Mapping Political Ideas: Is (basic income, a Tobin tax, a flat tax, etc.) an idea whose time has come? | Example Politics Essay

Dr.Kingdon, the American Professor is most widely known for his theories of Multiple Stream Analysis. Multiple Stream Analysis theory relates to the survival and solutions of ideas in public policy, the core principles that determines the policies lifespan are broadly determined by three core factors.

  1. The technical feasibility of the idea being translated into practice. Ideas that can make the transition from theory to practice with the least difficulty are generally thought of to stand a better chance of survival.
  2. The survival in turn is determined by whether the solutions are widely supported by a range of specialists, within the policy community.
  3. The third factor relates to any budgetary implications, with less costly solution often receiving a greater level of support (Milton, 2015).

Although, policy development may appear as a technical endeavour with the aim of increasing efficiencies, the reality is that, policy development is often based on internal a and external political dynamics, rather than on research evidence alone (Milton, 2015).

To exercise the political mapping exercise, this paper will focus on a policy issue within the European context. Specificity in dissecting the continental relevance of policy making is important for a number of reasons.Firstly, ‘Kingdon proposed a means of understanding public policy agenda setting based upon first and second hand examinations of agenda processes within the fragmented U.S political system (Howlett, 2016)’. Secondly, with the European Union political processes, State interest on policy development, varies widely, with particular reference to the United Kingdom. Not fully engaged in all matters within the European Union, such as immigration and currency, the country has a degree of autonomy over European Union State legislation and as such state interests intersect over public interests in discussions.

This paper therefore will focus on policy advocating within the European Union and the United Kingdom, and ascertain its effectiveness over a particular policy. The policy to be discussed is the  Tobin tax/Robin Hood Tax/ Financial Transaction Tax. For the purposes of this paper the tax will be referred to as the Robin Hood tax, as many UK based NGOs (UK’s strongest supporters) have formed a coalition calling it such (robinhoodtax.org.uk).‘The Robin Hood tax is a tiny tax on financial transactions that has the potential to change the world (robinhoodtax.org.uk).’

Initially the Robin Hood tax was more commonly known as the Tobin tax. Initially proposed by James Tobin a Nobel prize winning American economist.

‘In 1972 he proposed a tax on currency market transactions. His concern was rapid international financial flows, putting constraints on the ability of governments and central banks to pursue the right policies for their national economies (Walker,2011).’

The current proposed tax (Robin Hood tax), includes trading shares,bonds and derivatives. The most vocal lobby groups for the tax are the development lobby groups, who have also another objective, raising money for aid. Overall there is a lot of resistance for such a tax in the U.K and U.S, the rest of Europe however are amenable to some form of tax, and have made strides towards it(Walker, 2011).

The Robin Hood Tax has clearly been highlighted a number of times in history, however has fallen short in full implementation in some of the world’s largest financial centres, specifically the U.S and the U.K. It’s reemergence as a priority policy however rose quickly following the most recent financial crisis. According to Kingdon, ‘policy window’ openings for policy changes can be triggered by apparently unrelated external events, crises, accidents etc (Howlett,2016). In the case of the Robin Hood tax, the external crisis was the contagion effect of the 2007-2008 economic crisis that originated in the U.S.

The first signs of the crisis began in 2006 when U.S house prices started to fall. Initially seen as a correction in prices, the drop continued due to realtors not realizing that many homeowners had questionable credit. These questionable mortgages were used as collateral by banks trading derivatives that were sold to investors (i.e hedge funds and other financial institutions around the world) (Amadeo,20). This environment led to the 2007 Northern Rock, bank run in the UK, following a liquidity crisis at the institution. The U.K government had to step in, providing the institution a loan. By October the following year, to avert a collapse of the U.K banking sector, the government had to bail out the Royal Bank of Scotland, Lloyds and HBOS bank (Kingsley, 2008).

Consequently the 2007-2008 crisis, has widely been seen has the fault of the financial sector.Former Chairman of the U.K’s Financial Services Authority said in 2013, ‘ The financial crisis in 2007-2008 occurred because we failed to constrain the financial system’s creation of private credit and money’ (Tekelova, 2012). As many national governments had to loan the banks and financial institutions to stave off bankruptcy and wider economic collapse, many countries in Europe have endured years of austerity. In the U.K, retirement age will rise from 65 to 66 by 2020 and many Government departments have faced 19% budget cuts; unemployment in 2012 was 8.4%. This environment led to protests and “occupy” sit-ins in 2011. In other European Union countries, however such as Spain and Greece, unemployment reached 25% and 22%, prompting widespread protests based on the severe austerity cuts implemented by the state to recoup funds (BBC News, 2012).Although, all European countries found themselves experiencing the effects of the U.S crisis, each country has had variable exposure to the effects.

