The era of finance: proposals for the future

Futures

Volumn 30, Issue 8, 1998, Pages 749-768

  Fontela, Emilio ^a  

^a NONE   (Switzerland)

Author keywords

[No Author keywords available]

Indexed keywords

FINANCIAL SYSTEM; FUTURE PROSPECT; GLOBAL ECONOMY; GLOBALIZATION;

EID: 0032190856     PISSN: 00163287     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0016-3287(98)00083-4     Document Type: Article

References (14)

1. 1. Schwab, K., and Smadja, C., of the World Economic Forum (the organizers of the Davos meetings), reported on these trends in the International Herald Tribune (Jan. 30, 1997) and quoted a top European business leader as referring to the pressure exerted by shareholders for high returns on capital.
2. 2. To remind us of the great events in the history of financial speculation including the great debt bubble of North American regions like Rhode Island, from 1800 to 1830, or the scheme of the Michigan banks that in 1850 were moving gold reserves from one bank to another, or the great speculative schemes lined to the depression of the 30′, J. K Galbraith has revisited some old files, linking them to more recent speculative cases in Brève histoire de l'euphorie financière, Seuil, Paris 1992.
3. 3. The Governor of the Bank of France, Jean-Claude Trichet, wrote recently (La Stabilité des marchés de l'argent, Futuribles 192 (Nov. 1994)): 'Financial globalization is increasing the need for deepening international cooperation in order to induce a better coherence between national economic and monetary policies and to define a common approach to questions raised by the functioning of markets and the surveillance of the operators'.
4. 4. The Basel Committee, that includes the Central Banks and supervisory agencies of banking institutions in the G-10 countries, agrees upon prudential ratios on banks financial strength (i.e. the Cooke ratio establishing a minimum level of bank owned assets to total outstanding loans weighed by associated risks), and monitors bank risks (e.g. in the use of new derivative instruments). Over 130 countries in the world have now accepted the methods and rules developed by the Basel Committee. The International Organization of Securities Commissions also analyzes international problems related to the control of exchange markets and the protection of savings.
5. 5. The list of tax-havens is continuously increasing to meet an explosive demand: the Channel Islands and the Isle of Man, the Virgin Islands, the Cayman Islands, but also Liechtenstein, Malta or even Ireland, the UK or Switzerland offer privileged tax-rates to non-residents. The subtle ethical frontier between tax 'avoidance' and tax 'evasion' is becoming thinner and thinner, when tax haven services are increasingly used by the largest financial and non-financial corporations.
6. 6. 'Today, calls for democratizing and restructuring the World Bank, the IMF and the WTO, as well as opening up the still private BIS, have grown out of new evidence of irrelevance of structural adjustments and the failure of the economic approaches in the United Nations Development Decade. These demands culminated in the 1994 clashes in Madrid between developing and industrial countries over fairness and special drawing rights (SDRs) to the global grass-roots campaigns, 'Fifty years is enough', actually to shut down the World Bank... such campaigns will persist until the political assumptions of the Bretton Woods institutions are teased out of their economic models and their relationships with governments, banks, securities traders, stock exchanges and bond holders are made clearer', Hazel Henderson, New Markets and New Commons, Opportunities in the Global Casino, Futures 27, 2 (1995).
7. 7. James Tobin presented his initial proposal as a Presidential Address to the Eastern Economic Association; with the title, A proposal for international monetary reform, this address was published in Eastern Economic Journal, 4, 1978. In more recent years there has been a revival of interest in the Tobin proposal (taxing at a uniform ad valorem rate, all payments that involved a spot currency exchange) particularly on behalf of UN Organizations, as part of the debate on financing these institutions (see for instance the Special Issue of Futures, March 1955, or the United Nations at Fifty: Policy and Financing Alternatives, edited by Harlan Cleveland, Hazel Henderson and Inge Kaul). The Tobin Tax: Coping with Financial Volatility, Ed. Mahbub al Hag, Inge Kaul and Isabelle Grunberg, Oxford Univ. Press, 1996, summarizes the most recent analysis and proposals.
8. 7. James Tobin presented his initial proposal as a Presidential Address to the Eastern Economic Association; with the title, A proposal for international monetary reform, this address was published in Eastern Economic Journal, 4, 1978. In more recent years there has been a revival of interest in the Tobin proposal (taxing at a uniform ad valorem rate, all payments that involved a spot currency exchange) particularly on behalf of UN Organizations, as part of the debate on financing these institutions (see for instance the Special Issue of Futures, March 1955, or the United Nations at Fifty: Policy and Financing Alternatives, edited by Harlan Cleveland, Hazel Henderson and Inge Kaul). The Tobin Tax: Coping with Financial Volatility, Ed. Mahbub al Hag, Inge Kaul and Isabelle Grunberg, Oxford Univ. Press, 1996, summarizes the most recent analysis and proposals.
