Empty gestures in Istanbul

G7, World Bank and International Monetary Fund meetings are always full of empty gestures, political positioning and grand statements, many of which hold little water on close examination. Here are my top two from this weekend.

A global tax on banks and bankers. Dominique Strauss Kahn, the IMF’s managing director, floated the idea on Friday, he said, “to create a kind of fund insurance or funding for low-income countries”. There was a flurry of excitement because the idea sounded new, but after minimal digging, we realised this was an initiative going nowhere. It had already been included at the fag end of the G20 communique, (the last point of the financial regulation bit), but with no enthusiasm.Today, Alistair Darling effectively signed its death warrant before it was a day old. Insisting the tax had to be global, he said, “the principle of sovereignty is something we feel very strongly about”. So the British will not agree to anything that affects its sovereignty in taxation and is not global. The idea will never be global and clearly impinges on sovereignty. Go figure.A British and French initiative to support the poor. Christine Lagarde, French finance minister, and Mr Darling, have just issued a joint statement announcing they would contribute $2bn of their special drawing rights at the IMF to the Fund’s concessional lending facilities. Ms Lagarde said the initiative reminded her of the moon landings. “Just think of the first step on the moon - how small a step it was”. The romance of Istanbul must have been getting to her: small is the only apt word in her comment. The initiative merely puts money into one pot in the IMF from an overdraft facility for the UK and France, with no effect on their taxpayers and the Fund taking all the credit risk. Mr Strauss-Kahn conceded its lending facilities were not even short of money. So, extra aid to poor countries, no; an extra burden on French and British taxpayers, no; but more complicated money movements and ring-fenced budgets at the IMF, yes. Brilliant.
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