The Post Courier newspaper says the United States Embassy in Port Moresby has denied the US government will be funding the proposed Pacific Medical Centre, which is to be built outside Port Moresby.
When Health Minister Sasa Zibe announced Papua New Guinea government’s plans to build the K500 million ‘super hospital’ he claimed the project would be financed by overseas donor’s, principally from the United States. But those donors have all denied involvement in the project and now the US government has made clear it will not be bank-rolling the private hospital plan.
Meanwhile PNG’s Ambassador to the United States, Evan Paki’s assertions that the PMC concept is supported by Bill Clinton were proved to be false when former US President failed to make a promised announcement of funding at his recent Global Initiative meeting in New York.
Health Minister Sasa Zibe has also been exposed for misleading the public over the financing plans for the luxurious private hospital.
Zibe’s claims that no money would be diverted from funding for PNG’s dilapidated public hospital system were disproved when confidential documents surfaced showing Zibe had put a proposal to the National Executive Council that K230 million in loan funding from the Chinese government was to be diverted from support for public hospitals to part fund the PMC.
The PNG government has already provided K20 million from the public purse to support the PMC project. No details have been provided of how these monies have been spent.
The PMC project if opposed by most health professionals in PNG who say the hospital will only benefit a privileged few and the monies would be better spent on improving regional hospitals and rural health facilities that serve the majority of the population.
Villagers in Papua New Guinea’s Western Province are angry their government has allocated more than a million hectares of pristine forest for “special agricultural leases” – which they describe as a land grab for logging.
At a landowner meeting in Kiunga, Western Province this week, hundreds of disgruntled villagers said their land had been given away without any informed consent or notification.
Western Province now has half of PNG’s allocated 4.3 million hectares of “Special Purpose Agricultural and Business Leases”, after the government gazetted Tosigiba Timber group and North East Timber 1.25 million hectares on September 23 this year.
Last year, the government allocated 853,420ha to companies in the Western Province for special leases in areas such as the contentious Kamula Doso forest that has a court order preventing any forestry activity.
PNG’s build-up of “special leases” has enraged green groups, NGOs and numerous government officials concerned that PNG’s forests are under threat by oil palm or “logging by stealth”.
Western Province’s North Fly MP Boka Kondra, who addressed the landowners on Wednesday, says it is a grave concern.
“They are giving away the land but we don’t know what the future use is or the implications,” he said.
“It is a surprise to see this, I will talk to the ministers concerned to find a possible solution because a lot of people on their land will see this as taking it away.”
Western Province Land and Resource Owner federation Chairman, Paul Katut, said landowners had been duped.
“Its unprecedented the government gives one million hectares,” he said.
“We have members of the companies here that all say they didn’t agree to the deal.”
PNG’s Lands Department grants the “special leases” to companies to build, for example, oil palm farms, but in the past unscrupulous players have used the leases to bypass laws and cut down the forest, export the logs, and then leave.
Greenpeace forest and climate campaigner Paul Winn said increasing special leases was another example of PNG’s disregard for its purported climate change policy and indigenous people’s rights.
“These leases will never result in agricultural benefits to PNG they are just a way of sidestepping the logging laws,” he said.
PNG Agriculture Minister John Hickey and the Lands Department have refused to comment.
By Jujito Tubana
THE plan to build the Pacific Medical Centre is a waste of taxpayers’ money. As such, it should be withdrawn immediately.
My question is simple: “Why spend so much money to build this facility when all the main hospitals, rural health centres and aid posts do not have medicine or lack supply?
The Port Moresby General Hospital, the nation’s largest hospital, does not have the following:
- A properly equipped labour ward for expecting mothers;
- The emergency ward is a death trap as there are inadequate emergency facilities;
- There are not enough doctors and nurse on standby; and
- Many patients have died while waiting to be served.
We have to improve our current primary health care facilities before wasting money on such a facility which will only be used by politicians, businessmen, corporate clients and the rich.
