Gordon Brown is a noted intellectual pygmy, and he has resurrected the idea of a Tobin tax, out of context , to act as an insurance fund against future bubbles:
The Prime Minister told ministers from the group of rich and developing countries it was time to consider a global financial levy or an insurance fee to be implement by all the world's financial centres.
Addressing the meeting in St Andrews, he said there must be a ''just distribution of risks and rewards''.
''And it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us."
His comments follow earlier calls from former German Finance Minister Peer Steinbruck for a global tax on all cross-border financial transactions.
And the problem is that the suckers will get suckered by his plan. He is of course correct that
1) Capitalism is prone to bubbles
2) The bubble bursts are so awful/systemic that everyone has to muck into fix them
3) We should target the cause, as everyone fixing them is not fair
The issue is that he is proposing that everyone pay for them upfront. That is what his plan of a flat tax would do. Same difference but actually worse (due to liquidity dampening as well as cost of administration)
What is in fact needed is
1) Get rid of institutions that are "too big to fail"
2) Something very like a Tobin tax, except targeted at risky transactions, this would take regulatory brainpower & ongoing courage:
In Ireland we were well aware we had a property bubble... the Central Bank said it... yet nothing was done. No it simply wouldn't have been fair to put an insurance tax on all bank activity when we know the bubble risk was in property. What the Central Bank & Financial Regulator should have done was said
"Oi, you lot in the banks, you've to set aside 5% capital for any development further property loans as a rainy day fund"
That is what they did in Spain.
Targeting everyone... when you can see where the likely risk is: is simply unfair.
Brown has taken a dated concept, and applied it out of context, as a blunt instrument.