Rough Trade - currency traders and the economic crisis in Asia

Washington Monthly, June, 1999 by Nick Thompson

International investors opposed to such a tax make the argument that there would be difficulties in implementation. A Tobin tax, however, would rely on existing infrastructure and governments would also have incentives to make the tax work so that their central banks could set interest rate policies based on economic growth, not on potential currency speculation.

Of course, the principal reason that international investors are opposed to a Tobin tax has nothing to do with implementation concerns. Keeping markets completely free has simply become a religion. No regulation is good and no controls are worthwhile. It's not even worth it to have a small tax that would work like the surge protectors that most of us use to protect our computers: draining a little bit of energy all of the time but preventing the whole system from crashing in the event of a storm.

Today, the traders in New York, London, Tokyo, and every other center around the world are still wearing the same blue shirts and staring into the same blue computer screens. They are looking for economic weaknesses and looking for the next currency that's going to collapse. If they find a likely suspect, they'll attack it, and if enough speculators start to sell, the perception of weakness might become self-fulfilling. This will continue on and on, with markets around the world sinking like Thailand's. When this happens, the beneficiaries will claim that they were just pointing out weaknesses (just as they did in 1929) and that currency markets are vital to global commerce and to lubricating the gears of global capitalism that have certainly brought prosperity to people all over the world. Their implicit argument, however, will be the notion that global capitalism, like a brothel, works best when there's no regulation. As has been clearly seen in Thailand, that isn't always true.

NICK THOMPSON is co-author of the forthcoming book The Baobab and the Mango Tree, on development in Ghana and Thailand.