|
UN unveils plan to release untapped wealth of...$7 trillion
(and
solve the world's problems at a stroke)
By Philip Thornton, Economics Correspondent
01/30/06 "The
Independent" -- --
The most potent threats to life on earth - global warming,
health pandemics, poverty and armed conflict - could be ended by
moves that would unlock $7 trillion - $7,000,000,000,000
(£3.9trn) - of previously untapped wealth, the United Nations
claims today.
The price? An admission that the nation-state is an
old-fashioned concept that has no role to play in a modern
globalised world where financial markets have to be harnessed
rather than simply condemned.
In a groundbreaking move, the UN Development Programme (UNDP)
has drawn up a visionary proposal that has been endorsed by a
range of figures including Gordon Brown, the Chancellor of the
Exchequer, and Joseph Stiglitz, the Nobel Laureate.
It says an unprecedented outbreak of co-operation between
countries, applied through six specific financial tools, would
slice through the Gordian knot of problems that have bedevilled
the world for most of the last century.
If its recommendations are accepted - and the authors
acknowledge this could take years or even decades - it could
finally force countries to face up to the fact that their public
finance and growth figures conceal the vast damage their
economies do to the environment.
At the heart of the proposal, unveiled at a gathering of world
business leaders at the Swiss ski resort of Davos, is a push to
get countries to account for the cost of failed policies, and
use the money saved "up front" to avert crises before they hit.
Top of the list is a challenge to the United States to join an
international pollution permit trading system which, the UN
claims, could deliver $3.64trn of global wealth.
Inge Kaul, a special adviser at the UNDP, said: "The way we run
our economies today is vastly expensive and inefficient because
we don't manage risk well and we don't prevent crises." She
downplayed concerns over up-front costs and interest payments
for the new-fangled financial devices. "The gains in terms of
development would outweigh those costs. Money is wasted because
we dribble aid, and the costs of not solving the problems are
much, much higher than what we would have to pay for getting the
financial markets to lend the money."
The UNDP is determined to ensure globalisation, which has
generated vast wealth for multinational companies, benefits the
poorest in society.
It urges politicians to embrace some groundbreaking schemes put
in place in the past 12 months to tackle global warning, poverty
and disease, based on working with the global markets to share
out the risk.
These include a pilot international finance facility (IFF) to
"front load" $4bn of cash for vaccines by borrowing money
against pledges of future government aid.
The scheme, which is backed by the UK, France, Italy, Spain,
Sweden and the Bill and Melinda Gates Foundation, was born out
of a proposal by Gordon Brown for a larger scheme to double the
total aid budget to $100bn a year.
In an endorsement of the report, Mr Brown said: "This shows how
we can equip people and countries for a new global economy that
combined greater prosperity and fairness both within and across
nations."
The UNDP says rich countries should build on this and go
further. It proposes six schemes to harness the power of the
markets:
* Reducing greenhouse gas emissions through pollution permit
trading; net gain $3.64trn.
* Cutting poor countries' borrowing costs by securing the debts
against the income from stable parts of their economies; net
gain $2.90trn.
* Reducing government debt costs by linking payments to the
country's economic output; net gain $600bn.
* An enlarged version of the vaccine scheme; net gain (including
benefits of lower mortality) $47bn.
* Using the vast flow of money from migrants back to their home
country to guarantee; net gain $31bn.
* Aid agencies underwriting loans to market investors to lower
interest rates; net gain $22bn.
Professor Stiglitz, the former chief economist of the World Bank
and a staunch critic of the way globalisation harms the poor,
said: "Globalisation has meant the closer integration of
countries, and that in turn has meant a greater need for
collective action.
"One of the most important areas of failure is the environment.
Without government intervention, firms and households have no
incentive to limit their pollution." He said a global public
finance system would force countries to acknowledge the external
damage their policies had, "the most important being global
climate change".
Solving the environmental crisis tops the UN's $7trn wish-list.
It calls for an international market to trade pollution permits
that would encourage rich countries to cut pollution and hit
their targets under the Kyoto protocol.
But - and the UN admits it is a big "but" - the US would have to
sign up to Kyoto and carbon trading to achieve the $3.64trn that
it believes the system would deliver over time.
"We are dealing with a global problem as pollution can only be
dealt with internationally," Ms Kaul said. Richard Sandor, the
head of the Chicago Climate Exchange, added: "Many encouraging
signs are emerging. When the business case is clear, private
entrepreneurs step forward."
But, the proposal is unlikely to get support from some green
groups who believe that action to curb consumption, rather than
market incentives, are the way to reduce carbon emissions.
