Adair Turner was a near perfect bellwether of conventional thinking long before he took up his present role as chairman of the FSA.
His talent is articulating and popularising mainstream ideas rather than original thinking. As chairman of the Pensions Commission from 2003-6 he helped popularise the notion of the “demographic timebomb”. As chairman of the government’s Committee on Climate Change he will no doubt call for moral restraint as the main way to deal with impending climate catastrophe. He is also a supporter of the Soil Association, which supports organic farming, of which is wife is chair and Prince Charles is the Royal Patron.
It is in that context that Turner’s article in Prospect (partly available online) floating the idea of a Tobin tax on financial transactions should be understood. As Turner acknowledges it is not a new idea: James Tobin, an American economist, first proposed it in 1972. Indeed Gordon Brown also raised the possibility in a speech back in 2001. But its adoption by Turner shows that it is being seriously considered in mainstream circles.
Turner raised the idea in relation to the debate about excessive pay and a bloated financial sector. He argued the main way to deal with this problem would be higher capital requirements on trading activities but raised the Tobin tax as a possible additional tool.
As usual Turner fails to get to the nub of the issue. The bloated character of the financial sector is closely related to the atrophied state of the real economy. Reluctance to invest in real productive activity meant more money found its way into the financial sector. The solution, therefore, is to find ways to regenerate the productive sphere rather than putting curbs on finance.
Floating the idea of a Tobin tax is essentially a coded way of blaming speculators for Britain’s economic problems. It is a dangerous diversion from the task of promoting a dynamic economic recovery.