It was in 1972, after the collapse of the post-war Bretton Woods system of fixed exchange rates, that Mr Tobin, Yale economist and subsequent Nobel Prize winner for his analysis of the behavior of financial markets, first floated the "Tobin Tax" – a small levy on international currency transactions to reduce speculative turbulence. In 1978 he formalized the proposal. But for a couple of decades it went nowhere, politely dismissed by governments, cherished by aid and development agencies and sundry other utopians, and largely ignored by everyone else.

Now, suddenly, the tax is the talk of the global village: invoked by French presidential contenders, emblazoned on the banners of anti-globalization protesters from Gothenburg to Genoa, and picked to pieces by economic commentators from Wall Street to the City of London.

Mr Tobin isn't the first liberal economist to have worried over the risks posed by speculative flows to growth and and the financial stability on which that growth depended. "When the capital development of a country becomes a byproduct of the activities of a casino," Keynes wrote 65 years ago, "the job is likely to be ill done." But even the author of The General Theory is hard pushed to match the current celebrity of James Tobin.

An economist since 1939 and Professor of Economics at Yale since 1955, he no longer teaches. But the Tobin Tax is focal point of the anti-globalization movement. One prominent group, Attac – Association for the Taxation of Transactions for the Aid of Citizens – has built its campaign specifically around the tax. Another, Mobilization for Global Justice, a prime mover of the demonstrations that will overshadow this month's IMF/World Bank annual meeting here, is another supporter.

The appeal of the tax lies in its simplicity. Around $2 trillion (£1,400bn – a sum equal to one and a half times the annual output of the entire British economy) is traded on currency markets in a single day. Of this, only a small fraction covers physical commerce. The rest is speculation of one kind or another.

So impose a small tax on these transactions of between 0.1 and 0.5 per cent, and you raise anything from $150bn to $300bn in a single year, to be channeled into international development. Not loans, not tied aid, but a painless transfer of resources that the public is unlikely to resent, given that the money will be stumped up by the financiers of Wall Street.

When the anti-globalization show arrives in Washington, the Tobin Tax will stalk the deliberations of delegates. By then it will have featured on the agenda of European finance ministers. Already it is the hot political fashion in France where Prime Minister Lionel Jospin and President Jacques Chirac are outbidding each other for the anti-globalization vote ahead of next year's presidential election.

Mr Tobin's misgivings about globalization long pre-date today's controversy. "I don't think globalization is likely to succeed if it means absolute and complete freedom of capital movements," he said in 1998, when the collapse of some Asian tiger economies threatened worldwide financial meltdown. Today, however, he is under no illusions about the obstacles facing his brainchild. "Having a tax of this kind adopted depends on international agreement, and since the US is dead against it, it is not going to happen." And not just the US, it should be added for the benefit of those who would add the tax to the ever longer list of initiatives in which America is in a minority of one.

For the problems raised by the tax are legion. How on earth would it be implemented, even if every country agreed? In fact, not only the US but also Britain and most other major powers are against it. That, cynics say, is why French politicians can espouse it, safe in the knowledge that it won't be implemented. Were Britain were to sign up, the primacy of London could be jeopardized and currency trading would probably migrate to offshore havens. No British government could contemplate such a blow to the City.

And just suppose the UK, the US and the world's other financial powers did sign up: the feuding can only be imagined at whatever body is chosen to administer such a tax over the distribution of its proceeds. Finally, critics point out, it would not even succeed in its stated purpose of reining back speculation. What matters an annual tax of 0.5 per cent when a Third World currency can crash 10 per cent in a single day? These objections will surely prevail. But the Tobin Tax, so elegant and so morally beguiling, will not go away.

© 2001 Independent Digital (UK) Ltd

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