Democratic Economics and Improved Governance: Development Policies for the G20

David Mayer-Foulkes

No DTE 487, Working Papers from CIDE, División de Economía

Abstract: Democratic economics and improved governance can be guiding principles for the newly formed G20, representing two thirds of the world's population and 88% of the world's economy. To get economies to work for the majorities it is necessary to balance free market policies with global and national governance. Huge corporate profits 'based on huge market power' produced a savings glut that could not be invested and led to the 2008 crisis. Investment needed publically provided complements that were not available, such as health, education, infrastructure, urban development and technological, including green, innovation. In 2010, investment demand continues to be low (witness the low level of long-term interest rates). Neither stimulating consumption nor lowering interest rates work to increase global corporate investment. Instead, what is needed is funding indispensable public investments. Meanwhile, on paper, one quarter of FDI inflows and stocks were held in small island tax havens in 2009. Effective taxation of multinational corporations, in proportion to value added at point of final sale, can finance economic development, eliminating distortions between domestic and international production, and democratize and revitalize the economy. Global governance capable of regulating transnational corporations is essential, for example, to reduce non-communicable chronic disease health risks whose costs are projected to rise above retirement costs: cardiovascular disease, cancer, chronic respiratory disease and diabetes, mainly caused by transnational promotion of poor nutrition, alcohol and tobacco. Improving global governance is impossible without promoting national governance quality as well. For example, infrastructure investments could be paid for directly by firms as a form of tax payment, reducing government administrative costs and corruption.

Keywords: free market policies; democratic economics; improved governance; taxation (search for similar items in EconPapers)
JEL-codes: F42 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2010-03
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