Financial alternatives for development aid

Written on February 5, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
Jaime PM.jpg
The decem tax: a public firm’s contribution to development
The western society of the present world is sustained upon an economic and financial basis that has formed over the decades and throughout succesive crisis that hit hard countries and societies through forced devaluations, stock bursts and crisis that made the so-called capitalist system mature.
A society vertebrated from the very bottom in the principles of a free market, of the law of supply and demand, in which the entrepreneur is rewarded when a project successes and goes public through an IPO.
The most advanced societies operate under the rules of the free market, but are sustained thanks to the tax collection ability of the public administrations. The inability to collect taxes of economies like the Argentine or the Russian fed the economic crisis that hit their financial structures in 1998 and 2002 respectively.
The corporate profit is undoubtedly, an entrepreneur’s reward to a job well done. A corporate profit is taxed to a certain degree. A corporate tax represents the basis to determine the market value of a public firm.
The stock market is a key element to understand the economic stability of a sovereign state. It allows for the financing of large projects, at the same time that it reduces their cost of capital. It makes access to capital more horizontal and democratic and enables the small investor to share the earnings, if any.
Continue reading Decem02, Download file
About Decem: Series of articles fundamentally innovative that aim at the proposal of alternative financial mechanisms to considerably raise the amount of funds available for development in the third world. Throughout the series of 10 articles, J.Pozuelo-Monfort will stress the implementation aspects of the suggested ideas and will propose arguments for and against.


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