138–40, 155–6, 165, 167, 172, 178, 182 pensions 42, 51, 52, 76–7, 79–81, 84–6 PepsiCo 137 personal deportment skills 123 Philippines 109 Phoenix, University of 71 Pigou, Arthur 117, 125 play 13, 115, 117, 128, 141 pleasure 141 Polanyi, K. 163, 169 political engagement/disengagement 24, 147 Portugal 52, 56 positive thinking 21, 86 Prato (Italy) 4–5 precariat (definition) 6, 7–13 precariato 9 precariatisation 16–18 precarity traps 48–9, 73–5, 114, 129, 144, 178 pride 22 prisoners 112, 146 privacy, invasion of 133–5, 167 private benefits 11 productivity, and old age 85 proficians 7–8, 15, 164 proletariat 7 protectionism 27, 54 public sector 51–4 qualifications 95 queuing systems 103–5 racism 97–8, 101, 114, 149 Randstad 49 re-commodification 41–2 recession see Great Recession refugees 92, 93, 96 regulation 23, 26, 39–40, 84, 171 Reimagining Socialism (Ehrenreich/ Fletcher) 170–1 remote working 38, 53 rentier economies 27, 176 representation security 10b, 31 retirement 42, 80–3 rights 14, 94, 145, 163, 164–5, 169 see also denizens risk management 178 Robin Hood gang 3 role models for youth 63–5 Roma 97, 149 Rossington, John 100 Rothman, David 88 Russell, Bertrand 141, 161 Russell, Lucie 64 Russia 88, 115 salariat 7, 8, 14, 17, 32 Santelli, Rick 150 Sarkozy, Nicolas 69, 97, 149 Sarrazin, Thilo 101 Schachar, Ayelet 177 Schneider, Friedrich 56 Schwarzenegger, Arnold 71 seasonal migrants 98–100 security, economic 157, 171, 173–6 self-employment 15–16, 66, 82 self-esteem 21 self-exploitation 20, 122–3 self-production 11 self-regulation 23, 39 self-service 125 services 37–8, 63 195 196 INDEX Sex, Drugs and Chocolate: The Science of Pleasure (Martin) 141 sex services 63 sexism, reverse 123 shadow economy 56–7, 91 Shenzhen (China) 133, 137 see also Foxconn Shop Class as Soulcraft (Crawford) 70 short-time compensation schemes 55–6 side-jobs 119–20 skill reproduction security 10b skills 157, 176 development of 30, 31, 40 personal deportment 123 tertiary 121–4 Skirbekk, Vegard 85 Smarsh 138 Smile or Die (Ehrenreich) 21 Smith, Adam 71 snowball theory 78 social class 6–8, 66–7 social factory 38, 118, 132 social income 11–12, 40–5, 51, 66 social insurance 22, 104 social memory 12, 23, 129 social mobility 23, 57–8, 175 social networking sites 137 see also Facebook social rights 14 social worth 21 sousveillance 134, 135 South Africa, and migrants 91, 98 South Korea 15, 55, 61, 75 space, public 171, 179–80 Spain BBVA 50 migrants 94 and migrants 102 pensions 79 and the public sector 53 shadow economy 55–6 temporary employment 35 Speenhamland system 55, 143 staffing agencies 33–4, 49, 110, 111, 167, 168 state benefits 11, 12 status 8, 21, 32–3, 94 status discord 10 status frustration 10, 21, 63, 67, 77, 78, 79, 89, 114, 123, 160 stress 19, 126, 141, 141–3 subsidies 44, 54–6, 83–6, 176 suicide, work-related 11, 29, 58, 105 Summers, Larry 148 Sun Microsystems 69 Sunstein, Cass 138–9 surveillance 132–6, 153, 167 see also sousveillance Suzuki, Kensuke 152 Sweden 68, 110–11, 135, 149 symbols 3 Taking of Rome, The (Cerasa) 149 taxes 26 and citizenship 177 France 85 and subsidies 54–5 Tobin 177 United States (US) 180–1 Tea Party movement 150–1 technology and the brain 18 internet 180, 181 surveillance 132–6 teleworking 38 temporary agencies 33–4, 49, 110, 111, 167, 168 temporary employment 14–15, 49 associations for 170 Japan 9 and numerical flexibility 32–6 and old agers 82 and the public sector 51 and youth 65 