From today’s Financial Times:

The European Commission has thrown its weight behind the introduction of a financial activities tax in Europe, which would tax profits and remuneration at banks and other financial services companies, as it considers ways to raise money from the financial sector.

Officials in Brussels said on Thursday that the alternative idea – a financial transaction tax – was less suitable because of a “high” risk that business would simply move to other regions.

Depending on where the FAT (awesome acronym) revenue goes, this could be a great, though perhaps less “profitable” funding source for global development programs (See: yesterday’s post).

The Global Fund for AIDS, TB, and Malaria announced today that they’re about 8 billion short of their fundraising goals, which puts at risk the 2015 goal to: eliminate HIV mother-to-child transmission worldwide, prevent the spread of multidrug resistant TB, and eradicate malaria as a public health issue.

The Global Fund is a multinational pooling organization with independent project selection and evaluation processes, which is why folks like Jeff Sachs find its financing model so attractive (sans the bilateral, state-to-state politics).  As such, many are pointing to the economic downturn as to why more countries aren’t meeting the Fund’s pledge expectations.  Where there’s a challenge, so too is there often an opportunity for creativity, and that’s precisely what Senator Pete Stark from California is up to with House Resolution 5783.  The HR, otherwise known as the Investing in Our Future Act, amends the Internal Revenue Code to impose an excise tax on currency transactions exceeding $10,000 equal to 0.005% of the value of the currency acquired in the transaction (currency transaction tax).  This will capitalize (no pun) on currency speculation in which people buy and sell currencies to profit from fluctuations in their price, irrespective of their underlying value. Studies estimate that a worldwide 0.005 percent tax on dollar transactions would raise $28 billion a year and reduce speculative currency trading by 14 percent – ostensibly a win-win.  The gains from the tax would be used to pay for investments in children, global health, and climate change mitigation.

In a press release sent from his office in late July, Senator Stark (who is also Chairman of the Health subcommittee of Ways and Means) said, “Every day, there are $4 trillion worth of currency transactions.  The vast majority of these are speculative – banks trying to make a buck by out-guessing the system.  This speculation contributed to the last Wall Street crisis and makes our financial system less stable.”

Apparently 60 other countries are already supporting a global Financial Transactions Tax (FTT), which is a tiny tax on financial market transactions such as equity, bond, derivative or foreign exchange trades.  The Austrian Institute for Economic Research estimates that a global FTT could yield US$286 billion annually for a tax set at a rate of 0.01% and US$917 billion a year for a 0.1% tax rate. At a mid-range tax rate of 0.05%, an FTT would raise annual revenues of approximately US$650 billion – almost enough to cover the costs of the MDGs (~$170bil), the funds needed to help developing countries adapt to climate change and cover the budget deficits of developed countries.

The most pressing problem with speculation is the volatility of asset prices over the long run. The overshooting of exchange rates, stock prices, interest rates and commodity prices fosters a “predominance of speculation over enterprise” and thereby dampens the real economy and employment.  An FTT is thought of as an effective means of diminishing short-term speculative trades because it is collected each time a transaction occurs, which would have a stabilizing effect on asset prices and (I’m told) would thereby improve overall macroeconomic performance.  PLUS, then governments have this enormous source of revenue to spend fighting entrenched social issues.

Stark’s bill has been referred to the Committee on Ways and Means and the Committee on Foreign Affairs for a period TBD by the Speaker.  Let’s hope the US jumps on board, but I’ll keep my ear to the ground for any stirrings in Congress about a spec tax’s negative effects on banks.

First, UN Secretary-General Ban Ki-Moon is making MDG 4 on maternal health the focus of a $40bil push.  Maternal health is making notoriously slow (if any) progress, and Ban focused his appeal in compelling general terms: “Women and children play a crucial role in development,” he said in a statement. “Investing in their health is not only the right thing to do – it also builds stable, peaceful and productive societies.”

This brings us to a second interesting point, from Jeff Sachs over at Columbia’s Earth Institute:  bilateral aid doesn’t work.

[Bilateral] commitments have come without clear mechanisms for fulfilment…making it hard to monitor and largely unaccountable. Shortfalls are attributed to problems in recipient countries. Even when aid is disbursed, these programmes are scattered among many small efforts rather than a unified national plan, and include an endless spectacle of visiting dignitaries from donor countries, politicised negotiations, and countless headline announcements of support that all too often fails to materialise.

Rather than continue from peak to peak in political leadership structures, Sachs suggests countries pooling their money in financing organizations like the Global Fund to Fight AIDS, TB and Malaria.  The Fund aggregates all the donor countries’ commitments and then has an independent review board for national recipient programs based on scientific and management reviews, i.e. it erases politics from the equation.

Third, and I find this one almost hilarious: yesterday morning, Bhutan’s Prime Minister, Jimgi Y. Thinley, allegedly got the most applause of any speaker since the conference started on Monday when he made a call for a ninth MDG: Happiness.  “Since happiness is the ultimate desire of every citizen, it must be the purpose of development to create the conditions for happiness,” and he called on a proper balance of consumption, leisure, good governance, and attentiveness to nature, biodiversity, and environmental sustainability to achieve this sum of the previous eight goals.

I’m all for it, and this is calling me back to Eric Weiner’s non-fiction travel book, “Geography of Bliss,” in which, if I remember correctly, he concluded that Bhutan was in fact the happiest country in the world.  I can’t for the life of me remember why….

So, in review:

1) Focus on MDG 4: Maternal Health/reduction of maternal mortality and morbidity

2) Pool international funding in funds that independently evaluate national programs and can hold recipients accountable to outcomes without soaking aid in politics

3) Happiness needs its own spot on the list, a summation of all the energies and objectives in the other eight goals.

None of this is especially novel or precise, but rather suggests a paradigm change in development philosophy, and I’d be surprised to hear anyone argue much against it.

These next few weeks, we’ll let photos lead the blog through the pilot clinic’s delivery, installation, and opening. At this stage, it’s a compelling visual story: