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Bernard Kouchner Calls to Revive Idea of Global Financial Tax to Fund Development:

French Foreign Minister Bernard Kouchner calls in the Financial Times for a tax on global financial transactions as a means of funding the currently moribund UN Millennium Development Goals. It is an idea that has been floated repeatedly since the 1990s - sometimes with the emphasis on the tax itself as a means of deliberately slowing down and making more costly the movement of global capital (essentially a turnover tax on transactions,; the Tobin tax) and other times with the emphasis on the uses of the funds, whether to fund the UN or development goals generally or global income transfer or, as in this case, the MDGs. (I think this is behind the sub wall at the FT, but anyway registration is free.):

[T]o fund development, we have to think about introducing a voluntary contribution based on international financial transactions.

On one side, there are vast needs. The Millennium Development Goals set in New York in 2000 remain a priority. Last November, at the United Nations conference on development financing, President Nicolas Sarkozy reiterated our commitment to them. By 2015 we have to eradicate extreme poverty and hunger, achieve universal primary education, increase gender equality, reduce child mortality, improve maternal health, combat major pandemics such as HIV/Aids, tuberculosis and malaria, ensure environmental sustainability and develop a global partnership for development.

To meet the health goals alone, we will have to find no less than $35bn (€24bn, £22bn) a year. Then, on top of the millennium goals, there are new demands to finance, in particular the fight against climate change. The economic crisis is exacerbating the situation: according to the World Bank, afall in growth of one percentage point means 20m more in poverty. Mortality of children under a year old could increase by 700,000 because of the slowdown. Official development assistance, which provided $119bn in 2008, cannot do everything, even though it remains an essential lever. The innovative financing mechanisms must act as a catalyst so that the millennium goals may one day become the millennium achievements.

Why Kouchner calls this “innovative financing,” I am unclear, since the idea has been around for so long. Also, as I understand the papers at the Paris conference in which this was discussed, so far as I could tell, it was voluntary insofar as it was a “voluntary” step by governments to tax their financial actors, not voluntary as in a voluntary contribution by the participants.

For many policy reasons, I think this a very bad idea - mad and bad. Whether it is the sort of idea that might appeal to the Obama administration, I simply have no idea. But I do think it is a bad idea on both the (a) “slow down the velocity of global capital” revenue-collecting side and (b) the “create another vast international organization fund” that will not only be spent on the poor but will also actually make a difference spending side of the equation. Not to mention the precedent of a global tax - something that Kouchner says will help move toward global taxes to address carbon and climate change and potentially many other things.

I admit, I am an unapologetic Easterly-ite, and I think the MDGs were dead before the financial crisis hit and deader than dead two years later. Others will certainly have different reactions to that policy view, of course, but it is frankly incomprehensible to me that Kouchner could write such a call without addressing the fact that even without a financial crisis, the MDGs were in serious trouble in collecting their funds - even from European countries - let alone showing that this round of top-down financing, this latest in zillion dollar effort that comes about once a generation, this time will be different. Inchallah.

If I sound like I’m channeling William Easterly, I am. I simply don’t think it’s possible to pen a serious FT op ed proposing a global tax for the first time in history in order to fund the most grandiose and ambitious set of anti-poverty goals that have quite failed to meet any real targets either for funding or for accomplishment, without at least including a sentence or two about why that might be, or why it is not so, or why this might be different. A prayer - which is what it amounts to - that if only we have more money, the millennium goals might become millennium achievements is not enough.

More broadly, my view of UN development generally is that there is a serious conceptual mistake in the MDGs’ - in Jeffrey Sachs’s - assumption that international development requires a genuinely common fund. Meaning, a single big pot of money in the hands of the UN or, frankly, anyone. That would be so if

- first, we actually knew how to make international development happen (as distinguished from Professor Sachs thinking he knows how to make it happen if only he has enough money; I am not aware of any circumstance in Professor Sachs’s writing on development in which he has not called to double down on the bet for more resources);

- two, the prescription for making it happen required pools of capital large enough to do very large things, as distinguished from, for example, smaller pools of capital flowing into much smaller things, but many more of them; and;

- three, we had any reason to think that the UN was capable of administering such massive pools of capital, or that official development assistance actually works, as distinguished from flowing off into rent-seeking at the UN and its “wholesale” aid agents, and private corruption at the point of country-disbursement.

I don’t think there’s any reason to assume any of those three things. The position that leaves things in, so far as I can tell, is that funders should pursue the strategy each thinks best, because there is no reason to think - given the vast and heterogeneous demands - that a common pot is necessary. On the contrary, given the radical uncertainties, a diversification among uncorrelated efforts makes far better sense.

Better that funders work as they think best, in parallel, rather than in common. If best practices emerge - apart from the only large scale one that seems to have had real success, private direct investment combined with the ample provision of a limited list of public goods - and if they require the combined resources of donors, fine. But there will still be a presumption to be overcome, viz., that rent-seeking at the UN will always incline it to think that resources should flow its way for redistribution - after it has taken its cut.

Alan Potkin (mail) (www):
Semi OT: If you can allow me to blow my own horn, URL above is a link to the Call for Papers of a proposed conference on methodologies for the evaluating "actual outcomes" of Overseas Development Assistance, and of the impediments to such evaluation that evidently must exist, since so little of it appears to have occurred.

Following two years assiduously, even frenetically, flogging/blogging the CfP —which out of bottomless naivté, we three conveners thought was non-partisan and non-inflammatory— we attracted a half dozen or so pointed contributions: nowheres near enough to get this initiative off the ground.

I wonder why that was? What was Mr. Kouchener thinking! The UN as part of the solution, rather than part of the problem??
9.19.2009 7:21pm
Hank Bowman, MD (mail) (www):
Lets let France try it as an experiment and see how it works. No doubt the 'peans will show us the right way to behave.
9.19.2009 7:46pm
NickM (mail) (www):
I don't want any country trying it as an experiment, because channeling a large amount of funds into the hands of Third World dictators (and these dictators won't let it be spent independently of them in their countries) in the name of alleviating poverty will serve only 2 purposes: enriching their Swiss bank accounts and enabling more effective repression of their own people.

Nick
9.19.2009 8:06pm
Mac (mail):

Hank Bowman, MD (mail) (www):
Lets let France try it as an experiment and see how it works. No doubt the 'peans will show us the right way to behave.


Great idea! Further, lets make every country who thinks this is a wonderful idea contribute as much in aid to the third world as do the citizens of the US both in the form of foreign aid and in private donations. When they meet this criteria and have results to show for their money, then let us talk about a tax.
9.19.2009 9:30pm
Soronel Haetir (mail):

and develop a global partnership for development


The rent-seeking of this plan isn't even hidden. Amazing. It is as if the guy lives in some bubble where what he says has no meaning, yet he has to make sounds in order to live. Wait, maybe he does.
9.19.2009 10:11pm
PeteP:
The UN has consistently refused to be audited, or to open it's books to any inspection of any kind. Their history of corruption is a long one, exceeded only by their bungling incompetence.

Their Holy Grail has always been ( as the article laughingly puts its it ) a 'voluntary contribution', mandated by a law they write, collected by a supra-agency they create and run, subject to change ( read 'increase' ) at their whim, without the consent of the taxed ( read 'USA and Europe').

This is just more of the same from them.
9.20.2009 12:19am
martinned (mail) (www):

without the consent of the taxed ( read 'USA and Europe')

How do you figure that? Don't both the US and two EU Member States have veto power in the security council?
9.20.2009 7:57am
PeteP:
"How do you figure that? Don't both the US and two EU Member States have veto power in the security council?"

Yes. Not, however, in the General Assembly, nor in the uncountable ( and unAccountable ) committees.
9.20.2009 7:31pm
martinned (mail) (www):
@PeteP: Only the Security Council can make binding decisions, although the GA can be used as a forum for negotiation of treaties, which, however, would have to be ratified, etc.
9.21.2009 8:36am
eyesay:
Kenneth Anderson wrote,
in order to fund the most grandiose and ambitious set of anti-poverty goals that have quite failed to meet any real targets either for funding or for accomplishment, without at least including a sentence or two about why that might be ... my view of UN development generally is that there is a serious conceptual mistake in the MDGs’ - in Jeffrey Sachs’s - assumption that international development requires a genuinely common fund. ... if ... we actually knew how to make international development happen ...

