Can the democracies tame the financial sector? A sociological example in the unpopular Tobin tax

The idea that governments necessarily have a critical role in economy and society was again plain in the global financial crisis. For 30 years, the democracies said they were ineffectual in coordinating economic life, and markets alone were perfect for this political role. This paper examines one financial reform proposal, in light of the weakened situation of governments and political elites vis à vis the globally obstructive and destructive behaviour of the financial sector. Through an interpretation of ideal and less than ideal relations between democracies and a sector which, by and large, lacks the beneficial social purposes that are exclusive to banking, it assesses current failures of governments to agree collectively on international controls and taxes on banks and shadow banks. It uses the hated transaction tax proposal as the main illustration. Criteria about the feasibility and desirability of democratic controls over the sector are drawn from a broad framework about the purposes of banks and their role in global society. Many controls and taxes are modest reforms, so modest that the vehement opposition by the financial sector to them could be challenged. The paper proposes that a minimal aim is for governments to require this private finance sector to create new social wealth.