Why build a state-of-the-art hospital when the majority of the population cannot afford to pay private clinic fees?
That money should rather be spent to improve and upgrade all major hospitals in PNG and improve rural health services.
The Prime Minister of Papua New Guinea stated in The National (11th October 2010) that the REDD+ approach that is being championed by his government is being undermined by the trading of forest carbon through the voluntary carbon schemes (VCS) in PNG.
He describes VCS as being risky and premature.
But how much truth is in what the PM said is anybody’s guess. The PM does not elaborate on the risks involved in the VCS, but the only cheap excuse given is that the VCS are thinly capitalised. The advantages of the VCS over a compliance forest carbon market are not discussed by the PM.
Moreover, the PM failed to admit that REDD markets for forest carbon exists under some VCS, but a compliance market for forest carbon does not exist at the moment and the likelihood of a world market for forest carbon through the REDD+ scheme is far from reality.
The sad fact is that countries in South America, Asia and Africa have gone into VCS, while we are the only ones that are still fighting to engage in a compliance market for forest carbon, which does not exist or is yet to materialise.
Therefore, one wonders why the PM, PNG’s climate change ambassador and the acting director of Office of Climate Change and Development (OCCD) are all hell-bent on a REDD+ carbon scheme under the compliance market.
The reason why the OCCD, the PM and our climate change ambassador are globe trotting on climate change and carbon trade issues is that they want some of that $4.5 billion (US) that has been earmarked for REDD+ projects in developing countries.
So far our negotiations have failed two times to access any international funding because PNG does not want any strings attached to these REDD+ funds.
However, the international community is aware of what is going on in developing countries and will not release any funds until stringent measures are put place by respective governments to protect the rights of indigenous peoples and their forest resources from carbon cowboys.
Earlier this year, the PNGexposed Blog published an article that accused the PNG government of trying to be the “ultimate carbon cowboy”.
Nupan Trading was in the spotlight and was seen as being the culprit in carbon trade deals in PNG, but the PNGexposed Blog article also put the PNG government in the spotlight.
This article has been widely read and circulated over the internet and there are now more suspicions about the PNG government’s moves to have customary landowners snub the VCS.
It makes one wonder whether the moves taken by the PNG government are genuine in reducing emissions from deforestation and degradation of forests and ultimately combating climate change, or, is the PNG government trying to blackmail the international community into giving us funds so that we can put them in our pockets; let alone pay for political stability to protect the so-called “national interest”.
At the moment VCS are legal in a sense that it is a business deal that can be struck between a customary land owing group and a carbon broker.
The government has no control over customary lands therefore it cannot decide which carbon market the customary landowners chose to trade their forest carbon.
However, the OCCD, as the mandated authority on climate change and carbon trade issues in PNG, can facilitate carbon trade business deals between customary landowners and carbon dealers under the VCS.
The only problem with carbon dealers in the VCS is the issue of “carbon cowboys”, but this problem should be addressed by the OCCD.
The OCCD should check on any carbon dealer’s records and give appropriate advice to customary landowners on the authenticity of the carbon dealer and whether his business interest is genuine and has integrity.
However, to date the OCCD has refused to have anything to do with VCS or issue carbon certificates.
The reasons given by OCCD for not recognising VCS in PNG and not issuing carbon certificates to Nupan Trading and other carbon dealers is the same as that given above by the PM.
Regardless of the reasons given by the PM and OCCD about VCS in PNG, these are business deals like any forestry and mining business deals and OCCD will have to cater for that.
But the position taken so far by OCCD and the PNG Government to snub VCS indicates that there is something fishy going on in terms of carbon trade in PNG, and it goes to cement the suspicion that the PNG Government wants to be the “ultimate carbon cowboy”.
One reason why the government wants customary landowners to snub the VCS is that it wants to keep all carbon credits from REDD+ for its own interest so that it becomes the one and only carbon broker in PNG.
