Key Proposals for Global Rules

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Efforts to transform the Old Economy rules and institutions that now guide the global economy need to take place on many fronts.  Here are two proposals for transformative change that are currently gaining momentum:

1.  Financial Speculation Taxes

For decades, international activists have been pushing the idea of a tax on financial transactions. The goal is twofold: 1) a drop in short-term speculation that serves no productive purpose and leads to dangerous bubbles, and 2) significant revenues to support real community needs in the United States and globally, such as health, climate, and jobs programs.
In response to the global crisis that erupted in 2008, a wide range of activists, including trade unionists, international health advocates, and climate justice groups, have come together to move this decades-old proposition into practice. Their specific proposal is to tax trades of all types of financial assets, including stock, derivatives, and currencies. The tax rate would be so low that ordinary investors wouldn’t even notice it. Some U.S. legislative proposals would even exempt retirement funds and mutual funds, the primary middle class investment vehicles. The real target would be the hedge fund investors and other high fliers in the global casino, who make most of their money through high-frequency betting on short-term market movements that often have nothing to do with what’s going on in the real economy. Since the tax would apply to each of these transactions, it would make this type of speculative gambling much less profitable and encourage more long-term, patient investment.

Financial speculation taxes would help return the financial industry back to its proper role of serving real economic needs by shrinking the size (and hence also the power) of Wall Street.

2.  International workout procedures for sovereign debts

The international Jubilee networks and other global civil society organizations have long called for debt cancellation for the world’s poorest countries, as well as for the creation of international insolvency procedures.  The goals of these new mechanisms would be to work out disputes over sovereign debts in a systematic way that balances the interests of debtors and creditors and addresses how the debts were accumulated in the first place.  The prospect of another round of debt crises has renewed interest in these ideas.  Increased borrowing to help offset the impact of the current crisis has driven many countries, including some that have received debt relief over the past decade, back into unsustainable debt levels.  The campaigns behind international debt workout procedures got a boost from the UN Commission on the Financial Crisis headed by Joseph Stiglitz, which called in its 2009 report for “the creation of an ‘International Debt Restructuring Court,’ similar to national bankruptcy courts.” Increasingly, climate campaigners around the world have also raised the issue of "climate debt," the idea that rich countries owe climate debt to the poor ones due to their long economic history of fostering the climate crisis.

By liberating the poorest countries from the burdens of debt, these efforts would allow developing country governments much greater freedom to pursue economic policies that focus on building domestic markets and local businesses, rather than being dependent on volatile global export and investment markets.