Sessions summaries Towards another possible world: how to regulate financial markets democratically?
Reference Dialogue: World Youth Festival

This event, organised by the Consulta Justícia Global debated how, by means of regulation, the more underprivileged countries could profit from economic flows for development.

The expert of the Economic Commission for Latin America and the Caribbean (CEPAL), Daniel Titelman, explained that the developing countries, historically dependent on funding from rich countries, were able to grow as of the 90s thanks to the entry of new investment agents such as pension funds, thus becoming emerging economies. The investment of these savings resources in the economies of these countries led their development to increase considerably. Now, as Titelman illustrated, the problem is the volatility of financial markets, which oscillate around multiple factors and the decisions —sometimes taken with poor criteria — of the investors.

The poor countries depend fundamentally on these investments to be able to develop, and this is why there is a need to set up institutions that regulate financial markets and thus help stabilise investments. To a certain extent it is a question of governing, by means of democratic institutions, economic globalisation. This regulation should be global, regional and national. In conclusion, the economy must be regulated for capital flows to continue to reach developing countries, and these investments should be more stable to be able to promote true development.

The talk also addressed the necessary implementation of the Tobin Tax to fight financial speculation and redistribute wealth in the world. This tax would be levied on short-term capital movements, i.e. those that are clearly speculative. The Tobin Tax is one of the most specific proposals made by social movements to recover democratic control of the international financial markets. To explain it, the session featured the presence of the head of international relations of the Associació per a la taxació de les transaccions per l’ajuda al ciutadà (ATTAC) [Association of the rating of transactions to aid the citizen], Anna Maria Garriga.

“The economy and economics must be taken seriously, it is not a game for a few speculators to make a killing. If you want to play, as in a casino, then you should pay”. This is the effective comparison drawn by Anna Maria Garriga to justify the levying of this 0.1% tax on exchange transactions. The staunchest resistance to the application of the Tobin Tax in the financial world stems from the fact that the tax would eliminate the banking secrecy obligation and would expose many tax havens.

In turn, the director of the Consulta Justícia Global, Antoni Comín, systematised some of the concepts expounded by his colleagues on the table. Thanks to information and communication technologies, a global financial network was created in the 90s. Thus, “of all markets, it is the financial market that is going most global”, assured the director of Consulta Justícia Global. This global financial market is characterised, as was already said, by enormous interconnection and by a great complexity which is leveraged by experts. Similarly, during the last few decades there has been a disproportionate increase in the movement of this financial capital. Moreover, this movement of capital is completely free, deregulated and very often incoherent.

Comín explained that at the end of the day, the Tobin rate would only mean paying a very low price for a priceless public good: stability. The unstable behaviour of financial markets cannot be allowed to determine the development of the countries of emerging economies. There must be democratic regulation system and multilateral institutions controlling them. Therefore, the challenge is to make sure that financial markets not only leverage the profitability of investors, but also that their priority be to guarantee the economic programme of the countries that need it.