Is Trump threatening development?

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The world's developing countries mainly owe their debts in dollars. Trump is, however, making it harder for them to earn dollars, and is trying to inflate the dollar's value. The result will be massive poverty.

This is the audio version:

And this is the transcript:


Is Trump threatening development?

What I mean by asking that question is, is Donald Trump's economic policy likely to harm many of the developing countries in the world at cost not just to them, but also to us. Because if they are in trouble, so are we. Let me explain.

For a very long time, a large part of my work was focused upon the needs of developing countries with regard to taxation. It still does to some extent. Very recently, I've been working on a series of videos on how to improve the quality of tax administration in developing countries. And that focus remains to me a matter of priority.

Around the world there are too many countries which are unable to provide opportunities to the incredibly able people who live there. Very often, they're denied that chance to provide that opportunity because the world's economic system is stacked against them. There are some particular ways in which that happens.

Firstly, tax revenues are denied to them because of the operation of tax havens, places that could not exist without them the existence of the Big Four firms of accountants, KPMG, EY, Deloitte, and PWC, who provide the underpinning architecture of this system of abuse that is supported by countries like the UK and the USA.

Secondly, tax systems of the world are also biased against developing countries because corporations tend to pay their taxes in the countries where they are headquartered and not in the places where they actually generate much of their profit. And, of course, many companies generate their profits in developing countries because they extract raw materials from those places.

But that's not the only way in which the bias takes place. Very often, developing countries need capital to develop, which is finance, in other words, and it's lent to them either by countries or by international development agencies like the International Monetary Fund or the World Bank, and very often, the loans are denominated in dollars.

This is particularly important at this moment. If a country borrows in dollars, and it has to repay its debt in dollars, and it has to pay the interest in dollars, it has to be able to export its goods and services or its people - and I do literally mean is people - to generate the dollars in question because its own currency can't be used to service its debts. It does that by having to export more than it can consume itself. Therefore, there is an inherent bias against income growth in developing countries because of the dollar denomination of debt.

This is also why so many people leave developing countries to live in places where dollars or pounds or euros and the equivalent currencies can be generated and then sent back to their home territory, where that currency is valuable. They are, in effect, an export of that country used to repay its debt by the remittances that they can make from the places where they work.

We are, therefore, imposing massive cost by requiring that debts from these countries be repaid, particularly in dollars.

That literally prevents the development of their markets because they are fleeced of the goods that they produce before they ever have a chance to maximise the return on them to service their debt obligations.

And now Trump is trying to inflate the value of the dollar. The tariffs that he is imposing are doing two things.

One, it's going to make it harder for those developing countries to sell products in the USA to generate the dollars they need to service their debts. And that is obviously deeply prejudicial to their best interests.

And secondly, Trump is trying to increase the value of the dollar through the use of tariffs. And therefore, it becomes harder for them to actually service the debt because, relatively speaking, its increasing in value.

And at the same time, because those tariffs are likely to create inflation in the USA, the U.S. Federal Reserve, who are in open warfare with Trump at present, are expecting to keep interest rates high to try to control that inflation, and those interest rates are therefore also compounding the problems of debt payment from developing countries.

Everything that Trump is doing is, therefore, stacking the system against developing countries right now.

This is going to mean they are going to become increasingly indebted. More will face the risk of default, and more people will want to leave those countries because they quite reasonably see no hope there but also see that they need to leave, especially if they're young people, to generate an income in a country like the UK or the USA, which is trying to deny them access, so that they can generate the currency that is needed to service the debts of the country in which they live, by sending remittances back to their families, who then spend them into their economy, which then services that debt.

We are living in a vicious cycle that is, as a consequence, bad for developing countries; is terrible, frankly, for the USA because it's going to face an economic crisis as a consequence of all of this, and bad for us because migration is actually being imposed on developing countries, for economic reasons, because literally people in those places have no choice but migrate to earn foreign currency to service the debts that their countries face.

This situation could be changed. It would be easy and straightforward. We could denominate the debts of these countries in their own currencies. We could let them pay whatever it is that they use in their local economy for the payment for goods and services, taxation, and so on. That would then mean that the world's economies would need to buy their currencies. They would need to sell into those countries. They would need to get the economies of those countries to grow to service the debts. And those debts would then be manageable because they would be denominated locally.

Of course, there's a risk in this. The risk is that some of those countries would become irresponsible. One or two will. It always happens around the world at any point in time, but overall, we'd actually create more economic stability because the impact of one person pursuing mad economic policies in the USA would not threaten the well-being of billions of people around the world by imposing additional costs on them through increasing their debt obligations which then destabilises the world by requiring migration, the suppression of income in developing countries, the encouragement therefore of extreme poverty in some cases in those places, and the denial of all the facilities that most people would expect, including education, health care, and so on.

Trump Is a threat to developing countries, but indirectly, he's a threat to all the countries in the world because of the instability that follows from his policies.

We need to address this. We need to address it fast. And we need to find a world economic order that ensures that we can all share this planet together. Because right now, we're a very long way from that.


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