From Poverty to Power Green, Oxfam 2008 - weman

FROM POVERTY TO POWERthe USA is currently racking up huge debts due to large fiscal andtrade deficits and is covering them by borrowing some $2bn a day,largely from developing countries running surpluses, notablyChina. 43 In a highly risky ‘mutual hostage arrangement’, any majorshock or loss of confidence in the US economy or in the dollar coulddevastate both the USA and China and other Asian economies (whichwould see their dollar reserves fall in value).So far, in a warped mirror image of events after the Asian financialcrisis of the late 1990s, wealthy companies are snapping up assets in‘fire sales’ of distressed companies. But whereas in 1998 it was NorthernTNCs buying out companies in Indonesia, South Korea, and othercrisis-hit economies, in 2008 it was the ‘sovereign wealth funds’ ofdeveloping-country governments (mainly oil producers and Asiantigers), using their estimated $2.9 trillion in assets to bail out strugglingNorthern companies on Wall Street and beyond, and in theprocess gaining significant degrees of ownership and control. 44However, beyond this interesting exercise in role reversal, shouldthe feared recession finally break in the North, developing countriesare likely to be hurt too. Although in some ways they are less vulnerable– growth in the larger developing countries is primarily in the domesticeconomy rather than being export-driven, which means that commodityprices are likely to stay high even if the US and Europeaneconomies slow – many smaller developing countries still depend onexports to (and capital flows from) the USA and Europe. Financial‘contagion’ could infect developing-country banks and financecompanies. Historically, each new crisis is unpredictable and exposesa new source of instability – and the most vulnerable countries, andthe poorest communities within them, are unlikely to escapeunscathed.TAXATIONA major component of capital flows that cries out for effective regulationis tax evasion and avoidance. Put simply, the developing world is missingout on an estimated $385bn a year (five times the volume of globalaid) due to the evasion and avoidance of existing taxes. This happensthrough a number of mechanisms: 45314