Well, we actually do know how make international development happen, because there are programs that are working very, very well. The Global Fund to Fight AIDS, TB and Malaria is working very effectively to reduce the spread of these diseases because it works with civil society organizations, and because it reserves a small amount of its funds for oversight, and because it funds its grants in tranches, and recipients get subsequent tranches only if initial tranches are spent effectively and according to plan. Also, because it funds programs based on what works, and not based on fundamentalist religious views that say that abstinence-only is the only way to prevent the spread of AIDS. (The Global Fund is doing very well, but it could do much more. The United States has failed to take leadership in expanding funding to match the capacity that has developed.)

There is no need to have a super MDG agency in charge of development, but having an international agency like the Global Fund to Fight AIDS, TB and Malaria taking a leadership role in certain aspects of development can be highly effective.

Microcredit has also been highly effective. Already, over 100 million of the world's poorest families are receiving and paying back microcredit loans and starting or expanding small businesses and lifting their families up from desperate poverty. It works, but there are still some 1.4 billion people living below $1.25 per day, in absolute poverty. We need to do more.

Anderson is right, the world is not on target to meet the MDGs. And this is, as much as anything, because the United States has failed to show leadership. The United Kingdom, with less than one-fifth the U.S. population, contributes several times more to foreign assistance for education than does the United States. There are 75 million primary-school-aged children on earth not enrolled in school. A global fund for education, analogous to the Global Fund to Fight AIDS, TB, and Malaria, could get these children in school. So could Madrassas. Which one would make for a better future for the planet?

We do know how to end poverty. But we have allocated our foreign aid toward countries that don't need it, toward military aid that isn't saving lives, instead of toward education, prenatal care, and other programs that could help create sustainable self-sufficiency. To say, "we don't know how" is just plain dishonest.
9.21.2009 12:47pm
Soronel Haetir (mail):
eyesay,

And what if you don't think those things are even worthy goals? People living in poverty under despotic governments are no concern of mine.
9.21.2009 3:10pm
Mac (mail):
eyesay,

I have serious doubts about your figures. I am also very surprised that we aren't doing enough to fight AIDS in Africa. The Africans think George Bush did quite a lot. Strange.


I don't suppose the Global Fund to Fight AIDS, TB and Malaria supports limited indoor spraying of DDT which the WHO has determined has great benefit and little to no downside in preventing malaria?

If you feel so strongly about this, you can go to CFCA in Kansas City, Kansas and "adopt" a child in any number of countries and pay for his/her education for a mere $30.00 a month. Mine is in Afica, Kenya, and I receive regular letters from her mother and much information about their lives and the child's educational progress. We communicate regularly and I have learned a lot. I have persuaded two other people, so far, to adopt a child through this outstanding and honest organization. You don't have to wait for the UN, you know.

I wonder, do any of your figures about Great Briton include private giving and do your figures include private giving by people in the U.S.?
9.21.2009 4:44pm
eyesay:
Dear Soronel Haetir,

Please correct me if I misunderstand you. You seem to be saying that the Millennium Development Goals are worthy goals in principle, but that where despotic governments exist, they are unachievable, and that's not your fault, and there's nothing we can do.

(In other words, I assume that when you say that certain fellow human beings are "no concern" of yours, you don't mean you don't care at all about their well-being, but just that you feel that their oppression by a third party (their government) is not our fault and it is beyond our ability to do much to help them.)

I believe that the Millennium Development goals are worthy goals, and achievable in principle, although with only 6 years and 3 months to go by the end of 2015, the world will probably miss the 2015 target, and by more than a year or two, even if we start to get serious right now.

I believe that despotic governments are unhelpful and can be a significant impediment toward progress in some cases. And that is why the Global Fund to Fight AIDS, TB and Malaria is such a great model. It works with civil society, so if governments are not willing to step up to the plate, but citizen's groups are ready to solve the problems, the people don't have to wait for their governments. It's also why microcredit is such a great model. Microcredit is helping people lift their families out of poverty even in countries like Haiti.

So, I believe there is a lot we can do to help people lift themselves up from poverty, even when they live under despotic governments.

We are obliged to do our part to achieving the Millennium Development Goals and related goals, because we have repeatedly signed declarations that we would do so, including, for example, President George Herbert Walker Bush's signing on to the Declaration and Plan of Action at the World Summit for Children in 1990 and President Clinton's signing on to the Millennium Development Goals in 2000.

We are morally obligated to do so, because we are human beings who care about each other.

And we should do so, even if we are libertarians who believe that other people's well-being is no concern of ours, because achieving the millennium development goals will help establish a more stable world, and importantly, accelerate developing countries' passage through the demographic transition of high child death rates, high birth rates, and rapid population growth to low child death rates, low birth rates, and slowing or zeroing out population growth.

Nost Americans agree that U.S. foreign aid should not be zero, and that it should be targeted to helping the poor end their own poverty. I don't understand why this should be even slightly controversial.
9.21.2009 4:49pm
Mac (mail):
PS

You don't have to force the Soronel Haetir's of the world to give to your cause to give yourself and encourage others to give. Soronel Haetir may very well give to other causes he deems more likely to benefit from the use of his money. Although, I support CFCA, I do not support a UN tax and mandate on the US. Think "Oil for Food" and much other money that has been wasted or ended up in despot's Swiss and Swedish bank accounts, not to mention in the pockets of the UN's own grubby bureaucrats.
9.21.2009 4:49pm
Alan Potkin (mail):
It should be noted that the Global Fund is not, repeat not, a member of the "UN Family", and in Jan 2009 it pointedly terminated its administrative services contract with the World Health Organization, which is indeed a UN Family member.

According to eyesay, the Global Fund is effective exactly because of its rigorous application of actual outcome evaluation, tranche-by-tranche: thus radically unlike most official development assistance initiatives/agencies which are rich in hidden agendas and not-so-hidden beneficiaries.

But eyesay just couldn't help whacking the fundies and the Bushies on the "abstinence-only campaign", (N.B. also that in March 2009, the Global Fund's executive director loudly and publicly trashed Pope Benedict's critique of condom distribution as "worsening the HIV problem".)

Maybe "abstinence only" isn't so brilliant as an institutional development strategy (how do you possibly collect rent on such a campaign?), but at the individual level --apart from in-utero transmission, and tainted blood transfusions-- abstinence is 100% effective against AIDS infection, is it not?
9.21.2009 4:49pm
Mac (mail):

I believe that the Millennium Development goals are worthy goals,

We are obliged to do our part to achieving the Millennium Development Goals.

We are morally obligated to do so



Gee, and if you believe in the tooth fairy, eyesay, am I required to support her also?

I think the Constitution guarantees us Freedom of Religion, no? You practice yours and leave me to practice mine, please. You contribute as you see fit and I will contribute as I see fit, if you don't mind.
9.21.2009 4:54pm
eyesay:
Mac:

In 2006, the United Kingdom committed $15 billion over 10 years toward international aid for education. That's $1.5 billion per year. U.S. aid for education was $800 million in 2005 link and approximately $520 million for basic education in 2006 link. (These two figures don't represent a decline; the difference is secondary education.)

Anyway, I was correct in my claim that the United Kingdom, with a fifth of the U.S. population, contributes more foreign aid for education than does the United States.

I don't know what the GFATM's policy is on DDT. You can probably find it for yourself on the website at the Global Fund website. To my knowledge, the most cost-effective prevention for malaria is insecticide-treated bed nets, which cost $4.00 or less. That doesn't rule out using other control methods as well.

I applaud your charity and generosity and recruitment of others in providing for the education of African children. I agree, we don't have to wait for the UN or for the U.S. Congress to target the money, but I also don't think we should wait for private charity to complete the task. I think both private charity and foreign aid can play a major role here.

