Sunday, March 25, 2012

Why I support Ngozi Okonjo-Iweala for President of the World Bank

One criteria that I would beg to for to be applied when choosing the next World Bank president is the one of not being prone to be entrapped by groupthink or, much worse, being a promoter of a groupthink. 

While being an Executive Director of the World Bank, 2002-2004, the search for a new Chief Economist was announced, and we directors were told that although it was obviously quite a delicate task, it should not take too long, as the search had to be carried out within “quite a small and exclusive community of development economists”… and I immediately reacted with a “hold it there!... being in the hands of a small and exclusive community of development economists sounds like something really frightening and unhealthy to me. 

One of the reasons why I support Ngozi Okonjo-Iweala is precisely because I remember her, in the context of a very risk-adverse World Bank, to be more willing to discuss new ideas in delicate issues than most of her peers. This does of course not mean that any of the other two candidates, whom I do not really know, would not be capable of doing that as well.

Thursday, March 15, 2012

My tax paradise (Nothing as powerful against tax havens as tax heavens)

My tax paradise is not, as some could think, a country where there are no taxes paid, but a country with a just, transparent and efficient tax system which, without weakening the citizen, allows for the fiscal revenue necessary for the government to undertake what the citizen considers it should undertake on their behalf… and nothing more. 

Currently such a fiscal paradise does not exist anywhere. In fact what dominates in the world is the existence of real Kafkaesque tax infernos. Countries capable of transforming themselves into tax paradises have all to gain. 

My tax paradise would be governed by the following two principles: 

1. Every person has the inalienable right to contribute to his country by the payment of taxes, no matter how poor he is. It is also unacceptable that citizens can be odiously divided by interested politicians and bureaucrats, in those paying and those not paying taxes.

2. The state must not receive any income other than those taxes paid directly by the citizens in their own name. Is an inalienable right of citizens to have their governments work exclusively for them, without patrons or other interested parties, introducing confusion into such relation.

In this respect, in my tax paradise, any person who receives a single dollar in income, for any reason or from any source, pays taxes. The tax rate, progressive of course, could for example be between 10 and 49 percent. Never should the government be able to get hold of the largest portion of the income of any citizen, no matter how wealthy that citizen might be.

Companies would not be taxed at all, because their function is to create jobs and increase the taxable income of the citizens, something they can do much better without any distortions. Of course, companies would have to withhold and pay taxes on dividends paid to those who are not fiscally domiciled in the country.

All other revenue that may enter the state, such as the net oil revenues (Venezuela) and net import duties, should be distributed directly to citizens, in the extent that macroeconomic realities so permit, and will become part of their taxable income.

The tax revenues collected by the central state should be automatically distributed on a highly decentralized basis, which in our case I visualize to be about 10 percent for the governorates and 40 percent to municipalities, 90 percent of these to be distributed based on population and 10 percent based on the territory. Municipalities may also collect their residential property taxes.

In cases of national emergency, and with the favorable vote of 80 percent of the Assembly, the National Assembly may also enact a tax on the value of financial assets up to a maximum of 1 percent per year, up to a maximum period of 3 years.

¿Could public services be privatized? Absolutely, but always allocated on the basis of minimizing user fees and not, as is usual, maximizing state revenues.

¿What about public debt? Not a penny more that 30 percent of GDP, and only long term debt.

I appreciate any suggestions you may have to help make even more paradisaical my tax paradise. 

Translated from El Universal

PS. Phrased in other words: Corporate taxes only dilute citizen's tax representation or... clearer yet... the corporations have hijacked the citizen's tax representation... to the delight of politicians.

PS. And of course, VAT and similar, beside being regressive do not give real representation, as there is not an identified citizen behind the its payment.

PS. Many modern days' King John's Sheriffs of Nottingham, like Jeffrey Sachs, refuse to acknowledge the need for Sherwood Forest type safe havens, where citizens can safeguard resources which can be used to rebuild their nation, for their descendants, once it has freed itself from a plundering king. (And our great Robin Hood a fighter against Prince John,  is now cast in the role of a tax-collector for kings...please!!!)

