In a country where residents wake up in the morning not knowing if an illegal strike will take place and deprive them of the capital’s metro system, and visitors show up at its most revered archaeological site only to be turned away by protesting employees, it hardly seems that the prime minister’s priority should be to attend an island gathering of big thinkers. Discussing theoretical permutations when there are practical problems to deal with somehow doesn’t appear very fitting.
Rather than tackle more mundane issues in Athens, Prime Minister George Papandreou chose this week to visit Poros for the Symi Symposium, a brainchild of his which sees some of the world’s top politicians, economists, academics and opinion leaders gather in Greece every year. Like cicadas striking up across Athens, you could hear the disapproving tut-tuts of his political opponents but especially his government colleagues. In Papandreou’s absence, his PASOK party embarked on a new bout of schizophrenic infighting.
In fact, the past few days have epitomized Papandreou’s premiership — like the schoolchild who wants to sketch freely but is constantly forced to paint by numbers like the rest of his classmates — the PASOK leader’s attempts to allow his grand visions to take flight are repeatedly grounded by the complications of the day-to-day running of the country.
Yet, it seems churlish to criticize a leader for wanting to inspire and be inspired by great ideas or for broadening his contacts and the country’s allies by meeting with foreign leaders and experts. After all, his predecessor was castigated for remaining rooted to the spot, like a homing pigeon that didn’t have a message worth delivering.
Free from the burdens of protesting Culture Ministry contract workers and striking air traffic controllers, Papandreou was able to tackle meaty subjects at a symposium whose title alone — “Fast Forward: Progressive Ideas for Greece, Europe and the World” — projected positiveness. One of his big ideas this week was to express support for a Tobin Tax, also known as a Robin Hood Tax.
The idea — to impose a tax of as little as 0.1 percent on financial trades — was first proposed by American economist James Tobin in the 1970s as a way of reducing the volatility of currency exchange rates and, more significantly for today’s leaders, to “promote autonomy of national macroeconomic and monetary policies,” in other words to deter speculators.
As you might expect from a Nobel Laureate, Tobin had the intelligence to understand that the timing of his proposal was unfortunate. The idea of taxing transactions at a time when neoliberal economic policies were taking root meant that his plea fell on deaf ears. “It did not make much of a ripple,” he acknowledged some years later. “In fact, one could say that it sunk like a rock.”
However, the crises that have shifted the world’s economic paradigms over the last couple of years mean the idea is being floated again, especially as it would allow governments to build up funds that could be used for a number of things, from bailing out banks to driving development. The Tobin Tax sounds like something from Lord of the Rings and for years it seemed a work of fiction but now there is growing momentum toward making it become a reality.
“The proposal for the imposition of a tax on financial transactions, a so-called ‘Tobin Tax,’ which will bring in funds that we can invest in our economies, is very significant and one which we will insist on because investment is vital if we want to exit the current crisis,” Papandreou told his audience on Poros.
This week, both the French and German finance ministers Christine Lagarde and Wolfgang Schauble declared their support for such a levy (also known as a financial transaction tax or FTT), ahead of an Ecofin meeting where they raised the issue with their European counterparts. In declaring his support for the levy in the same week, Papandreou appears to be aligning himself with Europe’s big players. Isn’t this just what we want from a Greek leader — for him to put the country at the forefront of developments and progressive thinking rather than bringing up the rear?
You would think so but Papandreou’s attempt to grab at these big ideas somehow leaves a nagging feeling that he is overreaching, perhaps unaware of the full implications of what he is promoting. For instance, there is a strong counter-argument to the Tobin Tax. Some financiers claim it goes against the principles of wealth creation and would simply drive business to other countries where the levy does not apply. Sweden, where Papandreou spent part of his youth, applied such a tax on trades of local stocks and derivatives in the 1980s but the scheme was abandoned in the 1990s because many investors simply traded from other countries and the revenue generated by the levy did not meet expectations.
By declaring his support for a Tobin Tax, Papandreou may be showing that he’s in step with other leading thinkers but at the same time he is opening himself up to another, even more damaging, accusation that is often leveled at him — that he has a knack of identifying good ideas but just not the ones that would help overcome the problems he has to solve.
Papandreou’s statement of support for the levy came on the same day that Greece announced it had managed to slash its budget deficit by 46 percent during the first six months of 2010 compared to last year, but that it had fallen well short of its target to increase revenues by 13.7 percent. While public spending cuts seem to have done the trick, the idea of raising taxes, VAT in particular, has not had the desired effect.
Papandreou’s government had to scramble to rescue public finances but in its rush to do so, little thought was paid to the fact that hiking taxes when people are pushed for money leads to them spending less and will ultimately prove counterproductive, as the government collects less revenue. PASOK has not been able to find a way to compensate for this. It makes Papandreou’s bid to chase the world’s rich when Greeks become increasingly poorer seem like irrelevant folly rather than visionary politics.
Herein lies one of Papandreou’s greatest challenges. As he leads his band of not-so-merry men into the battles ahead, the prime minister must find a way of balancing his love of the broad, theoretical political brushstrokes with the need for precise, effective interventions that will address the pressing problems Greece faces. Anything less, and he’s in for a rather lonely and painful ride through the glen.
This commentary was written by Nick Malkoutzis and was published in Athens Plus on July 16, 2010.