tertiarisation 37–8 tertiary skill 121–4 tertiary time 116, 119 tertiary workplace 116 Tesco Law (UK) 40 Thailand, migrants 106 Thaler, Richard 138–9 therapy state 141–3, 153 Thompson, E.P. 115 time 115–16, 163, 171, 178 labour intensification 119–20 tertiary 116, 119 use of 38 work-for-labour 120–1 titles of jobs 17–18 Tobin taxes 177 Tomkins, Richard 70 towns, company 137 INDEX toy-factory incident 108–9 trade unions 1, 2, 5, 10b, 26, 31, 168 and migration 91 public sector 51 and youth 77–8 see also yellow unions training 121–4 triangular mergers 30 triangulation 34 Trumka, Richard 78 trust relationships 8–9, 22 Twitter 127 Ukraine 152 undocumented migrants 96–8 unemployment 145 benefits 45–8, 99, 104 insurance for 175 voluntary 122 youth after recession 77 uniforms, to distinguish employment status 32–3 unions freeter 9 yellow 33 see also trade United Kingdom (UK) 102–3 benefit system 173 Channel 4 call centre programme 16 company loyalty 74–5 conditionality 143–5, 166–7 criminalisation 88 de-industrialisation 38 disabled people 170 and education 67, 70, 71 financial shock (2008-9) 49–51, 71 labour intensification 119 Legal Services Act (2007) (Tesco Law) 40 leisure 129 migrants 91, 95, 99, 103–5, 114, 146 neo-fascism 150 paternalism 139–40 pensions 43, 80 and the public sector 53 public spaces 179 and regulation of occupational bodies 39 shadow economy 56 and social mobility 56–8 and subsidies 55 197 temporary employment 15, 34, 35 as a therapy state 142 women 61–2, 162 workplace discipline 138 youth 64, 76 United States (US) care for children 125 criminalisation 88 education 69, 70–1, 73, 135–6 ethnic minorities 86 financial shock (2008-9) 49–50 migrants 90–1, 93, 94, 97, 103, 114 neo-fascism 150–1, 152–3 old agers 82–3, 85 pensions 42, 52, 80 public sector 52 regulation of occupational bodies 39 social mobility in 57–8 subsidies 55, 56 taxes 180–1 temporary employment 34, 35 volunteer work 163 wages and benefits 42 women 62, 63 youth 75, 77 universalism 155, 157, 162, 180 University of the People 69 University of Phoenix 71 unpaid furloughs 36 unpaid leave 50 uptitling 17–18 utilitarianism 88, 132, 141, 154 value of support 11 Vietnam 28, 111–12 voluntary unemployment 122 volunteer work 86, 163–4 voting 146, 147, 181 Wacquant, L. 132 wages 8, 11 and benefits 41–2 family 60 flexibility 40–5, 66 individualised 60 and migrants 103 and temporary workers 32, 33 Vietnam 28 see also basic income Waiting for Superman (documentary) 69 Wall Street Journal 35, 163 198 INDEX Walmart 33, 107 Wandering Tribe 73 Weber, Max 7 welfare claimants 245 welfare systems 44 Wen Jiabao 105 Whitehead, Alfred North 160 Williams, Rob 62 wiretapping 135 women 60–5 and care work 125–6 CCTs (conditional cash transfer schemes) 140 labour commodification 161 and migration 92 multiple jobholding 119–20 reverse sexism 123 work 115, 117, 160–1 and identity 158–9 and labour 13 right to 145, 163, 164–5 security 10b work-for-labour 120–1, 178 work-for-reproduction 124–7 work–life balance 118 worker cooperatives 168–70 workfare 143–5, 166–7 working class 7, 8 workplace 116, 122, 130, 131 discipline 136–8 tertiary 116 Yanukovich, Victor 152 yellow unions 33 youth 59, 65–7, 89, 156 commodification of education 67–72 connectivity 127 and criminality 129–30 generational tension 76–7 and old agers 85 precarity traps 73–5 prospects for the future 78–9 and role models 63–5 streaming education 72–3 zero-hour contracts 36

