UN calls for tax on the super-rich

The United Nations has called for a tax on billionaires to help raise more than $400 billion a year for poor countries. The tax on the rich is proposed to help correct inequality between the super rich and the poor.

The UN estimates that a one-per-cent tax on their wealth would raise $46 billion in 2012. The report said “the ‘average’ billionaire would own $3.7 billion after paying the tax. If that billionaire spent $1,000 per day, it would take him or her over 10,000 years to spend all his or her wealth,” the report says.

Of course, the tax plan would not hurt these rich people. But a more fundamental question to address poverty is not the amount of aid to poor countries. Rather, the challenge is more on how to spend the money to address the root cause of the wealth imbalance.

Some economists argue that poverty could be eradicated by an increase in international aid to populations in need. But money alone is not the answer to this problem.

Ironically, regions or countries with a long history of international aid assistance struggle to defeat poverty. Countries in Africa, or Haiti, are glaring examples. Rather than a shortage of funds, the issue of how the aid is spent is more challenging for those who want to lift these countries up.

While international assistance can be highly useful to counter malnutrition or improve health standards in developing countries, some international agencies do not spend aid efficiently enough to address fundamental aspects of the problem.

For instance, some international aid money has gone to corrupt governments. And it would be wrong to send more money to administrations with bad governance. Some countries which have a long history of being foreign aid recipients saw people in high power become filthy rich while a majority of their people still struggle with poverty.

In addition, assessment and evaluation of how money has been spent has not always been effective. In some places, the information was limited as international agencies’ staff stayed in the compounded offices in the big cities instead of reaching out into rural areas. Reports to assess the impact of assistance programmes do not always fully reflect the situation as project managers fear that honest results could jeopardise their ability to attract donations in the future.

This is not to say that money is not an important factor. International assistance can be highly useful to help people overcome dire situations such as malnutrition or burdens of disease. 

Nonetheless, the ultimate goal of assistance should promote the ability of indigenous people to rise up. It could be extended in form of providing people with education or knowledge to make a targeted group able to stand on their feet. 

Local communities should be encouraged to take part in development projects early on to ensure full co-operation. This will also ensure that the programme would come from the needs of locals instead of an agenda of international aid agencies, which may not respond to the needs of communities the money was meant to serve.

In addition, full participation of local people would instil pride in their communities and enhance self-esteem. This would make the locals gain the expertise and confidence to carry on with development efforts after the aid agencies have left.

In the meanwhile, the policies of richer countries can also help. For instance, more open agricultural policies would help farmers in developing countries enjoy better income from an increase in commodity prices.

Some countries with no history of active participation of foreign aid can become highly successful in battling poverty, if governments adopt the right policies to create wealth for their people. Governments can help by creating a market reform environment under which locals can thrive, as well as provide basic infrastructure such as health services and good education.

It will be a generous move by the rich if they agree to contribute more to help the poor. But the money must come with effective efforts to ensure sustainable positive outcomes, which the money is meant to create.