What would be new?

What would be new?
Susan George
TNI Website, 21 January 2005

Many thanks to Maria for her contribution, Now I feel less lonely giving my views! Thanks also to Paulina who has asked us to make explicit "What would be new?" [If the MDGs are "old"].
Let me try to do this in a shorter format than my July, or subsequent, contributions, but first let me comment on Maria's input. If the work of our group is limited to picking and choosing among the proposals of the tracks, I can't say I find that a very inspiring mission. I was hoping and assuming the expectation was for intellectual effort, imagination and input consonant with the time we are all putting into this process. And yes, it is a "process", but I don't think we should have any illusions that it will continue after our Report is finished and especially after the Helsinki Conference in September. So it seems to me that it's "now or never. I won't, however, continue trying to rewrite the so-called Manifesto because if Maria is right, as she may very well be, this could be a complete waste of time. If, however, we do adopt a Manifesto, then it must at least attempt clarity and strive for legible, if not memorable, prose... We will, or at least I will, confront the writing when and if the time comes...

What would be new?

Particularly after the Jeff Sachs/260 experts' report, we can't just say "MDGs" and go home. Or write a 2 word report that says "Us, too." This is actually all to the good. As I've said before, concentrating on the MDGs is not only inadequate [see my previous contribution including the criticisms from friends in the South] but also allows one to finesse the basic question we were supposed to answer in part one ["What is wrong with the world and why?" ]. The "What" we know very well—as for the Why, well, poverty and hunger, in the present version, are just there, for no special reason, perhaps due to acts of God and/or the stupidity and backwardness of the poor and hungry themselves. If one has no ideas about causes, it seems futile to try to devise remedies. One can trace to specific policies the lack of progress in eradicating poverty, hunger and ancillary ills; just as there are discernible reasons for the huge increases in North-South inequalities since World War II, At least part of the problem is demonstrably due to the increased capital transfers from South to North [annual net outflows in favour of the North are about $200 billion according to the UN]. These large net outflows can, in turn, partly be traced to debt and financial market transactions as well as to falling commodity prices, lack of investment in infrastructure and the like.

Financial market speculation has contributed to crises from Mexico to Asia to Argentina and beyond. Transnational capital has almost total freedom; no international structures try to temper, much less control its movements. To the contrary, the IMF/Bank, the projected EU Constitution, the WTO all call for and enforce freedom of capital movements under any and all circumstances. Despite this received wisdom, during the Asian financial crisis, China and Malaysia fared better than, say, Indonesia or Thailand because they placed heavy restrictions on capital outflows. Citing such causes does not mean that I in any way discount or condone irresponsibility, mismanagement and sometimes corruption of Southern governments and elites. This is why financial transfers of the sorts Sachs and Co. recommend need to be accompanied by democratic guarantees, or "checks and balances" in US Constitutional terms, about which more in a moment.

In the IMF, Bank, WTO triad, we have a kind of international Ministry of Finance and Trade, at least an embryonic one, but we have no comparable "ministries" for health, education, justice, labour, etc. We have an international democratic deficit, a social deficit, a justice deficit, but not, as far as I can see, an economic or financial one. Financial markets and international companies are free to move capital, goods and services, investments anywhere at willl and there is plenty of money sloshing around out there, as Sachs and his group make clear. Perhaps total freedom of investment, capital movements, and trade in goods and services is a good thing—I know some members of the group believe it is an unreservedly good thing—but in my view this cannot be the case, as for any other human activity, without some checks and balances. We need enforceable rules.
We also need a sure source of finance for promoting universal education, health, justice, employment, etc.

The financial resources:

• The Helsinki Group should propose a very modest, but two-tiered, tax on cross-border capital movements, This is a variant of the Tobin Tax, now called the Tobin-Spahn tax, as passed e.g. by the Belgian parliament. The first tier is a tenth of a percent tax on international capital movements and could conceivably be even less, or be on a sliding scale. The second tier only comes into play in the case of huge financial market disruptions, like concerted speculative attacks on currencies. In such cases, very high outflow taxes are imposed, It works a bit like the automatic halt to trading on the New York Stock Exchange in case of large, abnormal market fluctuations. Jacques Chirac, along with Lula and Prime Ministers Zapatero and Lagos of Spain and Chile, took such a tax proposal to the UN last September where it was countersigned by 110 heads of State. I can supply details.
• We should support, and go well beyond, in order to make binding, the OECD guidelines on tax havens ["fiscal paradises"] and money-laundering. No one knows quite how much illegal money [related to terrorism, drugs, human trafficking and many other horrors] finds its way in and out of these paradises, but it would be better that the international community provide a living wage, forever if necessary, to all the inhabitants of, say, the Cayman Islands, than allow this system to continue. Corporate tax fraud is also abetted by these havens; for example Enron had over 700 shell companies in the Caymans.
• We should propose a uniform profits tax on Transnational Corporations based on sales in each national jurisdiction. Howard Wachtel, a Professor of economics at American University in Washington, has proposed a perfectly feasible way to do this. So as not to provoke total and unconditional opposition from the corporate sector, the tax rate could be lower than it now is in several major tax jurisdictions. The idea is to reduce and eventually eliminate harmful "tax dumping" which prevents governments from collecting redistributable income. Again I'm happy to supply details.
• We should propose ending the debt crisis once and for all. Gordon Brown and others have finally cottoned on to this. Do it for Africa and the other HIPCs, right now. For the richer ones, reduce stocks and flows by 20% a year until 2011.
• We should advocate environmental taxes on fossil fuels, on air travel, on pollution, whose product is to be used for R&D of renewable energy sources, clean-up, institution of clean production techniques, etc. [And the World Bank should be made to stop lending for dirty CO2-creating energy projects].