Therefore, if the OCCD facilitates business deals between customary landowners and the VCS and much of the forest areas in PNG are registered under the VCS, there will be few or no forest areas left for the PNG government when an international agreement is reached after 2012.
The PNG Government wants to be the “ultimate carbon cowboy” in PNG so it is playing delay tactics to stall VCS in PNG and to maintain all forest areas for itself to have access to when a compliance market comes on after 2012.
The PM also stated that a climate framework was not yet finalised to protect and safeguard the interests of customary landowners dealing with carbon dealers under the VCS.
However, this is the cheapest excuse that can be given, and it insults the intelligence of people who are familiar with development of policies and legislations.
The issue of climate change has been around since the 1980s, and literature has built up immensely within science and policy domains in the last few years which are available and can be used to develop a climate change framework for PNG.
Thus there is no excuse for the OCCD to say that it has not produced a climate change framework for PNG as yet.
Two offices have preceded the OCCD, in which time a climate change framework should have been produced by now, and the civil societies in PNG have been constantly calling on the government to put in place legislation and policy for climate change.
Moreover, there is sufficient human resource within country that can be utilise by OCCD to draft a climate change framework, but it seems a few handpicked people are being used by the government to run the show so that some peoples’ vested interests are protected.
But since no policy or legislation has been developed for climate change in PNG as yet, it goes to show that the PNG government is deliberately avoiding the issue so that it does not put itself under any obligation to protect its indigenous people and their forest resources from carbon cowboys, of which the PNG government is one of them and the “ultimate carbon cowboy”.
Finally, a few years ago the PM was questioned on his family’s vested interest in carbon trade in PNG and the establishment of a pyramid structure that was establish within the Office of Climate Change and Carbon Trade (OCCCT) to deliberate on carbon financing.
Although time has passed and memories have faded, I am of the opinion that the pyramid structure that existed within OCCCT is still alive and exists within the OCCD and is just waiting to deliberate on any international funding on REDD+ that may come out from the $4.5 billion (US) earmarked for developing countries.
The citizens of Papua New Guinea have jokingly been comparing the state of their Nation with the corruption riddled dictatorship of Robert Mugabe in Zimbabwe for several years now and drawing parallels between the longevity of the reign of PM Michael Somare and the African state’s leader.
But the latest Corruption Perception Index published by Transparency Intenational actually ranks PNG twenty places BELOW Mugabe’s Zimbabwe.
The Index places Papua New Guinea in joint 154th place, alongside African countries like Central African Republic, Congo-Brazzaville and Guinea-Bissau, while Zimbabwe is ranked 134th.
You can view the full results here – Corruption Perceptions Index 2010
A collection of some of the world’s leading scientists have published an open letter (below) denouncing Rimbunan Hijau’s favourite lobbyist and spin doctor, Alan Oxley.
Oxley’s and his organiastions regularly publish reports defending RH and attacking its critics, but the scientists say Oxley “treads a thin line between reality and significant distortion of the facts” and many of his arguments “represent significant distortions, misrepresentations, or misinterpretations of fact”.
An Open Letter about Scientific Credibility and the Conservation of Tropical Forests
To whom it may concern:
As professional scientists employed by leading academic and research institutions, we are writing to alert the general public about some of the claims and practices being used by the World Growth Institute (WGI) and International Trade Strategies Global (ITS), and their affiliated leadership.
WGI and ITS operate in close association. ITS is owned by Alan Oxley, an Australian industrial lobbyist, former trade representative, and former Ambassador who also heads WGI. According to its website, ITS also has “close associations” with several politically conservative US think tanks, including the American Enterprise Institute, the Competitive Enterprise Institute, and the Heritage Foundation.
In our personal view, WGI and ITS — which are frequently involved in promoting industrial logging and oil palm and wood pulp plantations internationally — have at times treaded a thin line between reality and a significant distortion of facts. Specifically, we assert that:
- ITS is closely allied with, and frequently funded by, multinational logging, woodpulp, and oil palm corporations. The financial supporters of ITS include parent corporations producing paper and wood products under the aegis of ‘Asia Pulp & Paper’, among others.