Powers and Prospects by Noam Chomsky

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anti-communist, Berlin Wall, Bretton Woods, colonial rule, declining real wages, deindustrialization, deskilling, Fall of the Berlin Wall, invisible hand, Jacques de Vaucanson, John von Neumann, liberation theology, Monroe Doctrine, old-boy network, RAND corporation, Ronald Reagan, South China Sea, theory of mind, Tobin tax, Turing test

As Tobin observed at this early stage, these processes would drive the world towards a low- growth, low-wage economy. A study directed by Paul Volcker, formerly head of the Federal Reserve, attributes about half of the substantial slow-down in growth since the early 1970s to this factor. International economist David Felix makes the interesting observation that even the productive sectors that would benefit from the Tobin tax have joined financial capital in resisting it. The reason, he suggests, is that elites generally are ‘bonded by a common objective, . . . to shrink, perhaps even to liquidate, the welfare state’. The instant mobility of huge sums of financial capital is a potent weapon to force governments to follow ‘fiscally responsible policies’, which can bring home the sharply two-tiered Third World model to the rich societies.

Stein, New York Times, July 30, 1995. 38. Lawrence Mishel and Jared Bernstein, The State of Working America: 1994–95, (M. E. Sharpe, 1994); Edward Wolff, Top Heavy (Twenty Century Fund, 1995). 39. Fortune, May 15, May 1; Business Week, July 17, 1995. 40. For details, see World Orders. Japan–US figures, 1993 UN World Investment Report, cited by Vincent Cable, Daedalus, Spring 1995. 41. Felix, ‘The Tobin Tax Proposal’, Working Paper #191, June 1994, UN Development Program; Challenge, May/June 1995. Wall Street Journal, May 9, 1994. Chapter 6 1. What follows is based on notes for a talk at Macquarie University in January 1995, updated with some more recent material, some adapted from my articles in Ha’aretz (Feb. 4, 1994) and Struggle (Ben-Gurion University, October, 1994). Unless indicated, sources can be found in my World Orders, Old and New, along with more extensive discussion. 2.

Rogue States by Noam Chomsky

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anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, capital controls, collective bargaining, colonial rule, creative destruction, cuban missile crisis, declining real wages, deskilling, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, labour market flexibility, labour mobility, land reform, liberation theology, Mikhail Gorbachev, Monroe Doctrine, new economy, oil shock, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

Stiglitz was soon to be appointed chief economist of the World Bank. For his reflections on the East Asian crisis, see his WIDER Annual Lectures 2, UN University, 1997; “An Agenda for Development in the Twenty-First Century,” Annual World Bank Conference on Development Economics 1997, IBRD, 1998. 15. David Felix, “The Tobin Tax Proposal: Background, Issues, and Prospects,” Working Paper No. 191, Washington University, June 1994; see his and other papers in Mahbub Ul Haq, Inge Kaul, Isabelle Grunberg, The Tobin Tax: Coping with Financial Volatility (Oxford, 1996). 16. Argentine political scientist Atilio Boron, “Democracy or Neoliberalism?,” Boston Review, Oct.- Nov. 1996; see his State, Capitalism, and Democracy in Latin America (Lynne Rienner, 1996). 9. “Recovering Rights” This is excerpted from an address given at the Oxford Amnesty Lectures, “Globalizing Rights,” Feb. 9, 1999.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

In 1987, economist and Nobel prize winner James Tobin suggested two possible routes for reform of the international monetary system in order to control the world’s speculative financial system and the “casino economy” [439]: 1. The first route consists in making currency transactions more costly to reduce capital mobility and speculative exchange rate pressures. This approach, which has become known as the “Tobin tax,” has become most popular among many new economists in the form of an internationally uniform tax on all spot conversions of one currency into another, proportional to the size of the transaction. Conventional anti– Tobin tax arguments include that it will dry up liquidity, be impossible to collect, and invite offshore forex operations. 2. The second route consists in a greater world economic integration, implying eventual monetary union and a World Central Bank. This could take the form of an International Currency Unit administered by a World Central Bank and based on an equivalent “basket” of goods in each country.


pages: 475 words: 149,310

Multitude: War and Democracy in the Age of Empire by Michael Hardt, Antonio Negri

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affirmative action, Berlin Wall, Bretton Woods, British Empire, conceptual framework, continuation of politics by other means, David Graeber, Defenestration of Prague, deskilling, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, friendly fire, global village, Howard Rheingold, Howard Zinn, illegal immigration, Joseph Schumpeter, labour mobility, land reform, land tenure, late capitalism, liberation theology, means of production, Naomi Klein, new economy, Paul Samuelson, private military company, race to the bottom, RAND corporation, reserve currency, Richard Stallman, Slavoj Žižek, The Chicago School, The Structural Transformation of the Public Sphere, Thomas Malthus, Thorstein Veblen, Tobin tax, transaction costs, union organizing, War on Poverty, Washington Consensus

The two strategies, of course, rely on very different analyses of the root causes of our economic problems. The first points primarily to neoliberal regimes and unregulated capital as the source of problems, whereas the second focuses principally on forms of power, both political and economic, that exert control over production and circulation. Consider as an example of the first strategy the group ATTAC and its proposal of the Tobin tax, which is a currency transaction tax, first conceived by Nobel laureate James Tobin, that would impose a small tax on all international currency exchanges and contribute the resulting tax revenue to the nation-states. The proponents argue that one benefit of such a tax is that it would help control the volatility of international financial markets and thereby avoid or moderate the financial crises caused in part by rapid currency trading: “Throwing sand in the wheels of global finance” is Tobin’s phrase.