Andrew Simms, director of the New Economics Foundation, said it
left unanswered questions over how these markets would be
managed and how the benefits and costs would be distributed. "We
have nothing against markets so it would be missing the point to
get into a pro- or anti-market stance. The point is how you
distribute the benefits."
He said the Nineties, the zenith decade for globalisation, had
seen just 60 cents out of every $100 worth of growth reach the
poorest in society, compared with the $2.20 in the Eighties.
He said a pollution trading regime had the potential to deliver
"enormous" benefits to poor countries, but said the UN report
failed to show a detailed plan.
"Our view is that you have to cap pollution, allocate permits
and then you can trade. But it depends on how it is set up.
Because you are dealing with a global commons of the atmosphere,
the danger is that you could be effectively dealing in stolen
goods."
He said a system set up now to trade in pollution permits could
end up permanently depriving poor countries that joined the
system further down the road.
International problems - and solutions
PANDEMIC DISEASES
Millions of people across the developing world have died from
malaria, tuberculosis and HIV/Aids, as well as from other
pandemics. Vaccines needed to avert them require much-needed
investment.
SOLUTION: An advance commitment by rich countries to buy $3bn
(£1.7bn) worth of vaccines would be enough to encourage
pharmaceutical giants to invest in finding medicines that would
eliminate these pandemics.
SAVING: $600bn
ALTERNATIVE SOLUTION: Vaccines are needed but more should be
done in the meantime. Extra aid is needed for simple tools such
as mosquito nets that would curb spread of malaria.
PARIAH STATES
Big business and global money ignore countries where they see
the risk of conflict outweighing their potential profit margins.
SOLUTION: Guarantees by international organisations such as the
International Monetary Fund to lower the cost of borrowing for
poor nations by underwriting investors' loans to conflict-torn
states.
SAVING: $22bn
ALTERNATIVE SOLUTION: Sometimes large volumes of cash are needed
and this is one. Live8 showed there was huge support among
taxpayers for higher aid to countries in distress.
Hitting a commitment made in the 1960s of 0.7 per cent of GDP
would unlock $140bn a year.
NATIONAL BANKRUPTCY
Once great nations such as Brazil and Argentina were reduced to
the status of beggars after poor economic policy combined with
debts with national and international lenders.
SOLUTION: A system to enable countries to take loans linked to
their average economic growth rate to ensure that they do not
have to cut public spending to raise the money to borrow needed
funds during the hard times.
SAVING: $600bn
ALTERNATIVE SOLUTION: A system to allow countries to seek
protection from their creditors in the same way that US
companies can take so-called Chapter 11 bankruptcy.
SPECULATIVE INVESTORS
Poor countries suffer most from swings in investment tastes by
the big global investors that means money can leave as soon as
it arrives.
SOLUTION: Enable countries to buy "insurance policies" against
big swings in growth that would ensure that they did not have to
cut public spending every time. In 1997 it wreaked havoc across
South-east Asia.
SAVING: $2,900bn
ALTERNATIVE SOLUTION: Curb speculative investment by imposing a
tax on foreign exchange transactions aimed at destabilising a
currency. It could directly raise funds for development while
preventing the worst excesses of the markets.
GLOBAL WARMING
Scientists believe human activity has led to climate change and
disappearing Arctic ice. The world's poor also have to live with
lethal storms and floods.
UN SOLUTION: A system of international trading in permits to
allow pollution that would encourage countries to cut their
emission of greenhouse gases so they can sell their "right to
pollute" to other states. UNDP says it is more effective than
just setting targets.
SAVING: $3,620bn
ALTERNATIVE SOLUTION: An international approach is needed but
one that prevents people from causing harm by setting pollution
targets rather than trying to bribe them not to. Also agree
global airline tax.
BRAIN DRAIN
Millions of skilled workers leave their home countries every
year in search of a better life in the West. In some states nine
out 10 professionals have left.
SOLUTION: Enable countries to borrow on the open markets against
the money workers send home. The capital would be used to invest
in the country to build infrastructure that would discourage
people from leaving.
SAVING: $31bn
ALTERNATIVE SOLUTION: An international code of ethical
guidelines overseen by bodies such as the World Health
Organisation (for doctors and nurses) to monitor the harm that
migration of professionals causes.
© 2006 Independent News and Media Limited
Translate
this page
(In accordance with Title 17
U.S.C. Section 107, this material is distributed without profit to
those who have expressed a prior interest in receiving the
included information for research and educational purposes.
Information Clearing House has no affiliation whatsoever with the
originator of this article nor is Information Clearing House
endorsed or sponsored by the originator.) |
