The United Nations says it can end poverty, stop global warming, and end the threat of contagious disease while also unlocking $7 trillion of hidden wealth from developing nations in the process. If this sounds too good to be true, that’s because it is.
In a new book launched with great fanfare at last month’s World Economic Forum in Davos, Switzerland, The New Public Finance: Responding to Global Challenges, the United Nations Development Programme (UNDP) claims to offer “innovative financial mechanisms that could dramatically reduce the cost of managing global risks can now be implemented by governments across the world.” The New Public Finance, according to the UNDP, emphasizes five policy approaches, which it describes as follows:
- Enhanced risk management to reduce the cost of response to international crises;
- Increased public-private partnership to leverage private finance;
- An emphasis on incentive-based international cooperation;
- The development of new products for trading on international markets, similar to those for carbon emissions; and
- The promotion of a more productive use of public revenue, focusing on social returns on investment, locally or globally, rather than expenditures.
If you think that such rhetoric means that this influential UN agency is now embracing market-based, capitalist solutions to difficult global socio-economic problems, think again. The UNDP has a long record of advocating precisely the opposite approach, one that focuses on redistributing the world’s wealth in the interests of “social justice.” Although packaged more attractively by using free market, incentive-oriented terminology, its latest plan is no different in substance than all the ones that the United Nations has generated for many years.
Indeed, the overview section of The New Public Finance says it all: “The equity or distribution branch of public finance, seen to support society in realizing its goals of fairness and justice, may sometimes have to achieve its objectives through income redistribution and transfer payments.” (Emphasis added.)
There is nothing new about this kind of public finance policy at all. It is as old as the socialist wealth redistribution dogma that underlies it.
Countries like the United States must give up control of their own economic policies in favor of global solutions because, as The New Public Finance puts it, “many global issues today are not natural global public goods but globalized (formerly essentially national) public good.” The independent, sovereign nation-state, “reflecting the choices on desired state action by national constituents,” is a relic of the past. Emerging in its place, the UNDP tells us, is something called the “intermediate state” – a hybrid globally interconnected entity “reflecting the choices on desired state action by international constituents.”
Global taxes are seen as a means for financing the new global paradigm that the UNDP has in mind - on everything from Internet usage to carbon fuel taxes to currency transaction fees to airline ticket fees. Included in The New Public Finance’s “Inventory of Financing Arrangements for International Cooperation,” for example, is “a tax on currency transactions that would be applied uniformly by all industrial countries.” This is the so-called “Tobin Tax,” named after the Nobel Laureate Yale economist James Tobin who first proposed such a tax years ago and which the United Nations has included on its revenue-raising agenda ever since. Also included in the UNDP financing inventory is a disguised internet tax, known as the Digital Solidarity Fund, whose financing mechanism relies in large part on mandatory surcharges imposed on high tech companies as a condition to having their contract bids accepted by participating local governments. Taxing the Internet to raise money for UN programs is not a new proposal either. It is just being dressed up differently. Indeed, back in 1999, the UNDP advocated an internet usage tax that it believed could raise as much as $70 billion dollars for the UN to spend as it saw fit. That would come to more than $150 billion dollars a year today in light of the growth of Internet traffic since 1999.
Just take a look at the UNDP’s most recent annual Human Development Report, which it issued on September 7, 2005, for more clues to its real thinking. In that report, the UNDP hammered away at two recurrent themes. First, it presented its simplistic diagnosis of the world’s problems: “Extreme inequality in wealth between countries and within countries is identified as one of the main barriers to human development.” In short, an “unequal world” is inherently immoral, no matter what the cause. Second, the UNDP offered its cure-all remedy: the richer countries, especially the United States, must give whatever money it takes to eliminate the disparities. “Aid targets without binding schedules,” says the UNDP, “are not a solid foundation for poverty reduction planning…Aid policies should reflect a commitment to reduce inequalities in human capabilities and income.” After all, according to the Socialist ideology prevalent at the UNDP and the rest of the United Nations establishment for that matter, we are talking about “universal entitlements, not optional or discretionary allowances.” (Emphases added.)
Never letting facts get in the way of its redistributive ideology, the UNDP ignores the endemic corruption and poor governance plaguing many of the countries that it claims have a “universal entitlement” to receive ever more unconditional help from us. Indeed, the agency goes so far as to blame the donor countries for even bringing up this unpleasant subject. It declared that “publicly expressed fears about governance are often smokescreens behind which donors seek to justify the unjustifiable: a legacy of indifference, neglect and failure to deliver on past pledges.”
Well, tell that to the African Union, which believes that corruption is a major problem in Africa that has impeded economic progress there. The African Union estimated that corruption alone has already cost Africa nearly $150 billion dollars a year. True development requires the nutrition provided by personal freedom and a predictable and transparent economic system, sustained and nurtured by honest government.
In many of the poorest developing countries, their corrupt, autocratic governments own all land and provide leases to the peasant tenants who till the soil for pennies a day. This alone prevents any chance for the peoples of these lands to get out of their poverty trap.
Instead of blaming the West for problems that are not of our making, the UNDP should focus on encouraging local entrepreneurship. They should listen to world-renowned Peruvian economist Hernando De Soto, who has argued for unleashing the potential of capitalism. The key is securing legally recognized property rights for the poor by giving the peasants formal legal title to their own land – land in which they can invest and borrow against. The poorest people in the world may well have trillions of dollars worth of unrealized assets that can potentially be monetized for their benefit – if they are fully integrated into their own countries’ legal systems. And the industrialized world can help here by providing more open markets to exports from undeveloped countries. How about, for example, agreeing to remove trade barriers to exports of African agricultural products that are grown on lands for which the farmers tilling those lands are provided secure, formally recognized legal title by their governments?
In sum, the United Nations should give up its zero sum wealth redistributionist schemes. It should either get out of the way altogether or work constructively with those countries that are willing to voluntarily cooperate in helping to stimulate conditions for economic growth in the developing world – capitalism and good governance are the best anti-poverty programs of all.
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