Some could raise the question of the relevance of the Mundum Nostrum project compared to the universal tax proposals initially emanating from the American economist James Tobin, and very recently taken on by a British initiative, the “Robin Hood Tax“.

THE TOBIN TAX

James TOBIN opinion

James Tobin (1918-2002) was, among other achievements, economic adviser to President John F. Kennedy, professor of economics at Yale University, and won the Nobel Prize for economics in 1981. During a conference at Princeton University in 1972 he proposed a universal tax on exchange of currency. As a supporter of Keynes’ economic theory, Tobin’s proposition was to limit speculation on exchanges which he believed would damage developing countries’ extremely fragile economies.

Many are the anti-globalism activists (the ATTAC group in particular) who, wrongfully interpreting the objectives of the “TobinTax“, have supported his project. They thought it was to help developing countries. James Tobin was indignant that incorrect objectives had been attributed to his tax proposal, as he expressed it in an interview in 2002, shortly before his disappearance, with German weekly magazine Der Spiegel. It is noteworthy that James Tobin said his tax would never be applied as “decision makers are opposed to it”.

Argumentation supporting the Mundum Nostrum concept of voluntary contributions versus taxes

Relevant criticism has been formulated against the Tobin tax:

• In spite of its very low rate, it would constitute a barrier to general trade. Sweden gave up an experimentation of Tobin Tax implementation in the 1990s because it had entailed a strong fall in trade.
• It would not make it possible to avoid large scale movements of capital, such as those that caused the Asian and Russian crises, because its rate would not be high enough to be dissuasive.
• To an extent it would be incompatible with bank secrecy.
• It should be implemented on a global or continental basis, which implies a difficult-to-obtain agreement. An isolated implementation in some countries would have negative effects on their economy. Even if it were implemented on a global scale, it would still be possible to avoid it by financial engineering techniques.
• The end-users would probably bear the cost of the tax.
• Given the inability to secure the market liquidity in the case of a uniform implementation of the tax, nations would be tempted to set up an exemption system for the banks and financial organisations. It is the case in the United Kingdom where the public, companies and investors pay the tax contrary to the banks, which however represent the heart of the supposed speculation.
• Thus, the tax would generate profit for financial engineering companies, able to develop systems of compensation and derived contracts thwarting the effects of the tax. As an example, the Euro-dollar market in the 1970s had circumvented the lawful obstacles to assets replacement in US external dollars, to the greatest profit of London and Luxembourg markets.
• Furthermore, to situate the matter in our current economic environment, it is not problems related to speculation that caused the 2008 economic crisis but insufficient ratios of capitalization and the “Too Big To Fail” policies. On the contrary, it is the real estate market, with its very high transaction costs, which has created the crisis bubble, as it was the case in Japan at the end the 1980s.

THE TOBIN TAX TAKES ANOTHER FORM: THE “ROBIN HOOD” TAX

Perhaps the same economic viewpoint as stated above, could be applied to the “Robin Hood tax”, a revival of the Tobin tax, some 38 years later. Without expanding on the choice of name for this project, even if bad management by financial institutions resulted in the 2008 global financial crisis, the proposal seems relatively vague.

If it is known that the project targets only financial institutions, information varies about the base of the tax. Indeed, it sometimes relates to the whole operations of the banks, sometimes only on the change transactions, or on specific types of financial transactions applying differentiated rates.

Furthermore, there seems to be a large difference of opinion between the political leaders and the Sherwood Forest rebel’s supporters! Whereas the Robin Hood tax project’s initiators conceive a tax to increase aid to developing countries – incidentally, without specifying any precise objectives and methods – and bringing answers to the environmental issues, the few political leaders who support the idea mostly envisage it to counter and offset the economic disorders that could affect national and global economies in the event of a new global financial crisis. These political leaders’ approaches are extremely differentiated with regard to the base and the collection of the tax, and how to use the tax dollars. The British Prime Minister’s “yes”, the German Chancelor’s “yes” or the French President’s “yes” do not cover the same concepts and commitments. They are rather “yes, but”.On the differences of approaches:

Some of the most influencial G20 political leaders are absolutely hostile to any kind of additional tax which would weaken their national economy competitiveness.

