Normative Narratives


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Economic Outlook: Reparations, Development Aid / Debt Relief, and Common But Differentiated Responsibilities

Original Article:

In recent international news, a group representing 15 Caribbean nations (CARICOM) is seeking reparations from former colonial rulers for past atrocities, which they argue continue to have negative socioeconomic development impacts to this day:

Spurred by a sense of injustice that has lingered for two centuries, the countries plan to compile an inventory of the lasting damage they believe they suffered and then demand an apology and reparations from the former colonial powers of Britain, France and the Netherlands.

To present their case, they have hired a firm of London lawyers that this year won compensation from Britain for the torture of Kenyans under British colonial rule in the 1950s.

Just as important, the discussions around reparations — in the Caribbean as in Europe — might become an occasion to delve into history, to mourn but also confront the many ways in which the past continues to shape the present.

Laurent DuBouis Op-Ed:

This is more than just creative accounting. When economists debate why some countries are poor and others are rich, they often focus on the cultural, political or economic structures of poor countries. But historians of the Caribbean have long argued that national inequality is a direct result of centuries of economic exploitation.

But a French commission concluded that, while there was a responsibility on France’s part, financial reparation was not the solution. Its report suggested that French aid to Haiti was a kind of “reparation” and urged more of it.

After the 2010 earthquake in Haiti, President Nicolas Sarkozy offered an aid and debt-forgiveness package to the country. But the French government never officially apologized, let alone offered compensation.

Despite the rightness of the Caribbean nations’ claim, European governments are likely to respond similarly this time. If Caricom accepts this approach, the call for reparations may ultimately just come to play a strategic role within international negotiations over aid and trade.

What would it mean to truly rid our world of the legacies of slavery? In the Caribbean, it would mean undoing the divisions created by colonialism, through regional economic cooperation and reduced dependence on foreign aid and foreign banks.

It would mean, above all, ending the continuing mistreatment and stereotyping of Haitians, who were the pioneers in the overthrow of slavery and have been paying for it ever since.

In Europe and the United States, it would mean abandoning condescending visions of the Caribbean and building policies on aid, trade and immigration based on an acceptance of common and connected histories.

It would mean, above all, consigning racial discrimination, exploitation and political exclusion to the past. That would be the truest form of reparation.

By framing the issue of reparations as a way to remedy past atrocities (mainly slave trade) as well as a way to move forward cooperatively, CARICOM may indeed be able to achieve its goals. Reparations fit into a broader interpretation of common but differentiated responsibilities, and are consistent with the human rights accountability based approach to development:

The concept of “common but differentiated responsibilities” in reference to the “global commons”, has until this point been used almost exclusively in the environmental and natural resource arena. I would argue that both of these terms have a much wider application. Global commons should refer to any non-excludable good / service, with positive / negative externalities, whose effective management requires global coordination (to overcome cheater and free-riders). This would include, among other things, development outcomes.

By re-framing the concept of “the global commons”, a new global partnership for development can take root through the UN Post-2015 Development Agenda, with the concept of common but differentiated responsibilities at its core. By “common but differentiated” I do not mean that countries should have ideologically different policies–quite the contrary. The “common” aspect refers to creating programs with global policy coherence, aimed at achieving a normative vision of the future. The “differentiated” aspect refers to these programs being financed in a way that takes into account past transgressions, present context, and future goals.

Both articles mention the socioeconomic effects of slavery and slave trade, and corresponding financial component of reparations, an unavoidable element of any reparations argument. More tellingly, both articles also mention the emotional and psychological impacts of slavery that still persist today. What exactly should reparations look like? I believe in order to be effective–to truly “rid the world of the legacy of slavery”–reparations must have two components:

1) Debt Relief / Development Aid: Debt relief already exists, in the form of the Highly Indebted Poor Country (HIPC) Initiative. However, only five of the thirty-five HIPC countries are in Latin America (LA)–apparently Latin American countries are not poor enough to qualify for debt relief. Given the IMF’s role in the “Lost Decade” of development in LA (1980s), which was much more recent and therefore has a more direct impact on current socioeconomic conditions in Latin America than the 18th century slave trade does, it is particularly troubling that the IMF does not believe most Latin American countries should qualify for debt relief–particularly given Latin America’s substantial debt burden.

