The Financial Crisis and the Bottom Billion

Via Rodrik, Bob Geldof in the FT:

Just as the crisis has been international because of globalisation, any new reforms will also need to be international. As Robert Zoellick, president of the World Bank, has remarked, a modernised multilateralism must put global development on a par with international finance. The next round of globalisation must be one where economic opportunities and responsibilities are more widely shared.

This moment of flux offers the chance to revive ideas that have been around for some time but have been heavily resisted. First is the Tobin tax. In 1978 James Tobin, the Nobel economist, proposed a tiny tax of 0.5 per cent or less on all foreign currency ex­change transactions to deter speculation and pay for development. Some calculate this tax could yield $375bn (€289bn, £253bn) annually. Even at half that amount, it is on a par with the amount that should already have been directed to development globally. This levy, even if it is cut to 0.005 per cent would limit volatility in small economies whilst generating enormous sums for the poor. It would also cost taxpayers nothing.

Second, we need to institutionalise the means by which profits from carbon trading can be channelled to development. As Germany has already shown, this is a vast market. It involves creating incentives for polluters to pollute less while generating resources for development. It is a smart, painless way to create revenues and jobs while bringing the poor into the global economy. A Europe-wide scheme is planned, but in Washington it should be seized upon as an effective mechanism for growth and development. It, like the Tobin tax, is tax neutral to the consumer while curbing overproduction of carbon dioxide and helping the world’s poorest.

Third, this new round of globalisation must not be accompanied by a return to protectionism. Make Poverty History called for progress on debt, aid and trade. Trade is the area in which the least has been delivered.