Foreign trade in goods and services is bound to suffer as well. In the end, the wealth-enhancing international division of labour will be hampered. Furthermore, in times of distress, a Tobin tax is not effective. Expected returns on speculative capital movements during a crisis by far outweigh the costs of any sensible transaction tax.
These structural reforms have paved the way for further necessary market-based corrections, for example in wage setting and intra-plant working-time flexibility, to take place. They have been painful, but the economy was in much better shape afterwards. In my view, this is the core lesson that can be drawn from Germany’s experience.