Inequality 12: Billionaires and the UN Politics of Envy

The United Nations (UN) is one huge global bureaucracy. Its original mandate was to promote world peace and resolution of conflict between and among nations, that is why it was formed at the end of World War 2 in 1945.

Since then, the UN has grown into a web or dozens of tentacles of different bureaucracies with concerns on almost all sectors. This somehow confirms one important role of the bureaucracy – once it is created, it only wants and aspires to perpetuate itself forever.

More than a year ago, I compiled a list of the different offices and agencies under the UN, I counted at least 131 of them, ranging from the Security Council and ILO, down to the UN World Tourism Organization. See the list here, UN bureaucracies – too many.

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From the long list of UN bureaucracies, and I think that list is not complete yet,  many UN officials are getting uneasy: who will feed them and sustain their high, tax-free salaries and perks, now that the rich governments, previously the main contributors to the UN and its dozens and dozens of bureaucracies, are having huge fiscal problems. If those rich governments can cut certain subsidies to their own people and taxpayers, then the international and multilateral bureaucracies could be next in the chopping block.

Late this week, there were several reports with headlines like UN calls for ‘billionaires’ tax’ to help world’s poor. Many rich country governments reeling from cut back their contribution to foreign aid. In 2011 for instance, foreign aid flows have declined by $167 billion.

So fearing the scary scenario that the budget and spending power of the UN and its many attached offices and going to decline, they have produced this fantastic plan of creating new taxes purportedly to “save the planet”, “save the dolphins and polar bears”, “save the poor”, etc. Me thinks that deep inside, many will not admit what they really wish to whisper, "save our pockets and lifestyle"..

Here is a list of the potential taxes proposed by the UN:WESS and the potential revenues they can give to the UN”

1.  A tax of $25 per tonne on carbon dioxide emissions. It could be collected by national governments, but allocated to international cooperation -- about $250 billion.

2. A tax of 0.005 percent on all currency transactions in the dollar, yen, euro and pound sterling.   a tiny currency transaction), which could yield an estimated 40 billion U.S. dollars per year for international cooperation - could raise about $40 billion a year.

3. Earmarking a portion of a proposed European Union tax on financial transactions for international cooperation – projected tto raise more than $70 billion a year.

4.  Regular allocations of he special drawing rights (SDRs) of the International Monetary Fund (IMF) and use of "idle" SDRs could yield about 100 billion U.S. dollars per year for the purchase of long-term assets which would then be used as development finance.

Overall, the various  billionaires’ tax will help raise more than $400 billion a year.

What's wrong with being billionaires? Take these two examples.

First, a bunch of science geeks and nerds made a grand conspiracy -- to create or invent a rice or potato variety that is packed with certain nutrients and vitamins that will improve or boost its consumers' immune system against certain infectious diseases. It's like an indirect vaccine against certain diseases minus the injections. Various laboratory and clinical trials prove that their invention was successful -- safe, effective, no negative side effects, etc. It became a hit worldwide, the geek inventors are selling their rice at P80 per kilo equivalent, millions and millions of people in Asia and elsewhere are buying their rice, the geeks became super-super rich, they became multi-billionaires.

Second, another bunch of information and communications technology (ICT) geeks and their investors also made their own big conspiracy – to produce cool smart phones and allied gadgets that can carry most if not all functions of separate gadgets, like internet and email access, a video-camera, a radio, tv, organizer and so on – at a much cheaper, really affordable prices. Even rural farmers can afford to purchase them and their kids help them to see some  graphs of price and quantity movements of their crops as sold and traded in various public markets and groceries. Tens of millions of people worldwide are buying these new products from a new company, the geeks and their investors have become very rich, some have become multi-billionaires

The UN officials now think that those geeks and risk-taking investors and entrepreneurs owe the UN and the world some debt, or they committed a crime of being highly efficient and  hard-working, highly successful, that these billionaires should pay lots of taxes to their national governments, and lots of additional taxes earmarked for the UN, so that the UN guys will save the planet, save the poor against certain infectious diseases, save them from illiteracy and the “digital divide”.

