As leaders of the world’s largest economies gather today in Pittsburgh for the Group of 20 meeting, people in the world’s poorest countries will likely look on with a mix of hope and trepidation, wondering whether their needs will figure in the deliberations at all. The G-20 nations could help both the poor and the global economy by fully financing lagging efforts to fight poverty and disease worldwide, and the best way to do this would be to impose a very small tax on the prosperous foreign exchange industry.
The eight United Nations Millennium Development Goals — which include eradicating extreme poverty and hunger, establishing universal primary education, reducing child mortality, improving maternal health and combating AIDS, malaria and other diseases — are meant to be reached by 2015. Morally and practically, the world must try harder to keep these promises. President Obama has made it clear that the United States has, in his words, “a responsibility to protect the health of our people, while saving lives, reducing suffering and supporting the health and dignity of people everywhere.”
Disease takes an enormous toll on economic growth: it sidelines or kills productive workers and causes tremendous suffering. Take, for instance, tuberculosis, an illness that with the right treatment can usually be cured. In 2007, it killed nearly 1.8 million people, more than 600 times the number who have died from H1N1 swine flu. The World Bank estimates that tuberculosis has caused the gross domestic product in some countries to fall as much as 7 percent.
Or consider maternal health. About 530,000 women worldwide die each year from pregnancy-related causes, most of them preventable, and millions more suffer injuries or develop lifelong disabilities. A serious effort to reduce those numbers would bring real economic gains. Improvements in the health of Asian women and children accounted for a significant share of that continent’s economic growth from 1965 to 1990.
Unfortunately, though, there is an enormous shortfall in the level of outside aid needed to reach the goals the world has set. Donor countries, including the wealthiest of the G-20, are providing only 0.3 percent of their combined income in development aid. Although the donor countries have made commitments to provide more money, they are not giving it fast enough to tackle runaway health problems, including the emergence of drug-resistant pathogens that threaten people across the globe.
The one untapped source that could easily provide the amount of money needed is the foreign currency market, which handles almost $800 trillion in trades annually, all of which is untaxed. A tiny levy of 0.005 percent on transactions involving the world’s most traded currencies — the dollar, the euro, the pound and the yen — would raise more than $33 billion annually for development, while not hurting the market or affecting the average international traveler.
The tax could be collected automatically by the computer system that handles foreign exchange transactions — so it would be easy to put into place, and impossible to evade. And because not all currencies would be taxed, only the countries whose currencies would be affected would need to consent. France already supports the idea, and Chancellor Angela Merkel of Germany has signaled her willingness to consider it.
We have already seen what innovative taxation can do to save lives, with sufficient political will. Since 2005, France and 10 other countries have collected a small tax on airline tickets (in France, it amounts to only $1 to $5 per ticket). And this has, without hurting the airline industry, raised about $700 million — enough to finance three-quarters of the AIDS treatment now being received by the world’s H.I.V.-positive children. Unitaid, the international organization that I lead and that manages the money from the airline tax, has also been able to negotiate 50 percent to 60 percent reductions in the price of pediatric anti-retroviral drugs in low-income countries.
How should the proceeds of a foreign exchange transaction tax be managed? One model is the Global Fund to Fight AIDS, Tuberculosis and Malaria, which holds medical programs in more than 100 countries to high performance standards, and can withhold financing when money is not used properly.
The banking industry has so far managed to keep currency trading untaxed, but this industry, which has so recently been dependent on government aid, has a duty to give back. President Obama has reminded Wall Street leaders about what he called their “obligation to the goal of wider recovery, a more stable system and a more broadly shared prosperity.” The same principle applies internationally. President Obama and other G-20 leaders should harness the mighty foreign exchange market in the service of better health for all.
Philippe Douste-Blazy, the French foreign minister from 2005 to 2007, the chairman of Unitaid and a special adviser to the United Nations secretary general on innovative financing.