A Robin Hood Tax will stop the machines wiping out the market

A small tax on each transaction will stop pointless yet risky high-frequency trading.

From Terminator to the Matrix, our fear that humanity may be supplanted by the machines we create has helped Hollywood make mega-bucks. But while Arnie’s cyborg killing machine and the Neo’s alternative reality remain firmly in the realms of science fiction, our financial sector’s love of a fast buck is leading us to cede control of markets to computers with sometimes disastrous consequences.

The extent to which financial markets are now dominated by computer-driven high frequency trading was revealed again last week, when Knight Capital, a leading New York trading firm made a mistake in its computer programming. The rogue programme swamped the stock market with errant trades, cost the firm $440 million and put the future of the firm in jeopardy.

So what? I hear you ask. Why should we care if a firm of traders loses millions because they rushed out a new computer programme before it was ready?

The fact is that beyond acting as a casino for traders to make or lose fortunes, financial markets are crucial to the functioning of the global economy. They are supposed to allocate resources efficiently and help firms raise capital and manage risk. When things go wrong, as in the crisis of 2008, the consequences for the real economy can be devastating.

A growing number of economists and financial experts – including more than 50 financiers who wrote a recent letter to David Cameron and other world leaders – are warning that unchecked high-frequency trading undermines markets’ economic efficiency and risks disaster. In May 2010, the most infamous "flash crash" dragged the Dow Jones index of shares down nine per cent with more than half the fall happening in just seven minutes. Shares in Accenture plunged from $40 per share to just $0.01, almost wiping out the value of the company.

High frequency trading (HFT) conducted may now account for more than three-quarters of all equity deals in the UK. When you consider that this sort of trading, managed by computers according to complex algorithms, was almost unheard of seven years ago, it is hard to avoid the conclusion that traders have been competing in a technological arms race that has left regulators floundering.

So what can be done? As anti-nuclear campaigners have discovered, it is not possible to un-invent a technology once the genie has left the bottle. But fortunately this is not necessary. High-frequency trading is only profitable because of the sheer volume of trades carried out; the profit margin on each trade is incredibly low.

A tiny tax of a fraction of a percent on each transaction would curb the worst excesses of this cyborg-style casino capitalism, while having little effect on long-term investments such as pensions where trades are carried out far less frequently.

European leaders are working towards such a tax – covering stocks, bonds and derivatives – but the UK government has chosen to side with City interests rather than back the efforts of Germany, France, Spain, Italy and others to make finance work in the interests of society rather than the other way around.

UK opposition to the tax, based as it is on the claim that such taxes have to be global to work, is somewhat ironic. The UK already has an FTT on shares, known as the Stamp Duty, which at 0.5 per cent is many times larger than the proposed European tax (0.1 per cent for shares and bonds, 0.01 per cent for derivatives). The problem is that banks, hedge funds and other high-frequency traders avoid the stamp duty by trading in derivatives.

Extending the UK’s existing FTT to derivatives and bonds would not only "throw sand in the wheels" of HFT and therefore increase stability in financial markets and the wider-economy; it would also raise billions in revenue – the reason the Robin Hood tax campaign is backed by almost 120 organisations from Oxfam to the TUC and by global figures such as Kofi Annan and Bill Gates.

Despite avoidance, the UK Stamp Duty raise £3bn a year. A full-blown FTT could raise as much as £20bn – money that could be used to help those hit by the economic crisis at home and abroad and to meet the UK’s obligations to help poor countries cope with climate change.

It can be done. The UK’s Stamp Duty is one of 40 or so FTTs that already exist around the world. Hong Kong has introduced an FTT on derivatives precisely to curb the excess of computer-driven trading. Charles Li, Chief Executive of the Hong Kong Stock Exchange, says it "effectively limits high frequency trading, just like a highway with many toll booths limits speeding."

By rejecting a broader FTT, the UK government is making its own bet on the markets. It is accepting instability and forgoing much needed revenue in the hope the City’s casino capitalism will help drive recovery from recession.