9. 7. James Tobin presented his initial proposal as a Presidential Address to the Eastern Economic Association; with the title, A proposal for international monetary reform, this address was published in Eastern Economic Journal, 4, 1978. In more recent years there has been a revival of interest in the Tobin proposal (taxing at a uniform ad valorem rate, all payments that involved a spot currency exchange) particularly on behalf of UN Organizations, as part of the debate on financing these institutions (see for instance the Special Issue of Futures, March 1955, or the United Nations at Fifty: Policy and Financing Alternatives, edited by Harlan Cleveland, Hazel Henderson and Inge Kaul). The Tobin Tax: Coping with Financial Volatility, Ed. Mahbub al Hag, Inge Kaul and Isabelle Grunberg, Oxford Univ. Press, 1996, summarizes the most recent analysis and proposals.
10. 7. James Tobin presented his initial proposal as a Presidential Address to the Eastern Economic Association; with the title, A proposal for international monetary reform, this address was published in Eastern Economic Journal, 4, 1978. In more recent years there has been a revival of interest in the Tobin proposal (taxing at a uniform ad valorem rate, all payments that involved a spot currency exchange) particularly on behalf of UN Organizations, as part of the debate on financing these institutions (see for instance the Special Issue of Futures, March 1955, or the United Nations at Fifty: Policy and Financing Alternatives, edited by Harlan Cleveland, Hazel Henderson and Inge Kaul). The Tobin Tax: Coping with Financial Volatility, Ed. Mahbub al Hag, Inge Kaul and Isabelle Grunberg, Oxford Univ. Press, 1996, summarizes the most recent analysis and proposals.
11. 8. According to The Economist (Oct. 7, 1995), 'the idea of a financial-transactions tax to rebuff financial markets pops up as frequently as reported sightings of the Loch Ness monster.... However, most economists reckon that in practice a Tobin tax would not work, nor would it be desirable. The main problem is that it would be unenforceable.... Thanks to integrated and innovative international financial markets, it would be easy to dodge unless its coverage was world wide'. Ruben Mendez (Paying for Peace and Develop Foreign Policy, 100, 1995)
12. 8. According to The Economist (Oct. 7, 1995), 'the idea of a financial-transactions tax to rebuff financial markets pops up as frequently as reported sightings of the Loch Ness monster.... However, most economists reckon that in practice a Tobin tax would not work, nor would it be desirable. The main problem is that it would be unenforceable.... Thanks to integrated and innovative international financial markets, it would be easy to dodge unless its coverage was world wide'. Ruben Mendez (Paying for Peace and Develop Foreign Policy, 100, 1995)
13. 9. Particular attention has been given in recent years to the question of the independence of Central Banks. A. Alesine and L.H. Summers, Central Bank Independence and Macroeconomic Performance, Journal of Money, Credit and Banking, 25, 2, 1993 have quantified the relation between inflation and bank independence, concluding that increasing bank independence inhibits the growth of inflation. Germany's Central Bank is, in this context, paramount of independence and successful control of inflation. But obviously this result is not costless. G.A. Epstein, Political Economy and Comparative Central Banking, Review of Radical Political Economics, 24, 1, 1992 has also found a positive correlation between Central Bank independence and GNP growth gap in relation to GNP potential. Thus Central Bank independence tends to inhibit both inflation and growth, something that tends to favour the USA solution of imposing to the Federal Reserve both objectives of price stability and employment.
14. 9. Particular attention has been given in recent years to the question of the independence of Central Banks. A. Alesine and L.H. Summers, Central Bank Independence and Macroeconomic Performance, Journal of Money, Credit and Banking, 25, 2, 1993 have quantified the relation between inflation and bank independence, concluding that increasing bank independence inhibits the growth of inflation. Germany's Central Bank is, in this context, paramount of independence and successful control of inflation. But obviously this result is not costless. G.A. Epstein, Political Economy and Comparative Central Banking, Review of Radical Political Economics, 24, 1, 1992 has also found a positive correlation between Central Bank independence and GNP growth gap in relation to GNP potential. Thus Central Bank independence tends to inhibit both inflation and growth, something that tends to favour the USA solution of imposing to the Federal Reserve both objectives of price stability and employment.