The Volokh Conspiracy - 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.

	[Kenneth Anderson, September 19, 2009 at 6:37pm] Trackbacks 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.