By definition, foreign aid means aid from governments and not private charity, so my claim is about government aid, including government to government, government to multilateral organization, and government to civil society groups working to solve the problem.
9.21.2009 5:20pm
eyesay:
Alan Potkin: I agree that abstinence from sexual contact with others is a way to limit the spread of AIDS. (AIDS can be spread through bodily fluids including blood and semen, so in particular, drug users who share syringes are at risk, even if they don't have sexual contact.) However, abstinence is effective only if it practiced all of the time. Therefore it has a high failure rate. A three-pronged ABC approach is much more effective: Abstince, Be faithful, Condoms. In other words, educate the at-risk population that abstinence safely prevents the sexual transmission of AIDS, and if you're not practicing abstinence, at least be faithful to your partner and require your partner to be faithful to you, and condoms help too. This three-pronged approach is much more effective at reducing the spread of AIDS than the abstinence only approach. I'm not sure what you mean by "collect rent." The goal is not to collect rent. The goal is to help reduce the spread of AIDS.
9.21.2009 5:32pm
eyesay:
Mac,

You are certainly entitled to your beliefs about how your tax dollars should be spent, but none of us have the right to unilaterally prevent tax dollars going to something we personally don't care about. We are a republic, and we don't require unanimous taxpayer consent for spending tax dollars. Congress continues to vote for some foreign aid to health and education and other measures intended to support the achievement of the Millennium Development Goals. I would like Congress to increase foreign aid that helps achieve the Millennium Development Goals (and reduce certain other aid programs, such as drug interdiction in Columbia, that I feel are ineffective at best and disastrous at worst). If you disagree, you are free to write to your member of Congress and urge that the United States reduce aid that helps achieve the Millennium Development Goals.

Have a nice day.
9.21.2009 5:40pm
Alan Potkin (mail):
eyesay...

With all due respect, I could have listed every HIV transmission route. But even if abstinence or marital fidelity exists 90% of the time, that's already a highly-cost effective reduction of infection. OK, let's not beat that to death.

Here's Wiki on "rent" in economic development:

Rent seeking generally implies the extraction of uncompensated value from others without making any contribution to productivity, such as by gaining control of land and other pre-existing natural resources, or by imposing burdensome regulations or other government decisions that may affect consumers or businesses.

You personally may not be interested in rent-seeking, but I assure you that your local partners in official development assistance have it placed very high in their priorities regarding which big-ticket international projects to approve and which to let wither away.

For example, there's a project funded by one of the heavy-hitter multilateral development banks now under bid to accomplish "green urban development" in and around a city in mainland Southeast Asia with which I am very familiar, and of which the local and national governance is notoriously un-transparent.

The project concept Terms of Reference entails draining the remaining wetlands and waterways in the name of "disease vector control". Whether waterborne diseases are actually a public health issue thereabouts I do not know, nor would I guess that neither the international funder nor the local agencies nor the local implementing agencies know either.

What they do know is that once the drainage is accomplished at the funders' expense —i.e., at the expense, actually, of the taxpayers of the rich donor countries if it's a grant, and/or at expense of the future generations of the poorer recipient country, if it's a loan— I guarantee you that the former wetlands will be filled with villas for the local apparatchiki.

What else I know all too well is that a consultant engaged to execute a greenwash scheme like this who challenged even hypothetically the basis of the project concept --that wetlands drainage is "environmental", and that vector control is both needed there, and will be accomplished under the project; and that in the end the general public interest (to include ecological protection issues), will be served at least as well as the private interests of whoever ends up grabbing the former-- will find him/herself crowbarred out of the game.
9.21.2009 7:39pm
Mac (mail):
eyesay,

Perhaps you are correct re education dollars, but you are insinuating that we are a niggardly country. I defy you to find any nation whose government and citizens give more to the world than the USA.

Also, tents work fairly well if you are in bed. Dusk is when the mosquitoes come out and DDT would work both at dusk and while in bed. However, the environmentalists won't allow its use. Forget that 50 million Africans have died or been made seriously ill by malaria, nope, can't use DDT. It does precious little good to educate people whom we won't stand up for against these ideological and non-scientifically driven true believers and prevent their illness and death.

