General Secretary of the Congress of SA Trade Unions (Cosatu), Zwelizima Vavi, has asked the G20 meeting, that takes place later this week, to come out strongly on the need to implement taxes to curb the excessive growth of the financial sector at the expense of the productive sector.
Vavi was speaking in Cannes during a meeting with French President Nicholas Sarkozy just prior to the G20 summit.
“We expect the G20 to come out strongly on the need to implement taxes to curb the excessive growth of the financial sector at the expense of the productive sector.”
Vavi proposed that two taxes be introduced, the first being a financial transactions tax, which would discourage excessive speculation and limit disruptions on the productive economy that were brought by financial markets.
Secondly, Vavi said a financial activity tax should be imposed. The tax would be levied on the size of excess profits and excess salaries within the financial sector, to ensure that the financial sector did not balloon excessively beyond what could be sustained by real production, and that resources that could be directed towards job-creation were not “wasted on financial speculation”.
In this context, Vavi proposed that the G20 consider the implementation of a tax on short-term cross-border flows, to limit excessive appreciation of currencies, especially in developing countries.
“An important part of the income-led recovery that we are calling for is the need to preserve and build industrial capacity in developing countries.
“What we have witnessed is that hot money continues to flow into these economies, strengthening currencies, dislocating manufacturing capacities, and leading to massive job losses through an influx of imports and a decline in revenues. In many countries, such as mine, we lost almost 10% of the workforce.”
Vavi added that under these circumstances, one would expect that the currency would weaken to balance the economy.
“This has not happened; in fact the currency has strengthened, thereby increasing the risk of a permanent damage to employment and industrial capacity.”
Vavi said the economic crisis had no doubt pushed vast populations into despair.
“There is an increase in poverty levels which are unbearable. Yet, part of the problem with rising food prices is the speculation in financial markets over essential food items.
“We want this practice to be limited. It must be used solely to enhance decision-making processes of food producers, e.g. farmers, when they decide when and whether to invest.”
However, this role of financial markets had long been overtaken by speculators.
“We propose that a heavy tax be imposed on speculation on essential food items,” Vavi concluded. - I-Net Bridge