Debt relief should be extended to Latin American countries. Furthermore, donor countries should make a strong effort to reach the 0.7% of GDP for development aid target. Both initiatives should carry only the precondition of good, transparent, and accountable governance (political preconditions as opposed to economic preconditions, which are restrictive, paternalistic, and often lead to counter-productive development outcomes). This precondition gives developing countries the greatest amount of autonomy in developing their poverty reduction strategy.

2) An Admission of Wrongdoing, and an Apology: It is clear that the scars of slavery have not healed on their own over time. Drastic economic differences between the most and least developed countries play out as various power-asymmetries on a global scale, where the rich get richer and the poor get poorer. Instead of convergence, there is divergence, with devastating impacts such as human suffering, instability, and conflict. In light of both our common past and interdependent future, it is essential to acknowledge past wrongdoings, so the worlds leaders can move forward in a constructive manner.

Case in point is recent news concerning allegations that the N.S.A. spied on foreign leaders. While Germany, France and Spain certainly are not happy with the news, they are willing to hear America out and work with U.S. intelligence agencies–they understand the positive ends of U.S. actions even if they do not agree with the means . Latin American leaders have, in general, reacted in a much more negative way, cancelling diplomatic exercises and moving towards greater isolation. This reaction is reflective of a deep mistrust between L.A. countries and the highly developed Euro-America alliance.

By admitting to past wrongdoings via these two forms of reparations, we can move forward with greater trust and cooperation with our L.A. neighbors. These are countries we share an economic and political ideology with; there is no reason for such distrust and dislike to persist. L.A. countries also have a crucial role to play in the global partnership for development, as an intermediary between the most and least developed countries in the world (“south-south cooperation“).

To overcome the most pressing issues affecting the world in the 21st century, we need trust, coordination and cooperation between nations–especially between allies! We also need a global economic framework that will reverse the damaging trend of economic divergence and lead to more sustainable, peaceful, and inclusive development. Reparations are but one example of the “common but differentiated responsibilities” every country has in achieving this future. That we can have a debate on the merits of reparations in an open and even-handed way is a testament to how far we have come as a global community, but much work still remains to be done.

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Transparency Report: The Global Partnership for Development, Global Commons, and Common But Differentiated Responsibilities.

A recurring topic here at NN is how globalization has shifted some of the most pressing political economy decisions away from national governments and into the global governance arena, where the rules are largely being drawn up as we go. Never has the world been as globalized as it is today, and we can be certain that tomorrow will only lead to further integration. 

A number of problems inherently arise in issues of global governance. There are innumerable public and private interests at work, none of which want to give up their legal/structural advantage for the greater global good. Politicians must balance the short-run interests of domestic actors with the long run interests of the global community (but only one of those groups is responsible for that politicians future job prospects). This may lead to a “free rider problem”, where a country may decide it will simply reap the benefits of global governance (which tend to be non-excludable), while not contributing anything (and by further complicating an already complex and differentiated international legal/policy/taxation order, undermining global governance initiatives). Differences in national regulations can lead to capital flight to low cost countries, creating another incentive to “cheat” on global commitments.

One way to overcome free-rider problems is to create forums or groups where countries can coordinate their policies and voice grievances with one another (and shine a spotlight on “cheaters” and “free riders”). The G-20 is one such organization. The 3G Global Governance Group is a similar group comprised of 30 more countries. Critics and proponents of such groups often bicker over the merits and limitations of inclusivity versus exclusivity–I am of the mind that if the stated goal is coordination, cooperation, and some element of global policy coherence, then the more the merrier. This does not mean we need a G-193; groups can determine for themselves their level of exclusivity, as long as they can interact together through global mechanisms such as the United Nations.

The concept of “common but differentiated responsibilities” in reference to the “global common”, has until this point been used almost exclusively in the environmental and natural resource arena. I would argue that both of these terms have a much wider application. Global commons should refer to any non-excludable good / service, with positive / negative externalities, whose effective management requires global coordination (to overcome cheater and free-riders). This new definition would include, among other things: environmental regulation, trade openness, financial and tax policies, issues of regional and global security and human rights concerns (and yes these are all interrelated issues, further boosting the argument for global coordination in tackling them).

By re-framing the concept of global commons, a new global partnership for development can take root through the UN Post-2015 Development Agenda, with the concept of common but differentiated responsibilities at its core. This concept itself will make countries more willing to coordinate on global commons issues. By acknowledging that countries are accountable to different degrees for the current state of global affairs, a basis for financing global initiatives that is fair yet acknowledges common goals all countries should be working towards can emerge. By “common but differentiated” I do not mean that countries should have different policies–quite the contrary. The “common” aspect refers to creating programs with global policy coherence, the “differentiated” aspect refers to how those programs will be financed in a way that allows them to fully realize their goals (as opposed to unfulfilled commitments that have dominated global agreements in the past).

