There will be some form of taxation on international financial flows in the near future. Japan, France and Belgium announced their support for it today at the UN Millennium Development Goal Summit. Billions of dollars will be raised. What should be done with that money? That question behind a meeting I organized last week in Paris of a leading group of Global Action Networks (GANs) and the Permanent Secretary to the Leading Group on Innovative Financing for Development (LG).

I introduced blog readers to the LG last May. Founded in 2006, it comprises 61 nations plus some NGOs. The LG is not a funding mechanism in itself. Rather, participants set up funding mechanisms to funnel new funds, such as they have done with UNITAID to fund the Global Fund to Fight AIDS, Tuberculosis and Malaria. The LG is the forum where Japan, France, Belgium and others developed the financial tax flow proposal. Japan is current President of the LG, France permanent Secretariat of it, and Belgium is EU President. They presented their case for a tax on international financial flows in a report

Important goals for the LG are:

1. Addressing negative externalities of globalizations…the bad outcomes
2. Funding “development” which refers to the North-South aid tradition
3. Raising funds that are (a) new, (b) of significant volume, and (c) stable and predictable.
4. New funding that comes from those who benefit from globalization.
5. Funding of the Millennium Development Goals (MDGs), with health being an historic focus and MDG education being the next priority

The broad frame for the LG’s work is global public goods production:

…public goods are those that share two qualities—non-excludability and non-rivalry, in economists’ jargon. This means, respectively, that when provided to one party, the public good is available to all, and consumption of the public good by one party does not reduce the amount available to the others to consume. Traditional examples of national public goods include traffic control systems and national security—goods that benefit all citizens and national private actors but that none could afford to supply on their own initiative.[1]

That’s what the GANs are producing. Those at Paris included the Fair Labor Association, Transparency International, ISEAL Alliance, Social Accountability International (SAI), Forest Stewardship Council, and Fairtrade Labelling Organizations International (FLO) the Global Compact also was a supporter. The Global Reporting Initiative, the Extractive Industries Transparency Initiative and The Access Initiative were keenly interested. These GANs are all giving life to standards (social norms and voluntary rules) that:

1. Optimize the positive impacts of expenditures such as those associated with the MDGs,
2. Address negative externalities of globalization,
3. Support more equitable development globally,
4. Work for an environmentally sustainable future,
5. Develop sustainable wealth generation; and
6. Nurture greater social cohesion – developing positive relationships between organizational sectors, across national boundaries and among diverse cultures.

Global Action Networks Addressing Globalization’s Bads

The GANs are doing the heavy lifting of defining, experimenting with, refining, and applying standards in the public interest. They are doing this in the very demanding cross-national boundary space, where there is no government authority. They are proving increasingly influential in governments’ mandatory standards. But they are anorexic – the needs and expectations far outstretch their resources.

So will the LG’s work like that with finance flows produce financing for GANs? SAI’s Alice Tepper Marlin made an insightful observation when she commented that the LG appears to be focused on only one half of the needed paradigm shift: how to raise money for global public goods. It appears that there is not sufficient attention to, and obvious financing for, efforts to ensure the effective use of those funds in ways that address underlying causes of the MDG challenges.

The GANs concluded that more investigation is needed, to see whether support can be built in the LG for their role in global public goods production. One hopeful sign is that the major conduits of funding to date with the LG focus on health care are GANs – The Global Fund to Fight AIDS; the Global Alliance for Vaccines and Immunization; the Global Alliance for Improved Nutrition; the Stop TB Partnership. This suggests that there is indeed recognition of the importance of applying funds through multi-stakeholder initiatives, rather than simply through governments and contracts with for-profit businesses.

Another hopeful point is the experimental, action learning nature of the LG itself. It is not burdened by the intergovernmental organization tradition of majority or consensus decision-making. Rather, if a country or small group of countries want to get together to investigate and advance an action, they do so. For example, the international financial flows tax will not be applied by all the LG countries or even a majority of them. The experiences of that group then are used by others to smooth broader adoption. That way of working means that if the GANs can obtain support of one or a few countries to create a Working Group, they can advance a strategy to provide them funding.

Realizing financial support for GANs appears to require 18 months or more of work. Paris meeting participants decided to pursue their investigation by getting more information from current participants in their networks; as well, with the same objective FLO’s Adrian Sym will attend the next meeting of the LG plenary in Tokyo Dec. 16-17.