Tobin Tax, Imperialism, and Globalization

One (of the many) differences between Professor Lal’s views and mine is that I believe that good things may happen in the future (though I cannot demonstrate they will), while he believes that good things did happen in the past or are happening today (but, unfortunately for his case, they can be demonstrated to have been bad, rather than good).

On the first point, I cannot prove that something akin to Global Welfare Agency may come to pass. But I do not think that the modicum of global moral consensus needed for it is a “mirage.” The Tobin tax, which is one of the two key parts of such an agency (the second being its ability to deal with individuals in poor countries, not governments), has already been endorsed by the World Bank Chief Economist, by the French, the Brazilian and a few other governments. For sure, we are not on the eve of the agency’s opening day, but we are much further along that path than ten years ago. Had the United States had a more enlightened and open-minded government since the end of the Cold War, I would venture to say that we would have been much closer than we are now. And we would be spending money on creating the underpinnings of just globalization rather than on security contractors and such. Note finally that the cash allocation of welfare for which I argue does take care of “the lords of poverty” objection raised by Professor Lal. “Lords of poverty” exist currently because the road from a dollar paid by the US taxpayer to the ultimate recipient is lined with scores of people who try to take a cut, from those who want to sell a new machine to the Third World to those who want to write policy reports. But with grants paid out in cash, one can set a clear rule: say, for each cash dollar physically disbursed to somebody in the Third World, total expenses cannot exceed 10 cents. Simple and efficient.

Now, going to the second point. Professor Lal somewhat extraordinarily writes in his original post that “short of direct or indirect imperialism there seems to be little hope of overcoming the domestic political obstacles to the efficient utilization of foreign aid.” But where was this “direct or indirect imperialism” successful in helping the poor—one wonders? And indeed if we look around today, we have four countries that satisfy Professor Lal’s criterion of being ruled by “direct or indirect imperialism.”

They are Bosnia, Kosovo, Afghanistan and Iraq. Each is a disaster. The first two, havens for smuggling, trafficking, ethnic cleansing and corruption. The other two are not even worth discussing—so obvious is the debacle.

As for the rosy view of Globalization I, it may be useful to recall that while migration was surely (as a share of total world population) greater then than today, a large chunk of that migration was involuntary: from black slaves brought into Brazil and the Caribbean all the way to 1890 or later, to the Chinese and Indian indentured labor driven to Malaya or Guyana. Not everything was sweetness and light.

Also from This Issue

Lead Essay

  • Why Doesn’t Aid Work? by William Easterly

    It is a tragedy that billions suffer from extreme poverty. The second tragedy of the world’s poor, William Easterly maintains in this month’s lead essay, is that trillions spent on foreign aid have done so little to help. Aid efforts so rarely succeed because they so often lack feedback and accountability. The way forward, Easterly argues, is “truly independent scientific evaluation of specific aid efforts … continuous evaluation of particular interventions from which agencies can learn.”

Response Essays

  • Thought-Provoking and Misleading by Branko Milanovic

    In his spirited reply to this month’s lead essay the World Bank’s Branko Milanovic claims that William Easterly’s argument is misleading. Easterly, Milanovic argues, is not clear about the definition of “aid,” and he both underestimates how much governments can do to help the poor and overestimates the likely effectiveness of his proposed new “grandiose bureaucracy” to assess aid effectiveness. Easterly, Milanovic writes, “provides an argument for those who have long argued that the best policy is to do nothing and ignore the poor world.”

  • There is No Fix for Aid by Deepak Lal

    In his reply essay, Deepak Lal, the James S. Coleman Professor of International Development Studies at UCLA, argues that like almost all aid efforts, Easterly’s proposed evaluation initiative is likely to fail. “Short of direct or indirect imperialism,” Lal argues, “there seems to be little hope of overcoming the domestic political obstacles to the efficient utilization of foreign aid.” Easterly’s proposal is just more fodder for the “Lords of Poverty,” the middle class professionals who derive a good living from the international business of alleviating world poverty.

  • Evidence Beats Rhetoric, Every Time by Steve Radelet

    The Center for Global Development’s Steve Radelet argues against Easterly that, in fact, “aid amounts have been modest” and that the evidence shows that aid is often effective. Without successful health interventions, “millions of these people would be dead,” Radelet writes. Furthermore, he argues, aid does promote economic growth. “Here is the dirty little secret: most of the published research over the past decade has shown a modest positive relationship between aid and growth.”

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