Also, knowing a child in Kenya and helping her, I still have to wonder what good her education will do her in a corrupt war torn country where their economy is in shambles and there are few jobs and few opportunities. In addition, an African child dies every 30 seconds from inhaling fumes from dung fires while on his mother's back. Al Gore and his devotees won't let them build power plants because global warming may some day or may not kill them and the entire Universe. (I believe that is how the mantra goes. )

Forgive me if I feel you are rather myopic on the subject of education for these unfortunate people. Most people need to have some freedom from illness, some access to the modern world, e.g. electricity, clean water, medical care, freedom from war, want etc. and some use for their education.

I am sure you are very well intentioned, but to pretend that if we just put enough money into education all will be well with the world is naive at best, and, given that resources are not infinite, harmful at worst. The road to hell being paved with good intentions and all that.

Allowing the limited, environmentally safe use of DDT and allowing them, indeed helping, them to build power plants and develop an energy and water infrastructure is easy compared to educating one and all to no likely purpose until we quit interfering in their lives and prohibiting them from having the necessities of life that we take for granted.
9.21.2009 8:25pm
eyesay:
Adam, where are you getting the idea that abstinence or sexual fidelity exists 90% of the time? Please provide any reasonably authoritative source to support the notion that at-risk populations where the AIDS epidemic is most rampant are abstinent or practicing sexual fidelity anywhere near 90% of the time.

(Marriage itself has nothing to do with AIDS transmission; two people being sexually faithful to each other is equally effective whether or not they are married. One might think that marriage implies a greater permanence to being faithful, but even this is not necessarily so.)

I agree that rent-seeking can result in international aid dollars being spent wastefully, or even on projects that are not beneficial in achieving their stated objection, but to me that only underscores even more strongly the validity of the approach of the Global Fund to Fight AIDS, TB and Malaria and why this model should be applied to education and other buttom-up development objectives.
9.21.2009 8:32pm
Mac (mail):
eyesay,

I am more than happy to contribute my own money for education and to even encourage others to contribute theirs, but when it comes to forcing taxpayers to contribute, especially when we, in the USA already do so much, I would not be comfortable with it. I have no idea where that money is going to end up and what good it will do, (see my post above). Hell, look at New Orleans where they "lost" a 100 million education dollars. In that district and many, many others, we can't seem to track our own education dollars. They certainly aren't doing much good even though the money devoted to education continues to skyrocket the test scores and abilities go down and down. I don't think I want to get involved in a "global education solution" when this is so obviously an area prone to great fraud.

And, as stated above, what good does it do when people have no work and the environment in which they are forced to live is so poor?
9.21.2009 8:53pm
Alan Potkin (mail):
eyesay...

I wasn't implying that 90% was a data-based figure. Only that if a tendency towards dangerous sexual behavior was contrained, due to self-control or religious strictures for 90% of the time, the chances are that STD's would likely be very much less problematic.

Also, from a rudely Darwinian perspective, once the epidemiology of HIV/AIDS became widely understood at all levels of society --certainly the case by now in most countries-- if people continued to obsessively misbehave sexually, well too bad for them (excepting the faithful partners of unfaithful spouses, of whatever marital/gender status). Or does their membership in "at-risk populations...where the epidemic is rampant" in itself somehow change the moral hazard equation?

By all means, feel free to be as compassionate and generous as you want with your own emotional and material resources. But why exactly should my tax dollars, extracted by implied governmental violence, go to expensive retroviral therapy to undo irresponsible behavior on the other side of the planet?

( Or even worse, go towards slightly-less-expensive retroviral therapy involuntarily subsidized by the pharmaceutical industry through ripping off their patents, as you admonish the Bushies for not doing.)

If you look at the URL above my first posting in this thread, you'll see how difficult it can be for professionals who are firmly fixed on the international development teat to come out --even in principle-- for robust, phased project evaluation, and with even more robust post-facto assessment of actual outcomes.
9.21.2009 9:02pm
Mac (mail):

you look at the URL above my first posting in this thread, you'll see how difficult it can be for professionals who are firmly fixed on the international development teat to come out --even in principle-- for robust, phased project evaluation, and with even more robust post-facto assessment of actual outcomes.



And, that is pretty darned easy to evaluate, unlike education.
9.21.2009 9:10pm

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