Ghost of Socially Useful Labor Haunts G20

by Chidem Kurdas

French president Nicolas Sarkozy reportedly wanted  the G20 leaders to introduce a special tax on all financial transactions, known as the Tobin tax. Mr. Sarkozy took the idea from Adair Turner, the head of the British Financial Services Authority. Lord Turner suggested last month that the tax might be used to shrink the financial sector, which has grown too big and is in part “socially useless.”

The argument that activities like securities trading add no social value and the labor is better channeled into other areas has now become popular. Hence the resurgence of James Tobin’s 1970s proposal of a tax on foreign exchange transactions to discourage speculative trading. But the notion of socially useful work dates back centuries. In fact, it reached its zenith with Marxian labor theory and Soviet planning.

According to Soviet ideology, any work in state-run factories or farms was socially useful, whereas private economic activities were likely motivated by greed and could harm public well-being. Another belief was that manufacturing and agriculture made “real” contributions but services like wholesale and retail trade did not.

This real vs. trade distinction is now to be found in commentaries on the financial sector. Thus a pundit writes that a Tobin tax “would squash the profitability of much of the short-term trading which swells investment bank profits without doing anything to create value in the real economy.”

Thomas Friedman Is Wrong

by Roger Koppl

Thomas Friedman defends “one-party autocracy” as represented by China. Presumably, his defense is a sardonic. He is trying to smack down the Republican Party in the US for “standing, arms folded and saying ‘no.’” Sardonic tone notwithstanding, he says something revealing. “It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure that it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down.”