Beyond the Tobin Tax: Global Democracy and a Global Currency

Abstract

The twin phenomena of erratic changes in foreign exchange rates and massive international flows of funds have been important elements in the instability of the world economy since the breakdown of the Bretton Woods system. The much-discussed Tobin Tax proposal on foreign exchange transactions is one response to these disturbances, but it addresses symptoms, not causes. James Tobin recognizes that a world currency with supporting institutions would be preferable. A world of competing currencies imposes a uniform policy template on countries in much the same way that the nineteenth-century gold standard did. The case is made here that a global currency not only offers a solution to the current impasses but also is a necessary component in the shaping of a global democracy, which will restore scope for diversity to the world's constituent parts.