At the international level, we are, figuratively speaking, where the now-advanced countries were in the early twentieth century, when the first national personal income taxes were proposed [and furiously resisted]. Reformers recognised that conditions in their own countries similar to those one finds in the Third World today, could not be altered without a source of additional income that could be redistributed. These countries became, of course, much richer as a result. We need to promote the same kind of reform in the international system.

I have nothing against once more exhorting the OECD countries to increase their ODA and meet the 0.70% target but this call has been repeated for the past thirty years with the results we know and does not belong in a contribution to "What's New".

N.B.: Nothing, alas, can be expected of the United States for at least the next four years and probably beyond. We must recognise this in the Report, although perhaps not in such stark terms, and make explicit that one must start with Europe and like-minded countries without waiting for the US which would be like waiting for Godot... How to spend it: [As the Financial Times might say] Assuming these various instruments [there are others] bring in sizeable new sums of money, how could they be redistributed? We must accept the premise that Southern governments are not any more angelic than Northern ones and that any scheme needs checks and balances in order to work properly. The public is overwhelmingly in favour of increased aid to the poor and hungry and overwhelmingly opposed to simply handing over large sums to Southern governments and hoping for the best. The way to get around the obvious objections is to make participation in the World Development Fund or the Global Marshall Plan or the Planetary Contract [my preference] conditional on good practice. First, the moneys ought to go into a common pot overseen by a small new UN agency. This agency should hire a raft of PriceWaterhouse types and pay them whatever it takes to establish the best international flying auditors corps on earth [the "UNIFAC" if you like].. Their job is to supply control from the top. Control from the bottom, and one answer to the huge democratic and governance deficit, should be supplied by elected national councils in each recipient country. Such councils should be elected by universal suffrage: No female voice, no money. They should be elected on both a geographical and a sectoral basis. That is, sectors of society, like farmers, workers, civil servants, the entrepreneurs/ business community, the media, teachers and health personnel , etc. should be represented and responsible to their constituencies as such. The Councils can invite foreign NGOs as participants or observers if they like. Women have to be fairly represented as such. The council, alongside the government, determines priorities for spending the new moneys [including debt cancellation] which are made available only when the council has been established [though funds could be advanced to organise the elections]. The council, along with the auditors, "follows the money". For all infrastructure construction, project supplies and the like, local firms should be given priority based on honest and open contracting procedures. The model is partly based on the Porto Alegre participatory budgeting
scheme which has reduced municipal waste and corruption to near zero [the system is now used in 80-some Brazilian cities and elsewhere].

What to spend it on?

The choice belongs to the Council and the government in each country, though a few universal, binding rules [e.g. no armaments] should apply. A variety of "template schemes" exist which have worked elsewhere and the UN or someone else should collate these "best practice" solutions from
various places so they could be consulted by everyone and adapted locally. One such scheme is Cristovam Buarque's "Bolsa Escuela" which gets kids out of work and into school. For up to three children per family, the mother gets a monthly sum for each child that has missed no more than two days of school-the sum is about equal to what the child would earn as a labourer. In the Brazilian districts where it has been practiced, the kids are of course better schooled, but also better nourished and taller, health epidemics and petty crime have been drastically reduced. It probably opens up jobs to adults as well but I haven't seen statistics on those aspects.

I like Hernan de Soto's proposal to register poor peoples' assets, even if it's no more than a tarpaper shack in a slum. Giving even the smallest title to property gives people a leg up and something to propose as collateral for small loans. Small loans agencies, along the lines of the famous Grameen bank, should also be set up, but Grameen doesn't work very well partly because it charges very high interest and is limited to individual loans. Groups of people should also be able to borrow to set up small coop businesses. The procedures for setting up businesses are often horrendous [de Soto has a lot to say about that too]. Our UNIFAC-PriceWaterhouse troops ought to be able to help governments get rid of the red tape.

People go hungry because they haven't enough money to buy food but also because their capacity to grow it has been drastically reduced. The North has to get rid of its export subsidies and the South has to give better protection and prices to small farmers.

I haven't had time to read the Sutherland Report yet on the future of the WTO, but I feel strongly that some aspects of human existence must remain outside the market—what many people call International Public Goods—and at the very least, areas like Health, Education, Culture, Water and the like should only be included in the market through the specific, and reversible, consent of governments and the governed. But this is opening up perhaps too large a chapter to be fully examined here.

Best wishes to all, looking forward to seeing you in New Delhi, Susan [NB: the list is fine, but for those of you who might wish to contact me personally, please note my new address: susangeorge@free.fr Many thanks, SG]]

See also TNI Helsinki page