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Europe’s approach to development could be characterized as energetically tackling the symptoms of poor economic opportunities for developing countries by providing substantial and effective aid, while doing relatively little to tackle the underlying structural causes of poverty.

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An interesting Economist article about the uses of prizes to promote innovation is a missed opportunity to explain the economic logic of prizes for innovations for developing countries. The reported comments by Tachi Yamada at the Gates Foundation about the value of market success do not seem to take account of the shortcomings of the system of patents and markets when it comes to developing drugs for diseases that mainly affect developing countries, nor to the problem of ensuring access in developing countries for new drugs.

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It worries me that people who are interested in reducing world poverty leap so readily on the Tobin Tax bandwagon.

There are three questions to answer:

  • should we spend more on reducing global poverty?
    (my answer: yes, if we have to)
  • should we tax transactions in financial markets?
    (my answer: maybe, though I am not persuaded)
  • should we link aid budgets to revenues from such a tax?
    (my answer: definitely not)

My answers are explained below the fold.

I can see why some people are attracted by a combination of extra money for the world’s poor and a poke in the eye for the unacceptable face of capitalism.  But to support the Tobin Tax on these grounds is at best opportunism, and at worst reveals a hostility to the functioning of markets which will, in the end, not serve the poor.

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About Owen

Owen Barder is the Europe Director at the Center for Global Development. He writes here about development, economics, politics, computers, running, and anything else that interests him. He also hosts Development Drums.


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