- Alan Oxley and ITS have often lobbied in favor of Rimbunan Hijau, one of the world’s largest industrial logging corporations. Rimbunan Hijau has been repeatedly criticized for its environmental and human-rights impacts in Papua New Guinea.
- WGI frequently lobbies public opinion on the behalf of Sinar Mas holdings, a conglomerate of mostly Indonesian logging, wood-pulp, and oil palm companies that includes Golden Agri Resources, a Singapore-based firm. One of these companies, known as ‘SMART’, could face expulsion by the Roundtable on Sustainable Palm Oil, an industry-led trade group, for “serious non-compliance with the RSPO Code of Conduct” with respect to its environmental and social sustainability guidelines.
- In an interview with Malaysia’s The Star newspaper, in which he strongly advocated further oil palm expansion in that country, Mr Oxley refused to answer a direct question as to whether he or WGI was supported by the Malaysian palm oil industry. He dismissed this question as being “immaterial”. We believe that WGI’s financial supporters include many of the same industrial sectors for which WGI regularly advocates.
- While routinely accusing several environmental organizations and the Intergovernmental Panel on Climate Change (IPCC) of bias and scientific misrepresentation, WGI and ITS have, in our opinion, advanced a range of biased or distorted arguments themselves. For example, consider an ostensibly “independent” audit from ITS that sought to exonerate Asian Pulp & Paper from claims of illegal and damaging logging practices in Sumatra, Indonesia. This audit appears to be far from objective in scope, especially given the clear financial links between these two entities, which brings into question its claims to be “independent”. Among other claims, the ITS audit broadly understates the scope and gravity of forest loss and degradation in Indonesia, despite that nation having among the world’s highest absolute rates of deforestation and being ranked 7th worst out of 200 nations in terms of net environmental damage, according to a recent analysis. It also suggests that the palm oil and pulp and paper industries are not important drivers of deforestation and greenhouse gas emissions in Indonesia. Yet recent research has demonstrated that much of the oil palm expansion in Indonesia between 1990 and 2005 came at the expense of native forests (many plantation owners favor clearing native forests over already-degraded lands as they use revenues from logging to offset the costs of plantation establishment). Moreover, the rapid expansion of pulp plantations is a serious driver of native-forest loss in both Sumatra and Kalimantan, Indonesia.
- A recent technical report by ITS concluded that “There is no evidence of substantial deforestation” in Papua New Guinea, a conclusion strongly at variance with quantitative, remote-sensing studies of forest conversion published in the refereed scientific literature.
- Reports from WGI and ITS routinely claim that newly established oil palm plantations sequester carbon more rapidly than do old-growth rainforests. This claim, while technically correct, is a distraction from the reality that mature oil palm plantations store much less carbon than do old-growth rainforests (plantations store just 40-80 tonnes of biomass aboveground, half of which is carbon, compared to 200-400 tonnes of aboveground biomass in old-growth rainforests). WGI and ITS reports have also in our view dismissed or downplayed other important environmental concerns, including the serious impact of tropical peatland destruction on greenhouse gas emissions and the impact of forest disruption on threatened species such as orangutans and Sumatran tigers. Furthermore, WGI and ITS, we believe, have failed to recognize adequately that many forests of high conservation value are being destroyed and fragmented by plantation development — a process that is mostly driven by corporations, not small holders.
- WGI, ITS, and Alan Oxley frequently invoke “poverty alleviation” as a key justification for their advocacy of oil palm expansion and forest exploitation in developing nations, and it is true that these sectors do offer significant local employment. Yet forest loss and degradation also have important societal costs. There are many examples in which local or indigenous communities in the tropics have suffered from large-scale forest loss and disruption, have had their traditional land rights compromised, or have gained minimal economic benefits from the exploitation of their land and timber resources. Such costs are frequently ignored in the arguments by WGI, ITS, and Alan Oxley.
