Oncoming this thursday the G20 summit will be held in Seoul, South Korea. This summit-level conference has a significant meaning not only to Korea but also to the international community. These kinds of high level conferences were used to be held in western advanced countries. However, this time, South Korea is hosting the G20 summit which has gone from having a GDP lower than much of sub-Saharan Africa to being one of the world's largest economy. Being a chairman country means that they can choose topics of the agenda. Since South Korea was once a poverty-stricken country, underdeveloped countries, who are not invited to the conference and some civil society groups are hoping that it would include poverty issues in the agenda. However, it is expected that the G20 will mainly focus on issues such as global imbalance and the current precarious exchange rate. In contrast, little will be dealt with the issues on development.
Recently, globalists came up with an idea of imposing taxes on global financial transaction. The so-called 'Global Financial Transaction Tax (FTT).' An FTT is a tax imposed on the global financial transaction to alleviate the poverty and preventing climate change. The tax will be at a rate of 0.005 percent which can produce more than $30 billion a year, roughly four to seven times the current level of overseas aid. People, who support FTT, argue that it can effectively raise funds to help indigent countries and at the same time have little side effects on the global market thanks to an extremely low rate of tax.
However urgent the situation may be ,though , an intensive research on the effects that FTT will cause must be conducted. Unlike the FTT advocates insist, FTT can interrupt the international market. Since the international market is based on free competition, a slight difference in prices can determine whether exporting companies can be successful or not. Even at a rate of 0.005 percent can be a burden to small companies and discourage them from entering the international market. Eventually it will enable existing, multi- national enterprises easier control to the global market.
On the other hand, FTT will only empower the international institutions. It is said that the money generated from taxes will go directly to World Bank and to other international institutions, not the developing countries to lower carbon emisssions or alleviate poverty. This can make global institutions easier to manipulate or intervene into domestic affairs of states, that are in desperate need of a capital. International institutions will lend money to states on a condition, which they think is a way to alleviate poverty. However, it has been empirically proved that measures reconmmended by economist in those institutions did not work in underdeveloped countries, because the economists had overlooked the differient situations in those countries and only followed the book. This approach may waste international aide. Also given the fact these institutions are mainly governed by people, who represent rich, western countries, it will only benefit the rich countries.
Even if global institutions were to help poor countries, the problem of distributing financial assistance to public still remains. Considering that many poor countries are ruled by a dictator, the FTT will enrich corrupt local dictators and their cronies. This is an empirical problem that are found in current Official Development Assistence (ODA) system. Even though failures have been found in the ODA system, insisting yet another assistance system without a resolution seem to be irrational. Before implementing the FTT, an intensive research should be done and authorities concerned should reflect the results in devising measures to solve the issue. The measures should focus on enhancing the direct accessibility to fund for the indigent people.
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