Q. Would the future prospects of Greece seem better if all Greeks had kept their money in Greece 

Flashback: April 3, 1998 The taxes we have to pay! Daily Journal Please read it.

PS. How I dislike the redistribution profiteers... let us diminish their franchise value with a Universal Basic Income

Tuesday, March 06, 2012

The World Bank and the Outliers of Civil Society

It is hard to explain Civil Society, since much more than something physical it represents something spiritual; the will of an individual to participate in making our governments govern better and to make the world of his grandchildren a better place.

But, that said, it is also very easy to ascertain that some of the multinational corporate NGOs currently active in the name of the civil society, are absolutely not the same as that individual who, acting on his own or in a group, with little or no recourses, feels an urge to have his voice heard, convinced that he has something important to say.

For the sake of simplicity let us divide civil society in an organized strong civil society with voice, most of them originating in the developed countries, and the rest, quite unorganized, weak, with little international voice, most of them belonging to the developing countries. In this respect, the first question the World Bank must answer is whether it wants to be able to listen to the latter or not.

This is an issue because the truth is that the more attention is given to the voice of the strong developed-world-civil-society establishment, the harder it will be for the weak and outliers to have their voice heard, as the former could, would and will, tend to monopolize, hijack and direct the debate on development issues.

As an example of how civil-society might be captured answer the following: When the natural-resource-curse issue is discussed, how many resource-cursed-civil-society voices are effectively present, compared to the number of experts from natural-resource-consuming countries?

And, might the unrepresented-civil-society not have more voice at the Board of the World Bank, than what it has when it is represented by civil-society-with-voice?

And, who responds the best to the issue of genuine representation in a transparent an effective way, the World Bank or civil society?

And, the current financial crisis, specifically the fact that the IMF did not alert to it, is most often and best explained as a result of groupthink within the IMF. This is also evidenced by the fact that the simple truth of the crisis, is not allowed to surface, because it would so embarrass the Group. But, in this respect, does not the strong and represented developed-world-civil-society establishment act just like another mean and lean group-thinking machine?

I do not advance any answers, but those questions need to be raised, over and over again

In a closely related context, I am currently arguing for the need of a totally randomized web search engine, which could permit that the odd and unsupported opinions can now and again float to the surface of the web. As is, in the world of the Google and the Yahoos, the outliers are effectively drowned in the millions of sponsored-hits, or in the so many well intentioned most-probably-looked-for-by-the-searcher hits. I sincerely hope the World Bank does its best to keep a line open so as to at least give the outliers of civil society a chance to be heard.

Besides the alternative of the weak-unrepresented-civil-society organizing itself in the Group of The Outliers, how could World Bank help to establish any meaningful communications with it?

Again this is not an easy issue but, given the constraints, it probably must start by somehow limiting the current preferential access given to the communications with the organized civil-society establishment.

Any claim to transparency would for instance require that the World Bank posts a list of all the NGOs and persons who have been present during spring-and-fall-meetings over the last decade, indicating how many times and how many presentations they have hosted or co-hosted.

Modern communications could also be more intensively exploited. For instance there could be a website where all civil society participants around the world would know that they can post a question or give an opinion, and someone from the WBG will at least look at it. Those questions should be answered; or, if already answered, it should indicate where; or, if it cannot be currently answered, it should say so and preferably explain the reason why.

A group of WB professionals should then periodically prepare a summary of the opinions posted on the site above and present these to the Executive Directors. That summary should give special emphasis to the opinions considered as outliers, especially if substantially argued.

In conclusion what we least need if for the Global Partnership for Enhanced Social Accountability to end up like just another small and exclusive mutual admiration group, like the Basel Committee for Banking Supervision and the Financial Stability Board.

I do not wish to extend more this comment but I should perhaps explain that it is based on my experience as an Executive Director at the World Bank 2002-2004, and on my intensive participation as part of civil society thereafter… thanks to the support of a quite eclectic and thankfully not too bureaucratic organized civil-society NGO.