- One of the most serious misconceptions being promulgated by WGI and ITS in our view is that “two-thirds of forest clearance is driven by low-income people in poor countries”. In fact, the importance of industrial drivers of deforestation — which includes large-scale palm oil and wood-pulp plantations, industrial logging, large-scale cattle ranching, large-scale farming of soy, sugarcane, and other crops, and oil and gas exploration and development — has risen dramatically in the past 1-2 decades. These industrial drivers are largely responsible for the explosive expansion of roads in tropical frontier regions, which facilitates massive forest loss and degradation. Such industries and their lobbyists also create great pressures on the governments of developing nations to allow access to their lands and natural resources, both via legal and illegal means. Hence, a crucial and overarching cause of tropical forest loss and degradation today is rapidly increasing industrialization and globalization. We believe WGI either fails to comprehend, or is failing to convey accurately, the real and growing magnitude of industrial drivers as a threat to tropical forests.
While Papua New Guinea “is in no fit state” to receive international funds to stop deforestation and mitigate climate change because of continued logging and corruption, the United Nations has no such concerns and is preparing to sign off on over $6 million in funding.
The funding details are revealed in the UN-REDD PNG National Joint Initiative proposal (file size is 2.3mb)
The proposal grandly claims the US$6.38 million will ensure that “by 2013, PNG has an operational Measurement, Reporting and Verification system that enables the country’s participation in international REDD-plus systems to protect its environmental resources and contribute to sustainable livelihood practices of rural communities”.
Unfortunately the lengthy proposal contains no mention of continuing illegal and unsustainable logging, massive forest allocations for ‘agriculture projects’, PNG’s determination to lock indigenous people out of REDD negotiations or the massive corruption that plagues PNG.
Rather than endorsing demands for a moratorium on all deforestation, the tackling of corruption and illegal logging, as well as the protecting of biodiversity and indigenous peoples before giving any international money to the PNG government, the United Nations seems happy to endorse business as usual.
By Ilya Gridneff
Greenpeace has presented the Papua New Guinea government with a “Golden Chainsaw” for being greedy rather than green when it comes to tackling climate change.
Greenpeace gave the award to PNG representative Federica Bietta during climate change talks in Nagoya, Japan, on Monday.
Greenpeace said it chose PNG for the dubious honour for its continued corruption in the forestry sector, stalling UN talks on reducing climate change, disregard for indigenous people’s rights and rampant deforestation.
At the conference, Greenpeace released a 16 page report, PNG is not Ready for REDD, outlining its concerns that PNG is not ready for the complex UN plan known as Reducing Emissions from Deforestation and Forest Degradation (REDD), which seeks to abate climate change through a series of donor funded schemes with forested nations such as PNG.
Greenpeace has criticised PNG for being more interested in donor money than seriously tackling climate change.
“The PNG government is hungry for international funding from REDD but has no plans to stop destroying its own rainforest or reduce its own emissions” Greenpeace forest campaigner Sam Moko said in a statement on Monday.
Mr Moko, who is in Nagoya for the latest climate talks, said the PNG government could not be trusted to stop cutting down trees.
“How can the government be expected to enforce a sophisticated REDD program, which requires thorough monitoring of emissions from reduced deforestation, when it can not keep its own forestry sector under control?” he said.
Earlier this month, AAP reported that PNG’s prime minister and deputy prime minister were at odds with each other over controversial carbon trade schemes that have plagued their country with scandal.
PNG, with its massive forest coverage, has been at the forefront of the REDD debate but the country has been plagued by numerous corruption allegations.
Previous winners of Greenpeace’s Golden Chainsaw include Malaysian logging giant Rimbunan Hijau and numerous logging companies in Brazil’s Amazon forest and the Congo.