This is a highly rent-seeking if not idiotic argument. These days, people can become very rich mainly by producing certain goods and services that really benefit humanity. Exception are  certain politicians becoming very rich.via dictatorship and/or heavy economic protectionism of their family-owned or crony-owned local companies.

So the proposed new taxes by the UN are mainly rent-seeking, distortionary measures driven mainly by the politics of envy while mouthing some bleeding heart developmental concerns.  

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See also:

Inequality 6: On Social and Class Dominance, May 13, 2011

Inequality 7: Roger Federer, Manny Pacquiao and Free Market, June 19, 2011

Inequality 8: On Sustainable Inclusive Growth, June 23, 2011
Inequality 9: CMFR Forum on Inclusive Growth, September 22, 2011
Inequality 10: On Urban Congestion, January 05, 2011

Inequality 11: Banks, Filipino Savings and the BSP, April 21, 2011

Fat-Free Econ 15: IMF and Freedom From Debt

* This is my article today in TV5's news portal,
http://www.interaksyon.com/article/36217/fat-free-economics-imf-and-freedom-from-debt
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To clamor for freedom from debt, one must clamor for freedom from borrowing first. Debt is nothing but the accumulation of past wastes, inefficiencies and profligacy. If the use of past debt was useful, then the debtor – a person, a corporation, or a government – should be able to pay off those debts later while sustaining its productive momentum. Or at least the debt stock should just be a small portion of its overall wealth. But if the use of past debt was unproductive, then the debtor will have an ever-rising pile of obligations.

Recently, the IMF has mobilized funds from emerging markets to pool some $456 billion to help debt-distressed European Union economies. The Philippine government through the Bangko Sentral ng Pilipinas contributed $1 billion to the IMF crisis fund. That fund will not directly come from tax money; rather, it will come from BSP’s international reserves, which are mainly foreign investments denominated in foreign currencies and are parked at the BSP. Still, the BSP move to contribute to the Eurozone bailout fund is wrong, and here are the reasons why:

One, those debt-ridden EU governments are not exactly resource poor. They have lots of state-owned corporations and financial institutions, as well as huge assets (military camps, parks, etc.) that can be privatized to raise domestic revenues to deal partially with their current spending requirements and debt obligations, instead of relying on endless taxation and borrowings.

Two, the bailout will create more moral hazard problems for those indebted countries. If they see that a bailout is forthcoming, why would they institute more austerity and subsidy reduction programs? Why privatize, which can hurt their chance at reelection? Instead, they made limited austerity measures, then issued some warnings that their debt problem can "spiral to the global economy” unless the world will send them more money.

If those European governments could not stabilize themselves when their public debt-to-GDP ratio was only at 60 percent or less, what makes us think that they can stabilize themselves at 110 percent or more? Spain, Italy and France for instance, have been in deficit spending for more than 30 years straight, three plus decades of living beyond their means. The PIGS (Portugal, Italy, Greece, Spain) would need possibly one trillion dollars or more of bailout money, and there is no guarantee that such rescue money will be fully paid.

Fiscal Irresponsibility 26: On the $1 B Philippine Loan to the IMF

Yesterday, I posted this in my facebook wall.

The $1B PH loan to the IMF for Eurozone reserve fund won't come from tax money but from BSP's international reserves. It is within BSP's mandate and resources to do so. Still, I don't support helping to bail out fiscally irresponsible governments with more loans when those governments have lots of state-owned enterprises, financial instns and assets that can be privatized to raise domestic revenues, instead of endless taxation and borrowings.

I was happy to see some serious exchanges and comments from some friends, below. I am posting these comments without asking the permission of these guys for two reasons. One, my fb wall is a public wall anyway, and  two, many of the points raised here are no-nonsense ideas and would greatly help educate the public on the merits and demerits of this recent move by the central bank/BSP.
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Malou Tiquia I just totally do not agree to it...

Butch Arroyo But if you were the BSP what else would you do with the $s? BSP evidently doesn't want to sell the $s to the local economy and make the PHP stronger. So it has to push out the $s. But everything else out there they could put it into is either risky (and wouldn't be allowed to count towards "international reserves"), or safe but very low-yielding. A loan to IMF might be the highest-yielding of the alternatives that are acceptable for designation as international reserves.

