Ross Buckley, Professor of Law at University of NSW, one of Australia’s leading minds on the financial transactions tax (Robin Hood Tax), and academic adviser of Jubilee Australia, writes a compelling piece about reclaiming our financial sectors.

Professor Buckley expresses his bemusement at why the Australian Government would not want either a bank levy or the preferred tax on wholesale financial transactions.

“It might seem like a paradox, but we need the tax because we need efficient markets. Markets determine prices and allocate resources far better than any other mechanism. Capitalism relies on markets working. As the global financial crisis has proven dramatically, global financial markets are less regulated, and work less well, than in decades past.”

Assets are often bought, held and sold in under a second. “Many French hedge funds recently moved their trading computers to London because the time it took electronic messages to travel from Paris was placing them at a disadvantage. Goldman Sachs has moved its computers right beside those of NASDAQ, the online exchange, and each millisecond gained, by Goldman’s own admission, is worth at least US$100 million.”

He cites the words of Lord Turner, head of Britain’s Financial Services Agency, when he described this type of trading as “socially useless”. But according to Professor Buckley, it’s even worse than that: “Speculation has become the dominant form of market activity and works against productive investment. Short-term speculation distorts and damages the critical price-setting function of markets, and it consumes financial assets that could be invested long-term in the real economy.”

“THE IDEA that we need to reweight our markets in favour of longer-term investment and away from rewarding short-term speculation is not a radical one. Last year the Aspen Institute in the United States issued a paper, “Overcoming Short-termism,” signed by a who’s who of corporate America, including Warren Buffett and Peter Peterson, together with the former chairs of IBM and Goldman Sachs, and others.

“As Warren Buffet has pointed out, the globalisation of finance has benefited the financial markets far more than anyone else. The incredible rise in profitability of investment banks, hedge funds and private equity funds has translated into enormous political power, opposed to any regulation of the markets from which they profit so handsomely. We need to reclaim those markets for their real functions, to serve the real economy that provides our livelihoods.”

Read the full article, “Reclaiming our financial sectors”.