Taxation, growth, and the bishop

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Dr Rowan Williams, Archbishop of Canterbury, has called for higher taxes and limits on economic growth. He says economics should be about good housekeeping, and should be about “creating a habitat that we can actually live in". He wants a Tobin tax on financial transactions, such as Gordon Brown recently floated, and taxes on carbon emissions.

I beg to differ with His Grace on most of his points. I take the view that the Tobin tax is unworkable and unjustified. Currency traders perform a service by generally bringing forward the likely effect of what they see as future trends. And a tax on transactions in one jurisdiction would simply move trade elsewhere.

I disagree with him on growth. I think it is hugely positive, lifting more millions out of poverty and starvation than ever before in human history. The Good Book exhorts us to help the poor, and growth has been the best way ever found of doing this. We should be promoting more of it, trying to spread across Africa the benefits it has been bringing to parts of China and India.

Even on carbon emission taxes, I disagree. If we want to make a difference, it will almost certainly be by using wealth to apply new technologies, rather than by using taxes to limit our lifestyle. The combination of creativity and wealth has a track record of solving problems. It has given rich countries cleaner air and water; it has conquered some diseases and is conquering others; it has fed more people than has ever been managed before.

His Grace talks of us over-using "limited energy and raw materials", but it is technology that enables us to create new sources of energy, and to develop substitutes for scarce resources. And it is the market he criticizes so much which sends the signals that encourage us to do these things.

The good bishop might back Tobin and carbon taxes, and oppose growth and markets, but the lot of humanity is more likely to be enhanced by rejecting the first pair and endorsing the second two instead.

Check out Madsen Pirie's new book, "101 Great Philosophers".