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Hillary to World Leaders: Time for the Rich to Pony Up Their Taxes

“You know I’m out of American politics, but it is a fact that around the world, the elites of every country are making money," the secretary of state told those gathered at the Clinton Global Initiative.
 
 
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Photo Credit: Clinton Global Initiative

 
 
 
 

This piece has been updated.

NEW YORK, N.Y. -- Secretary of State Hillary Clinton's address on Monday to the Clinton Global Initiative, the organization founded by her husband, former President Bill Clinton, illuminated changes in international development and how they fit within the tumultuous changes on the streets and in the governments of the Middle East and North Africa. 

Pointedly noted among her goals for fueling development is getting governments to collect taxes from their wealthiest citizens.

Given the recent focus in the U.S. presidential race on whether the wealthy are taxed enough, and Democratic pressure on Republican candidate Mitt Romney to release more of his tax returns, the secretary of state quickly noted, "You know I'm out of American politics...," a remark that drew applause from the audience.

"There are rich people everywhere," the secretary continued, "and yet they do not contribute to the growth of their own countries." The "elites," as she called them, are not supporting the fundamental building blocks of society, such as building schools and infrastructure she added. 

President Clinton's efforts to effect positive development involves engagement of the corporate world in tandem with non-governmental organizations that focus on development. CGI's annual general meeting, underway in New York to coincide with the United Nations General Assembly, brings together world leaders, corporate CEOs, and leaders of non-governmental organizations focused on development work.
 
The secretary of state’s keynote was about changes underway and those she she sees as necessary for development.
 
Secretary Clinton asserted that changes afoot in the ways international aid is used present exciting possibilities for development to assist democratic ideals taking hold in prosperous societies.  
 
“[T]oday, with so many other resources flowing into developing countries, development assistance can and should play a different role,” Hillary Clinton said. “We have to think differently about how it fits into a more dynamic economic picture, and how it can be a catalyst for economic growth and self-sustaining progress.”
 
Partnering with business
 
The only way for the development industry to put itself out of business is to sustain efforts, not to work for immediate results. Donors are as dynamic as recipient nations. Countries that once relied on aid are now donors assisting other countries. Perhaps because the CGI audience is predominately corporate, the way forward for development according to Hillary Clinton, is with new partners. 
 
The challenge, she said, is to “change ourselves to keep pace with events, while staying true to values.” Raising the old development axiom that development's ultimate goal is to put itself out of business, i.e., fulfill the world's social, health, economic, agriculture, infrastructure and governance needs, Clinton highlighted changes she has implemented at the State Department. 
 
As an example, she spoke of the Obama Administration’s support, under her guidance at State, for a Korean garment company that wanted to open a factory in Haiti -- an idea she said was deemed controversial by development professionals. And as she often does, Secretary Clinton cited the entry of women into the workforce as an important force for economic development.
 
“Today, that factory has 800 employees, most of them women who have never had a formal sector job before,” the secretary said. “Many are graduates of a new vocational training center nearby. By the end of the year, Sae-A will nearly double their employees, and they’re on track to reach their goal of creating 20,000 jobs by 2016.” In addition, Clinton noted that the factory was the catalyst for the building of a power plant and an office park in which a Haitian company was the second major tenant. 
 
Change is also happening internally in the U.S. government, as is seen with procurement reform at the U.S. Agency for International Development, development work is moving away from traditional, not-for-profit, subject-matter expert entities to companies that are assumed to be more accountable.
 
Taxing the rich
 
In a moment that drew some laughter, Secretary Clinton, asserted that accountability extends to recipients too, and the path to self-sufficiency is paved with business development and tax collection, particularly from indigenous wealthy who are not investing in their own countries.  
 
“One of the issues that I have been preaching about around the world is collecting taxes in an equitable manner, especially from the elites in every country,” she said as the audience erupted in laughter. Coming as her remarks did just after a controversy over the low tax rate paid by Republican presidential candidate Mitt Romney, Clinton added with a smile, “You know I’m out of American politics, but it is a fact that around the world, the elites of every country are making money. There are rich people everywhere. And yet they do not contribute to the growth of their own countries. They don’t invest in public schools, in public hospitals, in other kinds of development internally. And so it means for leaders telling powerful people things they don’t want to hear.”
 
The same taxpayers expected to contribute to their countries' development are likely to be closest to the government that needs to implement the reform; they are also the same group most likely to benefit from a biased or corrupt system. Plainly, getting agreement to sacrifice for the benefit of others (often from rival sects, tribes, races or religions) is an uncomfortable prospect at best, demonstrative of cultural ignorance at worst. The latter can manifest itself not only in disdain -- it can create a disconnect and distrust requiring years of positive re-engagement (through multiple administrations, ours and theirs) to overcome.
 
Newcomers to the development universe do not worry about such disconnects; China, a prime example of transformation from recipient to donor, is projecting itself into development with gusto. And perhaps because they came from the other side of the development world, their perspective is more keen to what elicits a response. 
 
While China is building roads, hospitals, hotels and infrastructure all over Africa, what they aren't doing is demanding their hosts governments to change policy, stamp out corruption or open their books to foreign accountants. It’s no wonder recipients prefer Chinese aid. 
 
But because the need is so great, third world countries can hardly refuse aid; host governments continue to accept Western aid based on colonial heritage, continuity or treaties through which they deal with the West's demands or find ways to work around them.
 
Accountability
 
This is another challenge for foreign policy and development. U.S. taxpayers are well within their rights to expect accountability, honesty and value. Secretary Clinton said that the U.S. government needs to be as rigorous with aid as the private sector is with their investments. This is true but business can not be equated with development: results are not immediate, advancements a not always permanent and benefits are not always obvious nor even where planned. Developing business can progress society, as social assistance can improve conditions for business.
 
Given that Secretary Clinton's call for the U.S. to invest in broader range of partners, beyond international NGOs was general, one could expect that she wants more engagement from corporations, faith-based organizations and foundations. 
 
The Clinton Global Initiative is an example of where these sectors can meet and how they can consider themselves, as Secretary Clinton, as carrying said "one shared portfolio." But understanding each other within this portfolio is almost as complicated as engaging diverse cultures through aid.  
 
Comprehending objectives and agreeing on how to measure effort and success is key to keeping the "portfolio" together. This requires learning one another's vernacular and motivations, and the Rosetta Stone that reconciles corporations’ aim for perpetual profit with the not-for profit NGO goal to “put itself out of business” has yet to be carved.
 
The recipients may hold the key for greater cooperation in development. Engaging transitioning societies together, to understand their values and norms while sharing development efforts will bolster all efforts. 
 
Speaking of the current anti-American unrest in the Muslim world, Secretary Clinton insightfully said, "You can’t replace the tyranny of a dictator with the terror of a mob." But you also can’t replace NGOs with corporations. Shared effort, shared curiosity, shared commitment and shared goals is the way forward for better development.

Bradley J. Austin is a multi-sectorial development expert and consultant with field and headquarters experience for a range of donors, including private and public development interests.

 
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