State regulation of capital, as opposed to neoliberal regimes that grant capital a maximum autonomy, is thus conceived in these proposals as the primary solution to the problems of the global economy. One limitation of this strategy, from our perspective, is that it relies so heavily on the beneficial actions of sovereign nation-states. It seems to us that nation-states, both the most powerful ones and the least, do not act consistently to alleviate poverty and inequality. With this in mind, some propose a modification of the Tobin tax that would contribute the revenues from the currency tax not to nation-states but to a democratic global body combining this economic proposal with one of the proposals to reform representative systems we saw above.102 One could even fund the United Nations or a global parliament with this tax, thereby freeing it from financial reliance on nation-states. The second general strategy includes proposals that seek to eliminate destructive forms of political and economic control.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, South Sea Bubble, statistical model, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

On the other hand, if the Fed could be relied upon to save the world’s financial markets whenever they threatened to freeze up, what was the problem? The Fed’s success in bringing markets back to life in 1987 and 1998 had political and regulatory implications. In the wake of the 1987 crash there was much talk of the need to tax financial market transactions to throw sand in the wheels of hyperactive markets. These proposals normally go by the name “Tobin tax,” after economist James Tobin, who in the 1970s proposed such a levy on foreign currency transactions. John Maynard Keynes had already broached a similar idea in his General Theory, and in 1929 U.S. senator Carter Glass had briefly thrown markets into a tizzy with a plan for a 5 percent tax on sales of stock that had been held for less than sixty days.27 In any case, interest in such measures faded quickly—in the United States, at least—as markets recovered and then boomed in the 1990s.

See also computers telecommunications firms, 266–67 Texaco, 271–72 Thaler, Richard, 328 and behavioral finance, 186–87, 201, 288–89, 292–95, 296–97, 298 and fund management strategies, 253 and market anomalies, 206 and market crashes, 233 and the rational market debate, 191–92, 287–88 and risk modeling, 184–88 satirical depiction of, 287–88 and Shleifer, 252 Théorie de le spéculation (Bachelier), 65 The Theory of Finance (Fama and Miller), 105 Theory of Games and Economic Behavior (VonNeumann), 50–51 The Theory of Interest (Fisher), 36 The Theory of Investment Value (Williams), 53–54, 87 Theory of Monopolistic Competition (Chamberlin), 188–89 Thomas Aquinas, xiii, xiv Thorp, Edward O., 146–47, 214, 216–21, 222–23, 230, 240, 242, 328 3Com, 262 three-factor model, 209–10 tight prior equilibrium, 89–90 Time Warner, 267 Tito, Dennis, 152 Tobin, James, 244, 302 Tobin tax, 244 trade deficits, 230 Travelers, 241 Treasury Inflation-Protected Securities (TIPS), 19 Treynor, Jack, 83–85, 88, 122–23, 125–27, 132, 139, 141, 149, 329 Trilling, Lionel, 91 Tsai, Gerry, 120, 124–25, 166 tuberculosis, 4, 12–13, 16 tulip market, 15–16 Tullock, Gordon, 159 Tversky, Amos, 176–77, 183, 185–86, 191–92, 201, 289, 291, 316, 329 “Uncertainty, Evolution and Economic Theory,” 93 United Kingdom, 40, 48 University of California, Irvine, 216 University of California, Los Angeles (UCLA), 86 University of Chicago (Chicago School of Economics) and academic isolation, 89–90 early growth of, 94–97 and efficient market hypothesis, xiii and experimental economics, 190 and Follies event, 287–89 founding of, 94–97 and Hayek, 92 and hostile takeovers, 167–68 and Knight, 84–85 and market efficiency, 101–5 and Miller, 237 and Mitchell, 31 and portfolio theory, 169 and the rational market hypothesis, 180 and role of businesses, 268 and Samuelson, 60–61 and unmanaged funds, 111 University of Chicago Law School, 157–58 University of Chicago Press, 90–91 University of Rochester, 107, 169, 275 Unruh, Jesse, 272, 273 U.S. and Foreign Securities Corp., 114 U.S.


