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TII SPECIAL
World Needs Marshall Plan V.2 to ward off Catastrophe
By Naresh Minocha
Apr 28, 2022

Levy Innovative Global Taxes to fund the Plan

THE world is fighting multiple wars with third world war (WW-III) looming on the horizon. The major battle fronts are 1) galloping debt & resulting risk of sovereign defaults and hike in interest rates; 2) alarming rise in global inflation and risk of socio-political turmoil as exemplified by Sri Lanka and Pakistan, 3) soaring poverty & hunger since the arrival of Covid-19 virus.

According to the World Bank's latest poverty estimates, the combined impact of Covid, inflation & Ukraine crises "will lead to an additional 75 million to 95 million people living in extreme poverty in 2022, compared to pre-pandemic projections".

As put by a team of WB's economists in a blog, "If the more pessimistic scenario plays out, 2022 could be the second-worst year interms of progress made in reducing extreme poverty this century—behind only2020, when there was an actual increase in global poverty".

The covid pandemic is still far from the endemic stage or fizzling out. The socio-economic restrictions to curb spread of infections continue to exist or resurface with varying levels of intensity. Reckon the diminishing prospects for attaining UN's sustainable development goals (SDGs) by 2030.

Factor in the West-conceived climate action that puts poor and emerging economies at a disadvantage. Add to this localized, prolonged, armed conflicts in Syria, Yemen, Congo, Sudan and elsewhere.

Now reckon the most dreaded variable: Russian Ukraine War (RUW), which has already rattled different global markets. The NATO countries are keen to supply arms and ammunition to Ukraine to sustain their proxy war against Russia.

The combined effect of all these variables is heightened global political, economic and financial instability. This constitutes the perfect setting for terrorism, regional conflicts and ultimately WW-III.

The other day UN issued an alert from Secretary-General António Guterres with a headline: "Ukraine war unleashing a 'perfect storm' of crises". Mr. Guterres delivered this warning while presenting the first detailed policy brief issued by the Global Crisis Response Group on Food, Energy and Finance (GCRG), which he set up to study the effects of the war in Ukraine on the world's most vulnerable, according to a UN release dated 13th April.

As put by UN Policy Brief, "There is no time to lose. Waiting months to put in place the necessary measures to preclude another lost decade for development, a generalized debt crisis, and social and political instability is not acceptable. The international financial system has the instruments and the capacity to respond accordingly and rise to the challenge of the moment. Leadership and political will can make this possible. There is no reasonable explanation for not doing so ".

Under a chapter titled 'Developing countries under the Sword of Damocles ' the Brief notes that a UN group has estimated Russia-Ukraine War's (RUW's) ripple effects on global commodity and financial markets. The transmission of effects on countries is assessed on the basis of six indicators. Says the Brief: "1.7 billion people in the world live in in 107 economies that are severely exposed to at least one of this crisis' three global channels of transmission – rising food prices, rising energy prices, and tightening financial conditions".

It adds: "Given elevated levels of socioeconomic stress following the COVID-19 crisis and unfolding impacts of climate change, just one of these channels is enough to trigger collapse – debt distress, food shortages, or blackouts ".

The policy brief has listed a slew of recommendations to salvage world economy from precipice of disaster. They deserve requisite attention and action by relevant stakeholders of global economy and peace.

Other multilateral organisations such as International Monetary Fund (IMF) too have chipped in ideas to manage worsening global economic situation. A case in point is proposed IMF-managed fund to provide additional help to Ukraine. To quote an IMF video dated 31 st March 2022, "At the request of some IMF member countries, we are working on a proposal for an IMF administered account for the benefit of Ukraine. This will provide a vehicle for donors to channel loans and grants to assist Ukraine ".

There are different schemes to write-off small debt, roll over loans, provide grants to poor countries grappling grave challenges. Similar is the case with Bilateral aid.

All these disjointed efforts are inadequate to create a stable, global geo-political and economic environment. The world needs a new deal for inclusive development of all nations under which all factors of production & services including capital and manpower move freely.

The world requires a visionary plan similar to Marshall plan that the United States of America (USA) conceived in 1947 to reconstruct Europe, which was ruined by World War II and faced hunger and famine.

The Marshall Plan was mooted by Secretary of State, George C. Marshall, in an address delivered at Harvard University during June 1947. The plan was given a statutory framework as Economic Recovery Act of 1948.

According to archive.gov, over the next four years, Congress appropriated $13.3 billion for European recovery. This aid provided much needed capital and materials that enabled Europeans to rebuild the continent's economy.

If General Marshall perceived world situation after WW-II as "very serious" and of "enormous complexity ", then the situation today is very grave & far more complex than what it was in 1947.

All multilateral institutions including elite groups such as OECD and Paris Club ought to come on a common platform to save the world from persisting and worsening miseries. The platform should formulate a new deal.

The first element of Marshall Plan V.2 (MPV2) should be dissolution of all multilateral, regional and bilateral defence treaties.The dissolution of treaties especially North Atlantic Treaty Organisation (NATO) would obviously make the RUW redundant. Post dissolution, there is no reason why Russia would not withdraw from Ukraine, which is on the verge of becoming another Syria in the super-power politics.

Without dissolution, the risk of WW-III would keep lurking around the humanity.

The second element of MPV2 should be abolition of veto power at the United Nations. All nations must be treated as equal sovereign nations with each having one vote. The Veto system at the UN is a prostitution of democracy, which is ostensibly precious to the United States and other Western nations.

The third component of MPV2 should be identification of resources for ending inhuman conditions in which over a billion human being live. This is key to ushering in peace at the ground level.

The first obvious resource is Official Development Assistance (ODA) from the developed countries to the developing ones. ODA has all along been a famished institution with majority of rich nations shirking their responsibility for decades to contribute annually 0.7% of their Gross National product (GNP) for development of poor nations.

Way back in October 1970, UN General Assembly had resolved: "Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 percent of its gross national product … by the middle of the Decade".

It is apt time to usher in innovative global taxes to fund MPV2. Let OECD take a lead in this arena by mooting global minimum tax (GMT) of 15% on arms export and matching GMT of 15% on arms import. The customs authorities of each country should deposit such GMT receipts every quarter with a UN-administered MPV2 Fund.

The proposed Fund should also impose 10% GMT on annual export surplus generated by all countries that record trade surplus for three years in a row. This tax should also be deposited in MPV2 Fund.

Time is also ripe to dust out the visionary idea of imposing Tobin tax on all capital flows across the world. It goes without saying that the receipts from this too should accrue to MPV2 Fund.

Yet another component of MPV2 should be rebooting of World Trade Organisation/treaty. It should provide for free movement/export of manpower solely for execution of projects and assignments in countries.

Reduction in unemployment in over-populated, poor nations is essential for promoting peace and harmony in countries that figure in the bottom rungs of global happiness index.

The ball is in the court of the super powers and their allies. If they opt to push the ball towards WW-III, then they should remember that world now is far different from what it was in WW-II. Let humiliating experience of interventions in Afghanistan, Iraq, Vietnam and Ukraine and other countries serve as lesson for all those itching for confrontations. Let them not forget that miniscule section of world population as terrorists can create hell for arrogant, rich nations.

Ends

 
 
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