The Robin Hood tax therefore targets financial institutions as a form of retribution for the most recent financial crisis.

‘The Great Recession, which was triggered by financial market flaws, has prompted calls for a financial transaction tax (FTT), to discourage excessive risk taking and recoup the costs of the crisis. The chorus of FTT advocates includes Bill Gates Jr., George Soros and Pope Benedict XVI (Nunns, 2016).’

In this way, the tax will not only be a form of justice for excessive risk taking but also reduce market volatility and bubbles and encourage longer term investing. Following Kingdon’s, Multiple Stream Analysis which builds, ‘on the idea that the policy process consists of three parallel and mostly independent processes - a problem stream, a policy stream and a politics stream (Knaggard, p.1),’ the taxes objectives align themselves with the politics of the day.

In this context, it was the economic crisis that pushed many eurozone countries to make severe budget cuts was the problem. As alluded to earlier, the problem was due to the financial sector, in particular banks. The social impact of the crisis, affected many citizens, leading to resentment and distrust of the financial and government institutions. In  this context, a ‘policy window’ opened, allowing policy entrepreneurs to be able to attach a particular policy to the perceived problem. The policy entrepreneurs, in the development of policy are the most important in understanding agenda setting in multiple stream analysis, as they develop policy alternatives and couple them to problems (Knaggard, 2015).

The development of the Robin Hood Tax in the public domain, has been developed and consequently attached to the problem of excessive trading risk by financial institutions, lack of perceived culpability of the institutions by the public and ultimate vulnerability of national economies due to such risk. As there are multiple problems in which the tax aims to address, they have been determined by the coalition of non-governmental organizations and individuals to deal with problems such as, poverty and inequality,public services, aid and climate change amongst others.

“To frame a condition as a problem, this means to highlight some problems over others. It implies defining the condition, not just a public problem but as a specific problem”(Knaggard, p6).

In framing the problem, the Robin Hood Tax aims to allude to its purpose within its own name. Robin Hood, is famous story from the U.K about a man ‘known for his generosity and downtrodden peasants, and his hatred of the Sheriff and his verderers (Johnson,2017) .’ As such, the name of the ‘new’ name tax from Tobin is easy to understand the implied purpose, to aid those in need from the wealth of those with excess. In the current context, the tax will be on the banks for minimal amounts for the public who suffer under their stewardship and dependence. By renaming the tax, Robin Hood, policy entrepreneurs are aiming  to add an emotional element to discourse, increasing the policies likely success; ‘the emotional element can be highly effective in creating acceptance for a problem frame (Knaggard,p 10).’ As the crisis fueled rapid unemployment, and severe austerity, the emotional attached was high in the Europe.

Framing the problem however does not guarantee success, credibility needs to be established. 

‘Druckman (2010) argues that the credibility of a sauce for successful framing. This indicates that it not so much the frames that are important, but rather who plays the role as a problem broker (Knaggard, p12).’

In this regard, the Robin Hood tax has significant credibility. It has the support of 220 million people, 1000 economist and include high ranking business leaders and politicians such as a Al Gore, Desmond Tutu, Joseph Stiglitz, Ban Ki-moon and Bill Gates (robinhoodtax.org.uk/supporters). Having successfully identified the problem and its framing, the following section will discuss its proposals.

After the 2007-2008 economic crisis, the general worry by many states and policy entrepreneurs was that banks could not regulate themselves. Although there are banking regulations and taxes in many countries, the Robin Hood Tax aims to tax at the point of transaction for a variety of financial products. The tax however is not entirely new in that many countries around the world have a financial tax that may be specific to a particular financial product. In the the United Kingdom for example, there is a stamp duty paid on stocks. The Robin Hood tax aims to expand the types of taxes,targeting particular financial instruments and with a relatively small tax. The tax will be,  ‘0.05% on transactions like stocks, bonds, foreign currency and derivatives, which could raise £250 billion a year globally (robinhoodtax.org.uk/faq).’  As mentioned above, there could be an extra £250 billion generated from the tax globally, the implementation of such proposal however of such a tax still needs to come from states. It is at this point European policy making becomes more complicated.

Within the U.K stamp duty generates approx. £3 billion of tax revenue, however increasing the types of transactions could provide an additional £5 - £20 billion in tax revenue.  According to the European Commission, the tax will raise £22 billion a year, 30% of the European Union tax collection will be enough to fund the end of Aids by 2030 (robinhoodtax.org.uk).

Although a progressive tax with clear ideological goals, policy entrepreneurs have had to advocate for policy changes within each major European State including the United Kingdom, to create a harmonized structure so as financial institutions do not take advantage laws in different EU states. As such,the proposed impacts and commitments of the tax varies between states.Since 2011, the European Commission proposed the tax so as to make the financial industry make a “fair contribution” after taxpayers bore the brunt of the financial crisis (Weber, 2017).

