Left and right tell it like it is to supporters
Breaking the taboo on corruption and on partition
People who feel for the poor admit their aid is not working. People who want to see some become rich point out many programs that donít work right in poor countries. Yet there is a revenue reform that has always worked before. We trim and blend two articles, one from the left out of OneWorld, 2008 September 18, by Daniel Nelson and one from the right out of the Heritage Foundation (lecture #1056) by Ambassador Terry Miller.
by Jeffery J. Smith, October 2008OneWorld: Overseas Development Institute (ODI) spokesperson, Sarah Bailey, and other aid analysts have acknowledged that their mentioning corruption is taboo. None specifically spelled out that a major reason for their silence was fear that the public might cut donations. Yet corruption -- not simply fraud, but also abuses such as "sex for food" demands in Liberia, post-tsunami allocation of houses according to political affiliation in Sri Lanka, and the re-sale of relief commodities in Afghanistan -- renders much humanitarian assistance useless.
People receiving aid often knew far better than international NGOs the political and power factors that influenced relief allocations. Even where aid agencies had set up complaints procedures, they did not always work -- particularly when complaints had to be made through the very officials who were the subject of complaints.
Atallah Fitzgibbon, performance improvement manager at Islamic Relief, said in terms of waste of aid, poor project design was probably a bigger factor than corruption.
Roslyn Hees, senior advisor at Transparency International, said in countries where corruption was endemic, individual agencies had little power but could wield more clout if they were open about the issue and acted together.
For more, see ODI's new report, "Need and greed: corruption risks, perceptions and prevention in humanitarian assistance."
Heritage: Research reveals no statistically significant link between official development assistance and development. Favoritism, corruption, and lack of property rights virtually destroy any chance for economic advancement.
Higher government spending, while it might boost growth in the short run, seems to do so at the expense of long-term growth (editorís note: whether growth uplifts all the population was not considered).
Spending on education lags economic growth. In other words, economic growth leads to better levels of education, not vice versa.
Reforms that encourage small holders to remain on the land impede growth. The conversion of rural and agricultural land to agribusiness, with farming regarded as simply another form of enterprise, was the path to prosperity.
Governments themselves are generally rent seekers where natural resources abound.
My own solution to both the land and the natural resource problem would be for governments to disperse ownership, but not direct control, of both kinds of resources by distributing freely traded shares of stock (that would pay dividends) to their citizens.
The best thing a country can do for itself is to set its tariff rates to zero. There is no need for negotiation. Unilateral action is faster and surer. There is no reason to delay the improvements in one's own economy that flow from free trade or to make them contingent on policy improvements in another country. Just get rid of the tariffs. Phase them out if you must, but get rid of them.
A tax system that promotes the rule of law rather than evasion will have economic benefits far beyond any revenue that might be raised.
JJS: There is a tax that stands out from the rest in being fair and transparent, and that is the tax on land. This tax not only generates public revenue but it also, unlike any other tax, expands its tax base. That is, it spurs owners to develop their parcels, which not only develops the rest of the economy -- as happened in Denmark, California, Australia, New Zealand, parts of South Africa, and Taiwan -- but also raises the value of locations in the region.
Like every other tax, however, it would be a challenge to levy land value and collect the revenue in a country lacking the custom of record keeping (a cadastre in the case of a land or property tax). However, the problem is not insurmountable. In Argentina, in the poorest barrios in Buenos Aires, the local government was able to find the owners of parcels and give them titles and then provide water, sewage, and electricity.
What would really facilitate the effort would be tying to the tax the above writerís idea of stock. Once people understand they are entitled to a share of their societyís land value, and not just obliged to pay dues for displacing others from their claimed site, then most people would quickly become cooperative. With both haves of geonomics in place -- land dues and rent dividends -- then development would take off and probably smash the record set by land-taxing Taiwan back in the 1950s.
Jeffery J. Smith runs the Forum on Geonomics.
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