pages: 182 words: 53,802

The Production of Money: How to Break the Power of Banks by Ann Pettifor

Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, light touch regulation, London Interbank Offered Rate, market fundamentalism, Martin Wolf, mobile money, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

Closing doors to footloose, speculative, mobile capital Keynes understood that under a bank-money system, not only was reliance on foreign capital over but that, in order to manage the economy, countries should actually close their borders to footloose, mobile international capital. To do so he advocated capital control: the taxing of cross-border capital flows. Capital controls are taxes, and differ from exchange controls. The latter place limits on the amount of a nation’s currency that can be taken abroad. Instead, the financial transaction tax or Tobin tax is a form of capital control, a tax on and ‘sand in the wheels’ of capital flows. Today’s excessively complex globalised financial system is very different from that of Keynes’s day. But given that complexity, and given the propensity of risk assessors, CEOs and the part-time members of globalised company boards to make catastrophic errors of judgement, a sound regulatory system is now an even greater imperative.


pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

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banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, lump of labour, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

The world economy has around $70 trillion in total output per year in goods and services, a sum that the interbank and securities markets flip over several times a week in trading activity. Many commentators, including Lord Turner of the UK Financial Services Authority, have questioned the social utility of all this financial market trading. Leading continental European countries have embraced the idea of a so-called Tobin tax, essentially a small percentage of each ticket, on wholesale financial trades to reduce incentives to trade and raise revenue for EU states, a move bitterly opposed by the UK, which forms the epicenter of all this activity. Certainly, interbank trading seems only loosely connected to the real economy, and as long as governments backstop the big banks, it looks a lot like a game in which the punters can win big but will always get their debts paid off if they lose.


pages: 330 words: 77,729

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

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Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, business climate, creative destruction, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, liberation theology, liquidity trap, means of production, microcredit, minimum wage unemployment, money market fund, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Shiller, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, unorthodox policies, Vilfredo Pareto, zero-sum game

He favored a gradual but comprehensive "socialisation of investment" as the "only means of securing an approximation to full employment" (1973a, 378). This was by no means "state socialism," but it could mean government ownership of the entire capital market. Keynes also sanctioned a small "transfer tax" on all securities sales as a way to dampen speculative fever.11 11. Nobel laureate James Tobin has entertained a similar measure, known as the Tobin tax on stock and foreign exchange transactions, a legal step that would surely reduce liquidity and enlarge the bid-ask spreads on stocks and foreign exchange. A Turning Point in Twentieth-Century Economics Keynsesian economics is ... the most serious blow that the authority of orthodox economics has yet suffered. —W.H. Hutt (1979, 12) Two factors created the right atmosphere for the Keynesian revolution to sweep the economics profession after World War II.


pages: 270 words: 73,485

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

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3D printing, bank run, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, market bubble, market clearing, means of production, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

