Two takes on Tobin taxes

Both from the FT whilst I was off. Martin Wolf is not completely opposed, suggesting that it might lead to more considered investment decisions:

…I might now entertain the argument that willingness to invest in costly “due diligence” on what investors are buying may be undermined by the perceived ease of selling. For these reasons, market liquidity no longer seems an unambiguous good. Maybe shifting the structure of incentives towards “buying and holding” might be better.

But Willem Buiter says it would be the wrong way to tackle the problem. Here’s the key bit for me:

“Churning” can be a problem for individual savers. Excessive transaction volumes can be caused by perverse incentive systems that link the remuneration of traders – acting as agents for owners of wealth – to trading volumes. Even here, the right solution is not transaction taxes but regulation restricting the undesirable features of these contracts directly. If excessive pay in the financial sector is a problem, tax pay.

Congress Voices

The TUC has launched a rather wizzy new website called Congress Voices, which allows you to follow what is going on at Congress this week, including the facility to comment on resolutions. More evidence of Tigmoo getting its head around the interweb.

Interesting new blog alert

This one here. I don't have time to give it a proper plug, so here's what they say about themselves:

Left Foot Forward is a political blog for progressives. We provide evidence-based analysis on British politics, news and policy developments.
We are a non-partisan blog. Because we are progressive and because of the aims we’re committed to, we often find ourselves in agreement with left of centre policies and politicians. But we are focused purely on the quality of policies and furthering progressive goals, rather than on promoting individual politicians and parties.
We have been inspired by our U.S. sister site, Think Progress, and have therefore adopted their approach to blogging by setting out our beliefs and categorising our stories accordingly.
We are fighting for:
1. A proactive and sustainable economic policy that creates jobs, pulls Britain out of recession and towards a low-carbon and more equitable future.
2. Public services that work for, and are accountable to, local people and leave no one behind.
3. Safe communities where poverty and inequality are tackled, and the victims of crime are put first.
4. A multilateral foreign policy to tackle climate change, poverty, nuclear proliferation, genocide, terrorism, and disease.
We are fighting against:
1. Public greed and attempts by politicians and public servants to line their own pockets.
2. Administrative incompetence whether it takes place at the national, regional, or local level.
3. Media manipulation and bias to support a hidden agenda.
4. The threat of racism and extremism.
Left Foot Forward is edited by Will Straw. Our editorial policy is set by the editor and contributors of Left Foot Forward alone, and no one else.
We welcome ideas for stories, tip offs, and pitches for articles. Please send your ideas to editor@leftfootforward.org or enter them in our ideas box. If you would like to support our work, please click here.

Lefties and the crisis

One fairly common thought that seems to struck lefties over the past few months is why haven't we done better out of the financial crisis. So here a few of my own quick answers to why we continue to be in a mess.

1. We didn't predict the crisis. No we didn't. We talked a lot about turbo-capitalism, financialisation, hedge funds and private equity. Some of us said (and had been saying for a very long time) that this would 'inevitably' all end in tears. But I don't think there was consistent and coherent critique advanced that was widely articulated, and who on the Left was suggesting that the banks would be the focal point of any crisis?

2. Allied to the failure to predict has IMO been the the failure to apportion blame to the right people. You can see this misdiagnosis at work in the desire to put one over on hedge funds and private equity while the crisis still affords us the opportunity. Clearly there are reasonable criticisms that can be levelled at both groups (though the former is much more disparate than the latter) but neither was at the centre of what went wrong, and both have emerged less damaged than many of us expected. And just to reiterate: Madoff wasn't a hedge fund.

3. We have tended to underestimate/play down what has happened. Again there are lots of criticisms that could be aimed at our and other goverments' responses to the crisis, but let's not pretend that some reasonably significant shifts haven't occured. Regulatory intervention is very clearly back on the agenda (and if you believe the pitch of the Turner Review, the philosophy of regulation is fundamentally altered by recent events), in my bit of the world there are noticeable moves away from a market-driven shareholder-focused approach to governance towards regulation - ie the FSA getting more involved at BOFIs. We've got a higher tax rate for the highest paid that so many lefties wanted, and look at all the sound and fury around remuneration.