By Robin Lillicrapp
It sounds very much like the Pollies who originated this [super hospital] project have been rebuffed as to their earlier search for funds.
Now, to save face, they are obstinately pursuing their illogical and potentially parasitical dream.
Who is to pay for this mess. Why, PNG taxpayers, of course. As other contributors have said, through siphoning off funds necessarily earmarked for maintaining already depleted regional services.
It’s all an insanity that demands a facility separate to PMC to treat its dumb stupidity.
As to why PNG leaders are pursuing such a course, it pays to note the relevance of history. My guess would be that Waigani intend to build this albatross and then flog it off to private investors.
Greg Palast in a recent article pursues solutions to the money madness that grips nations the world over as ordinary citizens stagger beneath the load of debt obligation imposed upon them without any real degree of informed consent:
“Remove the Bloodsuckers” TheExcavator May 8, 2010
The solution to the Greek crisis and the global debt crisis, is simple according to investigative reporter Greg Palast. In his 2001 article called “The Globaliser Who Came In From The Cold,” Palast suggests that we should “remove the bloodsuckers,” who are the global financial wizards that work at the IMF, WTO and the World Bank and practice the art of dark finance.
Palast details the step-by-step plan of how these transnational economic parasites bring entire nations to ruin, which he learned after he gained a hold of some precious World Bank documents that laid out the banksters’ game-plan of how to harness the financial will of sovereign nations and use it against them. Palast also talked with Joseph Stiglitz, the former Chief Economist of the World Bank and a Nobel prize winner, for the piece.
Step one, Palast recounts, is ‘Briberization,” and it involves the criminal global financiers paying national leaders of poverty-stricken nations hefty amounts of dough for the direct sale of public assets to oligarchical corporations and private foreign banks. All the illegal dough of the traitorous leaders is then safely stashed in secret Swiss bank accounts, miles and miles away from the nation’s angry citizens whose livelihoods and incomes are stripped in the process.
Step two is what is referred to as the “Hot Money” cycle by Stiglitz. This is how the cycle works, as described by Palast, “Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.” Step two is mainly about hijacking of pension funds, gutting employment benefits, and other social safety nets that people work all their lives for.
To put it another way, the criminal oligarchic parasites hypnotize a nation to sleep, bend it over, strip it of its clothes, and then rape it. That is the way the secret relationship works behind doors. The transnational banksters are all about economic rape. Rape of public assets, rape of pension funds, rape of electrical and water systems, rape of currencies, rape of everything that secures nations and keeps them alive.
And when the nation finally wakes up late in the afternoon, it realizes that it was robbed deaf, dumb, and blind the night before. It also discovers that it acquired an economic STD, so the pain has only begun and recovery is far from sight. An even bigger revelation awaits the nation, which will cause panic in the streets, and thrust the nation further into the economic abyss.
The people then begin to find out that the vampires from the IMF and World Bank never left the night before, they were hiding in the nation’s economic closet, where they’ve patiently waited to put the third step into effect, which is a sharp rise in food and gas prices, and other commodities that keep a nation running from day to day on an even keel. This step eventually leads to what Palast calls “Step-Three-and-a-Half,” and what Stiglitz brands as “The IMF riot.” It is attributed to the IMF because they basically engineer the collapse through their crippling policies and proposals for social spending cuts, which create the conditions for riots, public rage and civil unrest.
We are all familiar with the images from these riots around the world, they’ve taken place in Indonesia, Argentina, and now were seeing them in Greece. They include burning buildings. Streets in mayhem. Thuggish Stormtroopers protecting the Capitol and beating kids. Old and young fighting back with pots and pans. Entire roads up in flames. Palast writes:
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and teargas) cause new panicked flights of capital and government bankruptcies. This economic arson has it’s bright side – for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.