THE NEW MUNDUM NOSTRUM INITIATIVE

Some, mostly supporters to the Robin Hood tax project, strongly believe that G20 leaders will some day decide on the principle of such a tax. They have been repeatedly disappointed, especially when they saw that the expensive and highly policed 26 and 27 June 2010 Toronto G20 summit – the fourth meeting of the G-20 heads of government – was more than a confirmation of good intentions about handling national public deficits and tightening control over financial institutions, but had made no decision about a tax for helping poor countries.

Actually, the very principle of a universal tax comes up against the global political reality. Today, there is not a shadow of a possibility that all the nations would agree on the principle of a universal tax, on its base, its collection, and the use of the tax dollars.

The world, the developing countries, and the environment cannot wait another 40 year period to come to realise that such universal tax projects don’t work. It would be a waste of time, energy, possibilities and good will. Poverty is the source of illness, malnutrition, poor education, criminality and illegal migration to more developed countries. Getting developing countries out of poverty would help solve many of those problems.

In that context, a group of people from all over the world has come to realise that the solution will never be a political one, and that a working solution could only be one that would bring benefit to all parties, givers and recipients. From there, and after a thorough academic and business-oriented examination of corporate philanthropy, they have come to the conclusion that businesses could build strong reputation and image through their participation in a project that would pursue the goal of helping developing countries. Businesses already give to charities. Philanthropic expenditures amount to around $14 billions a year in the United States and could be up to $20 billions worldwide. Most of academic investigations acknowledge that businesses are not doing well in philanthropy and that “the majority of corporate contribution programs are diffuse and unfocused” (Porter, M. E. and Kramer, M. R. (2002). “The Competitive Advantage of Corporate Philanthropy.” Harvard Business Review 80(12): 56-69). Most of businesses use short term tactical philanthropy, without real focus and which bring poor results, instead of long term, long lasting effect strategic philanthropy which builds strong reputation and image among customers.

So here is the great news! The above mentionned group of people has created the Mundum Nostrum Project in Nouméa, New Caledonia, on 14 May 2010, to collect corporate philanthropic funds and invest them into 2 main areas in order to really make a change for the future:

– Infrastructures in developing countries. Most economists acknowledge that economic development primarily depends on infrastructures. Unfortunately, infrastructures are costly, long to implement, do not yield immediate return on investment and so do not allow the borrowing countries to repay their loans. That is why global corporate philanthropy paying for infrastructures would free these poor countries from borrowing money.

– Environmental programs which, like reforestation, are likely to improve the balance between humans and nature.

What makes Mundum Nostrum Project so unique and likely to succeed in its objectives is that:

– it gets the financial resources, not from governments but from companies, not in a coercive way, but on the basis of corporate voluntary commitment. Contributions are collected by consent of participating companies for a tiny levy (0.1% to 0.01%) on their international financial transfers;

– it implements infrastructures which will trigger the economic takeoff of developing countries;

– it is appealing because it creates a profitable synergy between givers and recipients; generating corporate reputation and image is mainly achieved by Mundum Nostrum through massive advertising campains about the participating companies’ commitment to economic development and a better future for the planet;

– it takes into account the environmental issues;

– and it defines infrastructure and environmental investment plans through consultation and transparency. Thus it gives the givers the guarantee that their donations will not be used for other purposes than those for which they have been collected.

For that, Mundum Nostrum project is ambitious, but realistic and pragmatic.

If you feel in absolute despair about the situation where 40% of the global population has less than US$2 a day to survive, about the developed countries opulence compared to that poverty, and the world apparent indifference regarding that reality, you will find freshness, and maybe even hope in the Mundum Nostrum Association initiative.

If, after visiting Mundum Nostrum’s website, you think that the project is a great initiative that should be promoted, please, spread the word, bookmark this article, send it to your friends, mention it of Facebook, make people know about it. The website displays an opportunity for everybody to support and participate in the project. Go there, hit the DONATE button and make a small, or a bigger donation to help Mundum Nostrum keep going on in this fantastic objective of creating the conditions for a real change in the world.

The infrastructure idea is not new. Any economist knows how important they are in the development process. However, what is new is the response Mundum Nostrum gives to the infrastructure financing problem, the scale this initiative could achieve thanks to your support and of many others, how businesses can become proactive actors of the change, and how they get return on investment for their action in terms of corporate reputation, corporate image and corporate respectability.

Mundum Nostrum project could create the reconciliation between corporations and the real world!