You pay to play the game

Chapter 5 of Nehemiah is an uneasy read for city bankers. The prophet-turned-whistleblower Nehemiah hears complaints from poor borrowers and immediately takes action: gathering citizens together, he publicly challenges the moneylenders, demanding that they pay back in full the interest they have extorted from their “own people”. The poor argue that the moneylenders are “of the same flesh and blood as the rest of our people”, and “our children are as good as theirs”. But the bankers had forgotten who they were lending to: they had forgotten their brothers and sisters, fellow humans under the same God.
 
Today’s financial industry is not dissimilar:

a London banker lending to a subprime, minimum waged, single Mum in Chicago sees nothing but numbers on a screen; a credit score. His decision will change her life; yet he will never meet her and she will never meet him. He is responsible for her future, but has no relationship with her. Our capitalist society forgets that financial elites are “of the same flesh and blood” as everybody else. It’s a common identity, even fraternity, that should bring all members of society together. The breakdown of this intangible, but essential, trust-relationship caused the banks to lend irresponsibly, and the world is still paying for those mistakes. 
 
Politicians are searching for a new kind of economics that won’t cause a repeat of the credit crisis, but perhaps what we need is a new system of relationship and responsibility. The Labour Party talks about ‘One Nation’, and it is this sense of unity which Nehemiah appealed to when faced with a similar crisis 2,500 years ago. The prophet’s appeal worked because after a few verses the moneylenders “could find nothing to say”, and the money was returned.
 
It is a belief in ‘One Nation’ that underlies the Robin Hood Tax. It is a sense of common identity and responsibility, for Christians a recognition that all are made equal in God’s image, which asks banks to clear up the mess they’ve made. The proposal is a 0.05% Financial Transactions Tax (FTT) on every transaction that takes place in the UK; money entering or leaving the country. It is estimated that this could generate £20 billion for the government annually, while at a tiny cost to banks.
 
Such a tax is, admittedly, a long way off from the Biblical ideal of a society without rich and poor, where the wealthy answer to the tribunal of need. Undoubtedly, there is exploitation in our financial system which the tax would not address, and we need Nehemiahs to shout out against all forms of usury, unfairness and greed. But perhaps this policy is a good place to start.
 
The size of London’s financial sector means that although an FTT would dramatically boost tax revenue, some fear that it would disproportionately harm the British economy. Economists are in disagreement about this; Joseph Stiglitz, Warren Buffet and Bill Gates all support the tax, arguing that it is better for the financial industry as well as society. After all, if Britain is overly dependent on volatile, risky transactions, a structural readjustment away from asset trading is actually healthy.
 
Stephan Schulmeister, an economist at the Austrian Institute of Economic Research, explains that even if “50% of [financial] trades” from Britain moved abroad, it “may be a disadvantage in the short term, but then you look at what the financial system has done to economies over the past 30 years – it was just financial alchemy... Longer term, the [other countries] will be the loser[s] because you can’t just live on trading assets.” High-volume asset trading contributes more to nominal GDP than real wealth. Although initially nominal GDP figures may suffer, in the long run an FTT would be good for the real economy (and real people). 
 
But aside from being fair and economically sensible, the FTT is also about honesty. Banks must recognise that each transaction passing through the City comes with a risk, a risk which will not harm the banks – they’re too big to fail – but can have drastic effects on society. Economies like Hong Kong, which relies on the financial industry for 11% of its GDP, have a financial transactions tax simply to manage that risk. The Hong Kong government defends this policy, arguing that an added tax reduces high-risk transactions; creating fewer short term gains but a healthier economy overall.
 
The Robin Hood Tax is more money for public services. It is better for our economy in the long run. It is justice, and it’s honesty. But it’s also lots more: it’s society. When the financial industry forgets its responsibility to society, two nations are created: the rich are cut off from the poor, living parallel lives yet a million worlds apart. One Nation politics has no meaning today unless the financial industry gives back to society. You pay to play the game: if banks want to ride the waves of stocks and numbers to make a profit, they must give something back... especially when those waves break at the cost of the poorest.

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