Global Financial Tax Wanted to Offset Costs of Economic Crisis

Human Wrongs Watch

A group of United Nations (UN) independent experts today called on the European Union (EU) to take the lead in promoting the adoption of a global financial transaction tax that would offset the costs of the current economic crisis and protect basic human rights, the UN reports.

*Youth protesting in New York, as part of Occupy Wall Street movement. Photo: David Shankbone

“Where the world financial crisis has brought about the loss of millions of jobs, socialized private debt burdens and now risks causing significant human rights regressions through wide-ranging austerity packages, a financial transaction tax (FTT) is a pragmatic tool for providing the means for governments to protect and fulfil the human rights of their people,” said the Special Rapporteur on extreme poverty and human rights, Magdalena Sepúlveda.

According to a news release from the UN office of the High Commissioner of Human Rights (OHCHR), estimates suggest that at its lowest rate the FTT would yield about $48 billion across the Group of Twenty major economies, with higher rates offering up to $250 billion per year to offset the costs of the enduring economic, financial, fuel, climate and food crises.

Alarming Global Unemployment

The call from UN experts came only few days after the United Nations informed in a new report that global employment situation is alarming, waining that recovery is not expected any time soon.

It also came a day ahead of the Group of Eight Summit of industrialized countries on 15 May, which will take place in Camp David in the United States.

“EU countries must take bold leadership now to pave the way towards what should eventually be a global FTT,” the UN experts urged, welcoming recent EU proposals to implement the financial transaction tax across the Eurozone.

Countries such as the Republic of Korea have implemented similar taxes in non-discriminatory ways to raise resources to achieve the right to development. The FTT, experts argue, would also help stabilize financial markets by discouraging speculation, and therefore mitigate the type of volatility which led to the 2008 financial and food crises.

Food Prices Spiking Dangerously

“Food prices have twice spiked dangerously over the past five years, and could easily do so again,” stressed the Special Rapporteur on the right to food, Olivier De Schutter. “The FTT will likely reduce hot capital flows that fuel speculation, drive price instability and wreak havoc on the right to food worldwide.”

“A global FTT is not a silver bullet, but it would help relieve sovereign debt load stemming from the financial crisis, shift the burden from ordinary citizens to the private sector which caused the crisis, and significantly enlarge government fiscal space for spending on desperately needed economic and social rights programmes.” said the Special Rapporteur on foreign debt and human rights, Cephas Lumina.

The FTT would provide governments with an opportunity to act on their commitments to sustainable development and to take a step to advance development and include marginalized populations, said the Special Rapporteur on human rights and international solidarity, Virginia Dandan.

“When the financial sector fails to pay its share, the rest of society must pick up the bill,” Sepúlveda emphasized. “It is high-time that governments re-examine the basic redistributive role of taxation to ensure that wealthier individuals and the financial sector contribute their fair share of the tax burden.”

Devastating Consequences

Meanwhile, the World of Work Report 2012: Better Jobs for a Better Economy – published by the UN International Labour Organization (ILO) – says that around 50 million jobs are still missing compared to the situation that existed before the global economic crisis.It also warns that the global jobs crisis is likely to get worse due to several factors, including the fact that many governments, especially in advanced economies, have shifted their priority to a combination of fiscal austerity and tough labour market reforms.

Such measures are having “devastating” consequences on labour markets in general and job creation in particular, ILO stated in a news release.

“The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe,” said the Director of the ILO Institute for International Labour Studies and lead author of the report, Raymond Torres.

“Countries that have chosen job-centred macroeconomic policies have achieved better economic and social outcomes,” he added. “Many of them have also become more competitive and have weathered the crisis better than those that followed the austerity path. We can look carefully at the experience of those countries and draw lessons.”

Jobseekers Demoralized

Another factor leading to a worsening jobs crisis is that many jobseekers in advanced economies are demoralized and are losing skills, something which is affecting their chances of finding a new job. In addition, small companies have limited access to credit, which in turn is depressing investment and preventing employment creation.

“In these countries, especially in Europe, job recovery is not expected before the end of 2016 – unless there is a dramatic shift in policy direction,” according to ILO.

Other factors include the fact that, in most advanced economies, many of the new jobs are precarious and there exists the possibility of increased social unrest in many parts of the world. According to the report’s Social Unrest Index, 57 out of 106 countries with available information showed a risk of increased social unrest in 2011 compared to 2010. The regions with the largest increases are sub-Saharan Africa and the Middle East and North Africa.

The report argues that if a job-friendly policy-mix of taxation and increased expenditure in public investment and social benefits is put in place, approximately two million jobs could be created over the next year in advanced economies.

Among the other findings of the report is that employment rates have only increased in six of the 36 advanced economies since 2007 – Austria, Germany, Israel, Luxembourg, Malta and Poland – and that youth unemployment rates have increased in about 80 per cent of advanced countries and two-thirds of developing countries.

*Youth protesting in New York, as part of Occupy Wall Street movement. Photo: David Shankbone

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The Dispossessed and the Greedy Capitalists, Craven Politicians, Scheming Bankers…

What Do We Really Know About ‘Hot Money’?

The Untrammeled Dictatorship of the Banks in Europe

2012 Human Wrongs Watch

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