Perhaps such commitments would be a more sustainable and effective way for donor countries to channel ODA, freeing up fiscal space for national governments in developing countries to finance their own domestic development programs without the distorting effects that large aid inflows can have.  

The G-20 is currently focusing on the issue of corporate tax evasion. (for a refresher, in a previous blog I explored the costs to society of corporate tax evasion)

“Government officials from the world’s largest and richest economies on Friday for the first time endorsed a blueprint to curb widely used tax avoidance strategies that allow some multinational corporations to pay only a pittance in income taxes.”

“In light of such practices – which are entirely legal, but take advantage of differing tax rules around the world – the Organization for Economic Cooperation and Development has proposed that all nations adopt 15 new tax principles for corporations. The plan focuses only on corporations and would, if adopted widely, shift some of the global tax burden toward large companies — the ones big and rich enough to devise complex tax-reduction strategies — and away from small businesses and individuals, which tend to spend a much bigger share of their incomes on taxes.

“Shifting profits to low-tax countries and costs to high-tax countries is less an option for small businesses and individuals, who inevitably wind up carrying more of the tax burden as a result. In the United States, for example, taxes on corporate profit contributed 40 percent of all income tax to the United States Treasury 50 years ago. Today, corporations contribute less than 20 percent, with the slack taken up by small companies and those paying individual income tax.”

“In contrast, the owners of a small coffee shop would probably not able to reduce its tax liability by claiming they had paid royalty fees to an overseas company owning the copyright to their cafe’s name.

The reform is intended to address such inequities, the finance ministers said Friday”

“‘It’s a matter of justice and fairness,’ Angel Gurría, the secretary general of the O.E.C.D., said at the presentation of the new plan with the finance ministers of France, Britain, Germany and Russia.”

The list, presented Friday at a meeting of finance ministers of the Group of 20 countries in Moscow, includes ideas to prevent corporations from “treaty shopping” to find countries with the lowest taxes and then find ways to book their profits there, even when much the money is made elsewhere.”

“The details, however, may prove daunting and will be subject to intense lobbying by corporations. In addition, countries have long used tax policies in efforts to lure businesses to locate operations there. The O.E.C.D. plan would not seek to end such competition entirely – any country would be free to charge lower rates than others did — but it would try to keep countries from essentially offering companies ways to avoid paying taxes anywhere, something critics say Ireland did in reaching agreements with Apple.”

“The O.E.C.D. does not expect to complete work on the proposals until the fall of 2015, and after that it would be up to governments and legislatures to implement them by passing new tax laws.”

Government are coming together to address the issue of corporate tax avoidance, which could not be addressed unilaterally. Reform will take a long time and run into intense opposition, but it has to start somewhere, and the G-20 is that somewhere. If the worlds biggest economies agree on rules, smaller countries will follow suit (powerful countries often use economic leverage to secure policy changes). In time, with nowhere left to run, large corporations will have no option but to pay their fare share–to the benefit of all.


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I’m Proud to be an American, Where At Least I Know I’m Free

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One thing I have learned in life, in my studies, and in my time as a blogger is that is in incredibly difficult to manage a large, diverse country in today’s modern, globalized world. In America, we are at least free to have open discourse, and have a responsive and accountable Federal government (despite current partisan bickering, at least we’ve been able to avoid Civil War / a military coup, and are no longer mired in Recession). We live in a country that indiscriminately upholds human rights and freedom from want and fear, and is attempting to spread that normative vision to all corners of the world.

We are by no means perfect, but I think America is certainly doing least worst of the World Powers; we can certainly celebrate that! Those who decry the “downfall” of America simply do not know what they are talking about. Just because other countries have seen gains in the past decades does not take away anything from America’s accomplishments. In actuality, this is the desired effect of U.S. foreign policy, the Marshal Plan, the United Nations, and any other organization / program that attempts to build peace and economic growth through cooperation and interdependence.

Today, and everyday, I am proud to be an American, where at least I know I’m free to voice my opinion and realize my full potential as a person. God Bless America! Bless Americans and people everywhere who share our values!

Happy 4th of July