(i), (ii) Rothschilds (i) Roubini, Nouriel (i) Royal Charter, grants of monopoly (i) rules of competition (i) Russia (i), (ii) Russian revolution (i), (ii) saltwater economists (i), (ii) Samuelson, Paul (i), (ii), (iii), (iv) “Analytical Aspects of an Anti–Inflation Policy” (with Robert Solow) (i) Say, Jean-Baptiste (i) Say’s Law (i), (ii) scarcity value (i) Scholes, Myron (i), (ii), (iii) Schumpeter, Joseph (i), (ii), (iii), (iv) The Theory of Economic Development (i) Schwartz, Anna, A Monetary History of the United States (with Milton Friedman) (i) Scottish Enlightenment (i) Second International (i) secular stagnation (i) securitization of mortgages (i) seigniorage privilege (i) self-interest (i) self-organizing society (i) self-sufficiency (i) service sector (i), (ii) servomechanism (i) shadow banking structure (i) shares (i) Sherman Act (i) Shiller, Robert (i), (ii) shocks (i), (ii), (iii) contagion (i) debt crises (i) political (i) see also oil shock short cycles (i) short-run rate of interest (i) Silesian weavers (i) single global currency (i) skills, types needed (i), (ii) slack (i) slavery, abolition of (i) Slutsky, Eugen (i), (ii), (iii) Smith, Adam (i), (ii), (iii), (iv), (v) the founding of the political economy (i) An Inquiry into the Nature and Causes of the Wealth of Nations (i), (ii) The Theory of Moral Sentiments (i), (ii) social science, founding (i) Socialist International (i) society regulation (i) self-organizing (i) Solow, Robert (i), (ii), (iii) “Analytical Aspects of an Anti–Inflation Policy” (with Paul Samuelson) (i) sovereign debt crises (i), (ii) Soviet Union, break up (i), (ii) speculation (i) speculative motive (i), (ii) stag-deflation (i) stagflation (i), (ii), (iii) Stalin, Joseph (i) static vision (i) statistics (i) development of (i) historical research (i) usefulness (i) sterling, as reserve currency (i) stochastic calculus (i) stock market crash, London (i) stock markets bull run (i) competition (i) computer technology (i) stock prices, randomness (i) Stockholm School (i) Stop-Go cycle (i) policy (i) Summers, Larry (i) surplus value (i) sustainable recovery, sources of (i) Sutcliffe, Robert (i), (ii) sweetwater economists (i), (ii) Sweezy, Paul (i) System of Natural Liberty (i) T bills (i), (ii), (iii) tatonnement (i) tax cut, US (i) technical progress, role of (i) technological innovations author’s experiences (i) displacement effect (i), (ii) and manufacturing location (i) see also computer technology technological shocks (i) telecommunications (i) Thailand, Crisis, 1997 (i) Thatcher, Margaret (i) theories, need for validation (i) theory of economic behavior of the household (i) Thornton, Henry (i) time, role of (i) time series data (i) Tinbergen, Jan (i) Tobin, James (i) Tobin tax (i) total money supply, and prices (i) total output, heterogeneity (i) trade doctrine see under Ricardo trade-off, unemployment and inflation (i) trade surpluses, banking (i) trade unions effect on money wage (i) as harmful (i) power (i) rise of (i) strengthening (i) weakening (i) transactions motive (i) transmission mechanism (i) Troubled Assets Recovery Program (TARP) (i) true costs of production (i) Truman, Harry (i) trusts (i) Tugan-Baranowsky, Michael (i) Turkey (i) Turner, Adair, Lord (i) Two Treatises on Government (Locke) (i) uncertainty (i) underemployment equilibrium (i), (ii), (iii) undersaving (i), (ii) unearned income (i) unemployment aggregate level (i) cycles (i) effect of wages (i) explaining (i) and inflation (i) involuntary (i) and money wage (i) natural rate (i) see also Keynesian models unifying principle (i) unique static equilibrium, and moving data (i) unit labor costs (i) United Kingdom budget deficit elimination (i) deindustrialization (i) economic trajectory (i) Great Depression (i) monetarism (i) recovery strategy (i) see also Britain United Nations Industrial Development Organization (UNIDO) (i) United States budget deficit (i) deindustrialization (i) econometric modeling (i) economic trajectory (i) economic weakness, post WWI (i) fiscal boost (i) Gold Standard (i) Great Depression (i) interest rates (i) Keynesianism (i) post-World War I power (i) post-World War II (i) Progressive Movement (i) prosperity (i) recovery strategy (i) seigniorage privilege (i) tax cut (i) trade deficit (i) welfare state expansion (i) westward expansion (i) withdrawal of currency (i) see also America unorthodoxy (i) urbanization (i) US House of Representatives, Greenspan’s testimony (i) usury defining (i) laws (i) prohibition (i), (ii) utopianism (i), (ii) valuation of assets, theory of (i) of capital (i) value vs.price (i) as price (i) relative (i), (ii) value added (i) value of goods, determination (i) variable costs (i) variables (i) Vietnam War (i) visions of economy (i) vocabulary, economic (i), (ii), (iii) volition (i) wage agreements, voluntary (i) demands, post-World War I (i) downward trend (i) effect on unemployment (i) rates, and unemployment (i) restraint (i) rises (i) share: declining (i); developed and developing economies (i); rise in (i), (ii) wage/profit distinction (i) units (i), (ii) see also money wages; real wages Walras, Antoine Auguste (i) Walras, Léon (i), (ii) Walrasian model (i) wars, financing (i) wealth distribution (i) inequality of (i) indicators (i) Smith’s theory (i) weaving, mechanization (i) welfare economics (i) welfare state, levels of support (i) White, Harry (i) Wicksell, Knut (i), (ii) basis of Hayek’s theory (i) later development of ideas (i) Wicksellian boom, developing countries (i) Wicksellian cycle, combined with Kondratieff cycle (i) William III (i) women, in workforce (i) workers dependence on capitalists (i) living standards (i) migration (i) productive/unproductive (i) workforce, recruitment of women (i) World Trade Organization (WTO) (i), (ii) World War I (i) World War II, outbreak (i) yields (i) Zombie firms (i)


