Friday, August 14, 2015

Global Cooperation: Easier Talked About than Done - Part I

One of the consistent themes you find when doing research for articles on monetary system change is that the global financial institutions (IMF.BIS,World Bank, etc) are always trying to increase cooperation at the global level for one reason or another. All kinds of goals and targets are talked about, but actual change moves at a snails pace for the most part. 

This article in Project Syndicate illustrates this very well. One big push you see again and again is the effort to get more global coordination and cooperation on taxes. Jose Antonio Ocampo explains that there has been a big setback on this issue. Below are some quotes from his article titled, "A Defeat for International Tax Cooperation".

"Most of the world’s governments – eager to mobilize more tax revenues to finance development and curb pervasive tax-avoidance schemes, such as those revealed in the so-called Luxembourg Leaks scandal last year – have an interest in collaborating on taxation matters. Yet at the Third International Conference on Financing for Development, held in Addis Ababa last month, the momentum toward strengthening international tax cooperation came to an abrupt halt.

Developed countries blocked a proposal at the conference to establish an intergovernmental tax body within the United Nations to replace the current UN Committee of Experts. These countries insist that tax cooperation should take place exclusively under the leadership of the OECD (Organization for Economic Cooperation and Development), a body that they control."
. . . . . 

"Developed countries, led by the United States and the United Kingdom –home to many of the multinational corporations implicated in the “Lux Leaks” – succeeded in blocking this much-needed advance in global governance. In the end, the Addis Ababa Action Agenda provides that the current Committee of Experts will continue to function according to its 2004 mandate, with three additional meeting days per year, all funded through voluntary contributions. That is a profoundly disappointing outcome."

My added comments:

This is just another example of why things don't change very much very quickly at the global level. When push comes to shove, nations and (and people) move to act in their own interest first. The inability of the IMF to get relatively minor governance reforms passed and now the move to delay a review of the SDR currency basket are other similar examples.

It's easy to talk about everyone pulling together on a global scale. Every now and then it does sort of happen such as when we landed on the moon or perhaps every 4 years during the Olympics. But the norm is for nations and and individuals to seek their own interests first. After hearing Jim Rickards discuss his theory on complex systems, I have come to think that the diversity that exists in a complex system is a very large natural barrier to cooperation on a global scale. Nations (and people) just see things differently. Getting them to agree on anything takes a massive effort.

This is the reason we keep an eye out here for another major global financial crisis. It is during those times that people are more likely to accept significant changes in order to "fix the problem". Without such a crisis, it is much more likely that we will continue to read articles like this talking about a "disappointing outcome" in terms of whatever global policy is being pursued. Of course this does not mean a crisis would be good in any way. Also, just because there is cooperation doesn't mean that the actions taken will be good either. It's just an observation that people tend to be more willing to cooperate in a time of crisis. What we do here is try to analyze what we think will happen, not try to decide if what will happen is right or wrong. Each reader can decide that for themselves.

We will continue to follow events here and see what actually does happen.

Added note: In Part II  we look at another example and then try to apply this to monetary system change at the global level.

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