The proposal to date has had the support of 10 European Union countries so far, excluding the United Kingdom. Although not in place as more work needs to be done, the tax has support in the European Union by key member states. The key issues stand to be matters of individual states but not an ideologically fundamental issue after all, ‘officially, finance ministers remain committed to the tax, partly due to coalition agreements that give them little scope to pull out.’(Weber, 2017). The negotiation for the tax is complicated further as the U.K leaves the European Union in the next two years. Though not a supporter of the tax broadly, the Robin Hood Tax Coalition has continually invested in advocating for a change of U.K position. As such, the coalition on its official website advocates as a case in point the success of the its endeavours within other European countries.

France for example, as mentioned in material has its own domestic transaction tax, which it allocates part of to the Global Fund Against Aids, tuberculosis (Coalition Plus, 2016). In advocating the successes of what the proposed transaction tax can achieve, the coalition is articulating its broader agenda, which is poverty alleviation. To adequately attain support within the U.K however, the proposals need to match the ‘emotional’ urgency of the proposal and its relevance to the U.K itself. Accordingly, in the U.K coalition, the group advocates that 50% of the revenue raised by the tax will be spent on poverty alleviation in the U.K, 25% poverty abroad and 25% on climate change in the U.K and abroad. In practical terms , the proposals suggest that a month a half of revenue from the tax could reduce the NHS deficit for England, one week's worth could pay for 5,000 new contables, teachers and newly qualified nurses. With the goal of placing the Robin Hood Tax on the political agenda, the coalition argue that the financial sector has effectively been given a subsidy through bail outs to the tune of £100 billion a year (robinhoodtax.org.uk).According to the Mirrlees Review (2010), the financial services sector in the U.K fundamentally exempt from VAT, paying solely corporate tax, the Robin Hood Tax would effectively help in attaining the ‘fair share’ (Dolphin, 2013).’

Following the relative success of policy entrepreneurs in the European Union, advocating similar policy changes are proving more difficult but highly relevant when analyzing the necessity of the presence of a ‘policy window’. The U.K financial services industry is considerably large contributing 11% of U.K tax receipts in 2014 and representing 11.8% of GDP. From 2007 - 2014 the industry attracted £100 billion in investment. The sector furthermore represents 7.4% of the U.K labour force. This means that the sector operates at 4% or £72 billion surplus to the economy in 2014 (The CityUK, 2016). With these figures, the U.K government is understandably not preoccupied or wish to change the status quo on a profitable sector. This view is also compounded by the uncertainty that leaving the European Union will do to the sector. Public opinion however on the issue is clearly in favor of reform. According to a YouGov poll in 2012, 61% of the population were in support of the tax and 19% against (Dolphin, 2013).

Clearly, the U.K citizenry was in favour of the tax and yet its public discussion has been refuted in U.K politics more than supported. Jeremy Corbyn, leader of the opposition Labour Party has openly supported the tax. A newspaper article in turn published an article, ‘Of all Corbyn's ideas, a Robin Hood tax may be the worst.The new Labour leader is keen to sign the UK up to a new EU tax that European politicians are trying to kill before it even gets off the ground’ (Wright, 2015).

Rather than addressing the plan itself, the article title is targeting the lack of credibility of the party leader and therefore the plan itself, also suggesting that the EU states are not in favour of the plan yet in practical terms, that has not been the case.

Although the policy in the European Union has not been finalized it definitely is one ‘whose time has come.’ There are a number of reasons for this, the extent of the crisis in several European was extensive, causing severe national outcry. Secondly because of the crisis, the Eurozone project itself was  threatened. Thirdly, to maintain an international relevance and crediblity.To reestablish the credibility of the project and retain support of the populous, the Robin Hood Tax serves these three functions. Internationally, the tax is supported by notable economists and politicians and increases the ‘fairness’ perception of the eurozone. Domestically, citizenry are in support of the measure therefore it is a way of reaffirming the current political establishment and engagement with the populous.

For the United Kingdom, the the policy not ‘might have come’ yet. Due to the U.K leaving the European Union, the domestic political environment is conservative in decision making. The ‘political window’ currently in the country is one that is for national priorities and advantages in contrast to the rest of the world. The economic crisis in the U.K furthermore was not as extreme as in other European countries, therefore the social demand for change did not reach a point of ‘extreme’ vocal social engagement on the issue. The Robin Hood tax therefore, though supported by the ‘people’, the benign nature of the state has been eroded in exchange for ‘maximizing opportunity and frugality,’ within the international and domestic sphere. For these reasons the Robin Hood Tax time has not arrived in the U.K.

Example Politics Essay: Mapping Political Ideas

References

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