The Financial Transaction Tax: Globalization's Payback Time for the World's Poor

Last year, UNITAID released a study that demonstrates exactly what a country would need to do to implement an FTT. The study found that the introduction of such a tax on a national basis should have no significant negative impact on national financial markets.
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FILE - In this Aug. 1, 2012 file photo, specialist Peter Giacchi looks at the price of Knight at his post on the floor of the New York Stock Exchange. Knight Capital announced Monday, Aug. 6, 2012, that investors have agreed to supply it with $400 million in financing, which would help the trading firm stay in business after last week's disastrous software glitch that shook U.S. stock trading and jeopardized its future. (AP Photo/Richard Drew, File)
FILE - In this Aug. 1, 2012 file photo, specialist Peter Giacchi looks at the price of Knight at his post on the floor of the New York Stock Exchange. Knight Capital announced Monday, Aug. 6, 2012, that investors have agreed to supply it with $400 million in financing, which would help the trading firm stay in business after last week's disastrous software glitch that shook U.S. stock trading and jeopardized its future. (AP Photo/Richard Drew, File)

For the first time since the economic crisis began, the last United Nations General Assembly offered real hope for those that wish to put an end to global poverty.

Every General Assembly since 2008 has heard the same, now familiar refrain: With an ailing global economy, we might not attain the eight Millennium Development Goals (MDGs), a set of ambitious poverty eradication targets agreed to at the 2000 General Assembly. In order to meet these goals by the deadline in 2015, developed countries need to increase their foreign aid. Yet the Organization for Economic Cooperation and Development (OECD) reported that foreign aid from the richest countries dropped in 2011 -- the first time since 1997. In today's environment, could we honestly expect a Greek or Spanish Member of Parliament to vote for an increase in foreign aid?

Last UN General Assembly heard a different refrain. In his first speech to assembled world leaders, French President Francois François Hollande called on countries to "globalize solidarity" and implement a global Financial Transaction Tax (FTT).

For the past few years, civil society groups have pushed for such a tax to limit high-volume trading and financial speculation while creating more resources for fighting poverty. This summer France implemented the first post-crisis FTT, after it was introduced into French tax regulation by the previous government of President Nicolas Sarkozy. This FTT levies a 0.2 percent transaction tax on share purchases and according to the French parliament, should raise around $2 billion a year. President Francois Hollande actually doubled the levy that his predecessor had proposed.

In a groundbreaking move during his General Assembly speech, President Hollande announced that a part of the FTT's revenues will be allocated to development aid. The French President should be praised for this extraordinarily brave step, for it offers a solution to a problem that is a danger for all citizens of the world.

After all, more than two billion people live on less than $2 a day and lack access to the most basic global public goods -- nutrition, sanitation, education and health. Foreign aid is instrumental in helping developing countries to provide these services. This is not just about aid dependency. Countries like Rwanda and Ethiopia are on track to meeting some of the MDGs because of a partnership between local poverty eradication programs and foreign aid.

Unfortunately, the economic crisis means millions more forced into grueling poverty as foreign aid dries up and economic growth slows down. If Europe and North America are paying for the crisis in deficits and persistent unemployment, the world's poorest pay with lives lost. Such global inequality can only lead to increased conflict and unrest.

Eleven other European countries have indicated that they will press forward with a FTT, set up under the European Union process of "enhanced cooperation." If they do so, they could generate over $30 billion a year. Such resources could go a long way in plugging the holes in declining foreign aid.

Luckily, there is already proof that globalization can give back to the global poor through small levies on transactions. It is called UNITAID, the global health organization I chair. President Hollande said it himself during his General Assembly speech, calling the FTT the "next step" after UNITAID's success.

UNITAID has raised over $2 billion over the last six years through a small levy on air tickets in nine countries, including France, Chile and South Korea. UNITAID uses this secure line of funding to negotiate the best prices for quality tests and treatments for HIV/AIDS, malaria and tuberculosis. Today, eight out of ten HIV-positive children have access to life-saving treatment because of UNITAID's intervention in the pediatric HIV market.

These "market interventions" embody a new model of development cooperation. UNITAID enables low-income countries to purchase cheaper life-saving medicines from a wide range of generic makers that entered the market directly as a result of UNITAID interventions. These medicines include formulations specifically made for poor settings, like easy-to-take HIV medicines that don't require refrigeration for use.

This unique business model -- coupled with a novel funding mechanism -- has turned UNITAID into a veritable laboratory of innovation for the world's poor.

These successes can be replicated. Last year, UNITAID released a study that demonstrates exactly what a country would need to do to implement an FTT. The study found that the introduction of such a tax on a national basis should have no significant negative impact on national financial markets.

Now that the FTT has become a reality in France, there is now a historical opportunity for the international community to join forces. The successful "Robin Hood Tax" campaign shows that an FTT has enormous grassroots support around the world. France's leadership shows that an FTT is perfectly feasible.

European leaders must continue their push for a Europe-wide FTT. Importantly, European leaders must learn from UNITAID's successes and insist that over 50 percent of the proceeds of an FTT are allocated to poverty eradication.

Through this, we can truly globalize solidarity for the world's poorest.

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