The European bailouts are painful and costly result of policy mistakes of the EU in not enforcing the fiscal and public debt requirements of the original Maastricht agreement. I agree that those governments (the borrower govts for sure, but also the Germans, who weakened fiscal discipline in the EU by themselves violating the fiscal pact) deserve the wrath of their constituents. But until they get voted out they are (unfortunately) still the democratically elected leaders of these countries. If the leaders of the center countries (FRA, GER) still favor a bail out of the problem governments rather than allowing an exodus from the monetary union, the IMF will probably have to go along, since the only other countries who could vote it down-- US, UK, and, Japan-- probably support preservation of the monetary union.
From PH perspective, as long as the bailout lenders retain seniority, $1B to IMF is probably a small portfolio risk for the BSP.

Nonoy Oplas Thanks Butch. If I were the BSP, I will use some of my $77 B gross international reserves (GIR) to buy and hoard more gold plus other precious metals. My beef is that by pooling rising amount of bail out money, it will create moral hazards problem for those indebted countries. They have many govt-owned corporations, financial institutions, national parks, military camps and other assets, things that can be privatized to raise local revenues to deal with their spending requirements and debt obligations. I have not encountered much literature that those governments are taking this measure. Rather, they made limited or bogus austerity then issue some warnings that their debt problem can "spiral to the global economy unless the world will send them more money."

By not participating in the creation of more moral hazards problem with that IMF bailout money, the PH government is sending a signal both to itself and the rest of the world, that it is time to really look inwards, there are several options and solutions that can be internally generated, aside from endless borrowings and issuing a blackmail of global fiscal crisis unless they are given more bailout money.

Jules Calagui It is high time that we create a Sovereign Wealth Fund. We can set aside $20 B to start one and still left with over 6 months of GIR to cover 7 months of imports.

Benson Te The Bangko Sentral ng Pilipinas is a creation of the Philippine Congress REPUBLIC ACT No. 7653 and hence every exposure it does exposes Philippine taxpayers.

To give you an example, the liabilities of the old central bank (central bank ng Pilipinas, according to Malcolm Cook valued at over 300 billion were shifted to the newly created, off-budget Central Bank Board of Liquidators. In short, the liabilities of the old central bank was passed on the taxpayers.

FYI

Giovanni Rodriguez Agree with you Noy, the financial crisis in Europe and the world is the culmination of a failed experiment - fiat money !

Todd Foster So a country who still has many scratching out subsistence levels of living is loaning to a country, so it's residents can better afford their new "right" of do-overs on their vacations, if they got the sniffles on vacation #1? That's just plain evil.

Malou Tiquia Butch Arroyo, I really do not agree with your "small portfolio risk for BSP line. Point of the matter is we need the money here and not to support a failed system worldwide. Bail outs have proven to be not the right thing to do and really the Phils as lender is just a stunt to project the "breakout nations" status. Why not use the $ locally? BSP has to be creative, instead of FER what Jules Calagui posted is something worth considering. With SWF, it maximizes long term return, with foreign exchange reserves serving short term currency stabilization and liquidity management. There is a way to go than serve the ends of IMF. The world is in search of a new economic order and IMF has been part and parcel of failure of nations to handle responsibly fiscal and monetary policies. I fully share Nonoy Oplas' position here. Its time to go back to the drawing boards and bailouts are not the way to go! That's IMHO.

Casey Phyle The only thing that could possibly justify the Phils lending $1B to save Europe is the hope of not losing an important export market. But that is a vain hope, as lending to people who owe more than they can ever pay back is not the smartest thing to do. Borrowing more only makes their hole deeper. Some say it was intended like that by the money power who, on the way to NWO or One World, wants to force its will on the nations. So far that appears successful. The Philippines should not tie its raft too tightly to a sinking ship that will probably go down this year. On the other hand, the Philippines have been the recipient of western aid for long enough and have improved their situation at least this far. Now that they have a little cash on the side they probably thought it was only right to reciprocate and show some solidarity. Difficult to judge. That 1B would have stayed with the CB anyway and never gone to the people. Now the Phils will have a marker from IMF/Europe for $1B, with gold at $1600/oz.