I thought this might be of interest to some on the list.
Selma Singer
----- Original Message -----
Sent: Sunday, January 29, 2006 11:27 PM
Subject: UN unveils plan to release untapped wealth of...$7 trillion (and
solve the world's problems at a stroke)
http://news.independent.co.uk/world/politics/article341967.ece
The Independent, London
By Philip Thornton, Economics Correspondent
Published: 30 January 2006
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.
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