I'm not saying that more could not have been done, at that some of these things are a bit of a sideshow, but lefties do seem to adopt the default position that 'nothing' has changed because capitalism hasn't been abolished. And that message does filter out to the punters (btw there is the same problem with TUs constantly slagging Labour off for not doing enough, and then being surprised when TU members aren't enthusiastic Labour supporters come election time).

4. Lack of a coherent set of alternative ideas. Let's be honest, a lot of the Left's response to the crisis has consisted of variations on 'tax the rich' and 'regulate the rich'. It's often simply come across as vindictive. On one level this is understandable, but it only takes you so far, and certainly isn't any kind of programme that deserves public support. More broadly there's been a tendency to suggest 'obvious' solutions despite the lack of evidence that they would make any difference (reinstating Glass-Steagall, developing longer-term remuneration policies, 'tighter' regulation etc etc etc).

5. We have no preordained right to benefit politically from financial crises. End of.

Tackling short-termism

Via the ace Corporate Governance, I came across this report (PDF) from the Aspen Institute. Press blurb below. 

28 BUSINESS, INVESTMENT, ACADEMIC, & LABOR LEADERS JOIN ASPEN INSTITUTE IN BOLD CALL TO OVERCOME SHORT-TERMISM

Washington, DC, September 9, 2009—Twenty-eight leaders representing business, investment, government, academia, and labor joined the Aspen Institute Business & Society Program’s Corporate Values Strategy Group (CVSG) to endorse a bold call to end the focus on value-destroying short-termism in our financial markets and create public policies that reward long-term value creation for investors and the public good.

The statement, “Overcoming Short-termism: A Call for a More Responsible Approach to Investment and Business Management,” identifies three leverage points for encouraging a renewed focus on long-term value creation and for addressing one part of market short-termism, shareholder short-termism:

1. Market incentives: encourage more patient capital through tax policy

2. Alignment: better align the interests of financial intermediaries and their ultimate investors

3. Transparency: strengthen investor disclosures

The statement highlights the need to focus on the system and not just the corporation, recognizing that a complex dance involving corporate managers, boards, investment advisers, providers of capital, and government drives the results we have now. This distinguished and diverse group is unified in calling for a comprehensive examination of market short-termism in our economy. The signatories hope that policy makers in Congress, the Executive branch, and relevant regulatory agencies will heed this call.

Recognizing that voluntary action alone is not enough to address today’s economic reality, a small group came together to create the foundation for this much-needed public policy conversation. The current drafting committee began with a set of ideas shared in Aspen CVSG meetings among varied market players beginning in July 2008. This effort builds on the CVSG's ongoing focus on sustainable value for investors and society, including the “Aspen Principles for Long-Term Value Creation,” that were released in June 2007 by a coalition of business, labor, institutional investors, and corporate governance experts. The Principles called for voluntary change in practice by business and investors around metrics of success, investor communications, and executive compensation.

“Short-termism must be addressed as a conceptual whole — piecemeal approaches do not work,” said Judith Samuelson, executive director of the Aspen Institute’s Business & Society Program. “Now is the time for bold ideas to drive change in the incentives and behaviors critical to transformation of how value is created and sustained.”

And this!

1. Post on the new Unison blog UnisonActive about tackling exec pay from a workers' capital perspective. Hat-tip: Mr Gray (The UK's Number 1 union blogger!)

2. This year's TUC Pensionswatch report. The usual wheezes for boosting directors' retirement income are set out - better accrual rates in DB schemes, much higher contribution rates in DC schemes, top-ups to offset tax changes, and whopping payments in lieu for directors without pensions. By far the most generous pension provision in the UK.