The fourth and last step is called “poverty reduction strategy” by the World Bank/IMF, or if you don’t like the Big Brother coinage, the more apt term is “monopoly market politics.” People often mistake this last step with free trade policies, but one important thing to keep in mind, as Palast says, is that this is “free trade by the rules of the World Trade Organization and World Bank,” in other words, it is corporatist-monopolist trade in the guise of free market capitalism.
Speaking to Alex Jones in March 2002 about the article, Palast said that the IMF/World Bank/WTO policies amount to “systematically tearing nations apart.” The global economic illusionists have done it to African and Latin American nations, and now they have their bloody, slug-infested eyes set on European and North American nations.
And the economic parasites never have new tricks up their sleeves, but everywhere their tricks work exactly the same, because they’re usually backed up by military muscle, so you’re condemned to believe in them, or face death. But not everybody believes in them. Certainly not Venezuela. They showed them the door. With guns, of course. But guns need not be involved.
Recently, Germany, America, England, and France supported the IMF’s call for a global bank tax, which would be dedicated to a fund that would secure the payment of future bank bailouts. Canada is the only nation in the Western hemisphere to oppose the tax. But it is not the only nation in the world. Brazil, Japan, Switzerland, and Australia are also voicing their dissent.
Simon Nixon writes in The Wall Street Journal that the proposed IMF bank tax doesn’t address structural problems within the global financial system, and should not be implemented. He further says:
But while taxing the banks may be a legitimate way to raise revenue, the IMF is on weaker ground with its claim that its proposed taxes directly address weaknesses in the global financial system exposed by the crisis. It argues that its proposed Financial Stability Contribution (FSC) would charge banks for the cost of implicit government guarantees by levying a fee on their liabilities less their equity and insured deposits, similar to the Obama administrations proposed bank-liability tax. The IMF recommends the money raised goes into a fund to cover the cost of future bailouts. Aware such a fund could encourage banks to run bigger risks, the IMF says governments must also introduce special resolution regimes allowing regulators to seize and restructure failing banks.
The IMF is also proposing a Financial Activity Tax (FAT), which would tax bank profits and banker pay as a way of keeping a lid on bonus payments, or what the IMF calls “excessive rents.” This would be similar to one-off taxes introduced this year by the U.K. and France in response to public outrage over this year’s giant bank bonuses.
But these proposals address only the symptoms and not the cause of the financial crisis. The real challenge for policy makers is to eliminate altogether—or at least minimize as far as possible— the implicit government guarantees that fueled excessive risk-taking in the boom and reduce the systemic risks posed by the failure of large banks that have left taxpayers in this crisis saddled with such huge bills.
That can only be done by much higher capital requirements and radical structural reform. The IMF is right to point out that higher capital requirements are themselves a form of tax. Indeed, from a macroprudential point of view the two approaches may achieve similar outcomes. But taxes don’t provide the same incentive for institutions to avoid excessive risk taking.
Allister Heath,( author} has similar complaints about the IMF proposals. He writes:
There is a vital distinction between asking banks to pay a fee to finance this wind-down fund – and telling them the cash will be used for future bailouts, which would fuel more moral hazard. A related, crucial reform would be to set-up automatic procedures for the private sector to recapitalise troubled banks; this would allow bail-ins, as opposed to bail-outs. Banks could issue contingent convertible securities (CoCos); these debt instruments would convert to equity if capital ratios fell below an agreed level. Ordinary debt could also be turned into equity if a bank were to run out of capital. These ideas would transform banking, make it more market-based, introduce incentives to control risk and protect taxpayers. It is a tragedy the IMF and politicians are so obsessed with taxing everything that moves that they are incapable of a grown-up debate.
A democratically mature reform would include smart regulation of credit and financial institutions, the reintroduction of public banking, the reduction of public subsidies to undeserving corporations and banks, the reinstatement of the principles of free economic competition, and lastly, the termination of the IMF, World Bank, and WTO, i.e. the “bloodsuckers,” whose agenda is to establish an oligarchical grip on nations and peoples, and deprive them of all prosperity, as well as economic and political independence.