It is a risky bet. As Andrew Haldane, Executive Director of Financial Stability at the Bank of England has put it:

"Grit in the wheels, like grit on the roads, could help forestall the next crash."

"Whoa" ~ Neo, The Matrix. Do we all fear that machines will supplant us?

Jon Slater is a Senior Press Officer for Oxfam and a spokesperson for the Robin Hood Campaign

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No, Christopher Hitchens did not convert to Christianity on his deathbed

From Mother Theresa to Princess Diana, for Hitchens, there were no sacred cows. He certainly would not have wanted to become one. 

The suggestion that atheist writer Christopher Hitchens converted on his deathbed was inevitable. When the evangelical Christian Larry Taunton appeared on Newsnight last week to discuss his new book, he suggested that “the Hitch” was “contemplating conversion” in his final days. The collective sigh from his fans was palpable.

That particular claim is uncontroversial. Of course Hitchens “contemplated” Christianity – to say so simply suggests he had an open mind. However, the book goes further, and claims that Hitchens began to doubt his convictions in his final days. Taunton writes that: “Publicly, he had to play the part, to pose, as a confident atheist. In private, he was entering forbidden territory, crossing enemy lines, exploring what he had ignored or misrepresented for so long.” The book is littered with similar insinuations that he was, so to speak, losing his faith. His close friends, those he wasn’t paid to spend time with as he was with Taunton, deny this completely.

Naturally, the book has sparked a host of rumours and junk articles that suggest he converted. Not one to let a cheap shot slide or leave an insinuation untouched, Hitchens was forward-thinking enough to not only predict these accusations, but deliver a perfect pre-buttal. When Anderson Cooper asked him, a short while before his death, whether he had reconsidered “hedging his bets”, he responded:

“If that comes it will be when I’m very ill, when I’m half demented either by drugs or by pain when I won’t have control over what I say. I mention this in case you ever hear a rumour later on, because these things happen and the faithful love to spread these rumours.”

If that isn’t enough, however, his wife has made clear in the strongest possible terms that talk of a softening on Christianity and a deathbed conversion is entirely untrue. “That never happened. He lived by his principles until the end. To be honest, the subject of God didn’t come up.”

The spreading of fallacious rumours of deathbed conversions by the religious is predictable because there is so much historical precedent for it. Many of history’s most famous atheists have suffered this fate, so, in a sense, Hitch has now been inducted into this hall of infamy alongside the likes of Darwin, Thomas Paine, and David Hume. In God is not Great, he wrote that “the mere fact that such deathbed ‘repentances’ were sought by the godly, let alone subsequently fabricated, speaks volumes of the bad faith of the faith-based.”

Now, not for the first time, Hitchens has fallen foul of this bad faith. After all, what can be more abhorrent than baying for a man to abandon his lifelong principles when he is at his most vulnerable, and spreading callous lies when he can no longer respond? It speaks for the complete lack of confidence these people must have in their beliefs that they strike when the individual is at their least lucid and most desperate.

Hitchens felt the bitter end of the religious stick when he was dying as well, and he responded with typical wit and good humour. He was told that it was “God’s curse that he would have cancer near his throat because that was the organ (he) used to blaspheme.” His response? “Well, I’ve used many other organs to blaspheme as well if it comes to that.” One suspects that he would have rubbished recent talk in a similarly sardonic fashion.

Likewise, for a man who was not afraid of a provocative title himself (see: The Missionary Position, No One Left to Lie to) it would be reasonable to think he’d accept his own life as fair game. From Mother Theresa to Princess Diana, for Hitchens, there were no sacred cows. He certainly would not have wanted to become one.

Fortunately, we are blessed with the wonders of the internet, and Hitchens can respond to these claims as Thomas Paine and David Hume could not – from the grave. His prediction and preparation for this speaks of an intellect like no other. In a posthumous debate he still wins out.