Edited by Trevor Hopper, Mathew Tsamenyi, Shahzad Uddin and Danture Wickramasinghe
Chapter 3: The Role of Rich Countries in Development: The Case for Reforms
Alex Cobham and David McNair* INTRODUCTION The aims of the chapter are to identify how many issues in LDCs such as governance, corruption, capital shortages and environmental degradation are exacerbated by financial policies and practices in rich countries, and to examine the case for necessary reforms in rich countries to ameliorate this. The chapter sets out the key obstacles for development which stem directly from the financial, accounting and tax policies pursued or promoted by rich countries. Most of these relate to the problem of illicit flows, which are estimated to dwarf aid received by a factor of eight or ten to one. Poul Engberg Pedersen, the Norwegian minister who opened the first World Bank conference on illicit flows in September 2009, lamented that donors tended to reverse the equation, and spend – at the very best – just one-eighth or one-tenth of the resources on illicit flows that they devote to aid. In the following sections we will survey evidence on the damage caused to development by financial opacity and other results of rich country policies, and then address the major policy areas in turn and consider the main options to remove the obstacles to poverty eradication. The first section summarizes evidence on the damage done, starting with the leading assessments of total illicit flows and then assessing the impact in four key areas: taxation systems; corruption; global financial instability; and environmental destruction. The second and third sections of this chapter focus on two key areas in which rich country policy...
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