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

After thirty years of all the gains and all the tax cuts going to the people who brought us the bubble, payback is coming. Not because of Occupy Wall Street and not because of my personal preferences, but because it’s so much easier and more effective to do than it is to enforce self-defeating austerity that it’s bound to happen. Speaking of taxes, it’s not just going to be sophisticated quasi-hidden liquidation and/or so-called Tobin taxes on financial transactions that are levied, either. Personal taxes have room to grow, too—especially in the United States. A recent analysis from the Congressional Research Service, which gives us an idea of what Congress might be thinking, noted that top marginal rate of income tax in the United States in the 1940s an 1950s, the heyday of US power, “was typically above 90%” while “the top capital gains tax was 25%.”


pages: 422 words: 89,770

Death of the Liberal Class by Chris Hedges

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1960s counterculture, Albert Einstein, Berlin Wall, call centre, clean water, collective bargaining, Columbine, corporate governance, deindustrialization, desegregation, Donald Trump, Fall of the Berlin Wall, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, hive mind, housing crisis, Howard Zinn, illegal immigration, Jane Jacobs, Jaron Lanier, Lao Tzu, Pearl River Delta, post scarcity, profit motive, Ralph Nader, Ronald Reagan, strikebreaker, the scientific method, The Wisdom of Crowds, Tobin tax, union organizing, Unsafe at Any Speed, Upton Sinclair, WikiLeaks, working poor, Works Progress Administration

It shifts resistance from the tangible, the immediate, and the practical, to the amorphous and the indeterminate. But to stop resisting is spiritual and intellectual death. It is to surrender to the dehumanizing ideology of totalitarian capitalism. Acts of resistance keep alive another way of being. They sustain our integrity and empower others, whom we may never meet, to stand up and carry the flame we pass to them. No act of resistance is useless, whether it is refusing to pay taxes, fighting for a Tobin tax, working to shift the neoclassical economics paradigm, revoking a corporate charter, holding global Internet votes, or using Twitter to catalyze a chain reaction of refusal against the neoliberal order. We must resist and trust that resistance is worthwhile. Our communities will sustain us, emotionally and materially. They will be the key to a life of defiance. Those who resist, who continue to practice moral autonomy, will become members of the underclass.

Propaganda and the Public Mind by Noam Chomsky, David Barsamian

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Albert Einstein, Asian financial crisis, Bretton Woods, capital controls, deindustrialization, European colonialism, experimental subject, Howard Zinn, Hyman Minsky, interchangeable parts, labour market flexibility, labour mobility, liberation theology, Martin Wolf, one-state solution, Ralph Nader, RAND corporation, school vouchers, Silicon Valley, structural adjustment programs, Thomas L Friedman, Tobin tax, Washington Consensus

During the Bretton Woods era, the period of rapid growth of the world economy, when capital controls still worked, controls existed at both ends. So the recipient countries, the country from which the capital was flying, agreed to block capital flight. If there are a couple of rich countries like the United States that won’t play the game, then the game’s over. But these are social policies that are under potential control. There have been technical proposals around for twenty-five years, like the Tobin tax, that might slow down speculative capital flows. And other things are possible. But the business sector doesn’t want it. Up until now they haven’t wanted it because they’re gaining from it, especially financial capital. They’re gaining a huge amount of profit from it. So they’ve been perfectly happy to see the slowdown of the economy. Of course they love the inequality since it’s pouring wealth to the rich sector.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

We also need to better regulate the shadow banking sector, end offshore banking, and close tax and corporate filing loopholes that enable the kind of creative accounting that hides not only what’s on corporate balance sheets but also how much CEOs and other executives are being paid in options. This measure would go a long way toward creating more transparency in finance and curtailing the issues of short-termism that were discussed in chapter 4. A financial transaction tax—akin to a proposed Tobin tax—could likewise help in this respect, by forcing banks to pay a small fee for each trade in bonds, stocks, and derivatives that they do, many of which (as this book has explored) have little to no benefit to the real economy anyway.4 Beyond this, we need to end the cult of “experts” in finance and open the conversation about how and for whom the financial system should work to a much broader group of people—far beyond the small priesthood of financiers, politicians, and regulators who tend to share the same finance-centric view of the economy.


Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brownian motion, business process, butterfly effect, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, Chance favours the prepared mind, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, merger arbitrage, meta analysis, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, paper trading, passive investing, Paul Lévy, Paul Samuelson, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Shiller, short selling, sovereign wealth fund, statistical arbitrage, Steven Pinker, stochastic process, survivorship bias, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

., 100 Sobel, Russell, 206 social Darwinism, 215 social exclusion, 85–86 social media, 55, 270, 405 Société Générale, 60–61 Society of Mind, The (Minsky), 132–133 sociobiology, 170–174, 216–217 Sociobiology (Wilson), 170–171 Solow, Herbert, 395 Soros, George, 6, 219, 222–223, 224, 227, 234, 244, 277 sovereign wealth funds, 230, 299, 409–410 Soviet Union, 411 Space Shut tle Challenger, 12–16, 24, 38 specialization, 217 speech synthesis, 132 Sperry, Roger, 113–114 “spoofi ng,” 360 Springer, James, 159 SR-52 programmable calculator, 357 stagflation, 37 Standard Portfolio Analysis of Risk (SPAN), 369–370 Stanton, Angela, 338 starfish, 192, 242 Star Trek, 395–397, 411, 414 stationarity, 253–255, 279, 282 statistical arbitrage (“statarb”), 284, 286, 288–291, 292–293, 362 statistical tests, 47 Steenbarger, Brett, 94 Stein, Carolyn, 69 sterilization, 171, 174 Stiglitz, Joseph, 224, 278, 310 Stocks for the Long Run (Siegel), 253 stock splits, 24, 47 Stone, Oliver, 346 Stone Age, 150, 163, 165 stone tools, 150–151, 153 stop-loss orders, 359 Strasberg, Lee, 105 stress, 3, 75, 93, 101, 122, 160–161, 346, 413–415 strong connectedness, 374 Strong Story Hypothesis, 133 Strumpf, Koleman, 39 “stub quotes,” 360 subjective value, 100 sublenticular extended amygdala, 89 subprime mortgages, 290, 292, 293, 297, 321, 327, 376, 377, 410 482 • Index Sugihara, George, 366 suicide, 160 Sullenberger, Chesley, 381 Summers, Lawrence (Larry), 50, 315–316, 319–320, 379 sunlight, 108 SuperDot (trading system), 236 supply and demand curves, 29, 30, 31–33, 34 Surowiecki, James, 5, 16 survey research, 40 Sussman, Donald, 237–238 swaps, 243, 298, 300 Swedish Twin Registry, 161 systematic bias, 56 systematic risk, 194, 199–203, 204, 205, 250–251, 348, 389 systemic risk, 319; Bank of England’s measurement of, 366–367; government as source of, 361; in hedge fund industry, 291, 317; of large vs. small shocks, 315; managing, 370–371, 376–378, 387; transparency of, 384–385; trust linked to, 344 Takahashi, Hidehiko, 86 Tanner, Carmen, 353 Tanzania, 150 Tartaglia, Nunzio, 236 Tattersall, Ian, 150, 154 Tech Bubble, 40 telegraphy, 356 Tennyson, Alfred, Baron, 144 testosterone, 108, 337–338 Texas hold ’em, 59–60 Texas Instruments, 357, 384 Thackray, John, 234 Thales, 16 Théorie de la Spéculation (Bachelier), 19 theory of mind, 109–111 thermal homeostasis, 367–368, 370 This Time Is Different (Reinhart and Rogoff ), 310 Thompson, Robert, 1, 81–82, 83, 103–104 three-body problem, 214 ticker tape machine, 356 tight coupling, 321, 322, 361, 372Tiger Fund, 234 Tinker, Grant, 395 Tobin tax, 245 Tokugawa era, 17 Tooby, John, 173, 174 tool use, 150–151, 153, 162, 165 “toxic assets,” 299 trade execution, 257, 356 trade secrets, 284–285, 384 trading volume, 257, 359 transactions tax, 245 Treynor, Jack, 263 trial and error, 133, 141, 142, 182, 183, 188, 198, 265 Triangle Shirtwaist Fire, 378–379 tribbles, 190–205, 216 Trivers, Robert, 172 trolley dilemma, 339 Trusty, Jessica, 120 Tversky, Amos, 55, 58, 66–67, 68–69, 70–71, 90, 106, 113, 388 TWA Flight 800, 84–85 twins, 159, 161, 348 “two-legged goat effect,” 155 UBS, 61 Ultimatum Game, 336–338 uncertainty, 212, 218; risk vs., 53–55, 415 unemployment, 36–37 unintended consequences, 7, 248, 269, 330, 358, 375 United Kingdom, 222–223, 242, 377 University of Chicago, 22 uptick rule, 233 Urbach-Wiethe disease, 82–83 U.S.