draining development.pdf - Khazar University

484 Draining Development?technical assessment of the most frequently cited figures? The final sectionof the chapter reviews potential research paths.Illicit Flows and PolicyThere is no doubt that illicit financial flows (IFFs) from developing countriesare substantial. Even if the correct figure is only a 10th of the oftencitedGlobal Financial Integrity estimates (about US$1 trillion annuallyaccording to Kar and Cartwright-Smith 2008), that is, around US$100billion, it is large relative to either official development assistance (aboutUS$70 billion) or total foreign direct investment in the developing world(around US$250 billion in 2004 according to UNCTAD 2009). Eliminatingthis outflow, all else being equal, would be an enormous gain todeveloping countries.This alone does not imply, however, that IFFs constitute a good focusfor policy. IFFs are a specific consequence of more fundamental problemsthat have long been of great concern. Most notably, corruption andthe payment of bribes to major government officials have become a centralissue for the World Bank and for the development community generally,at least since World Bank President James Wolfensohn put it onthe Bank’s agenda in the mid-1990s. Similarly, the failure of developingcountries to collect taxes has also come more into focus in the lastdecade; the reliance on official development assistance is seen as, importantly,a consequence of the inability of these countries to tax their ownresources (Bräutigam, Fjeldstad, and Moore 2008). The root cause argument,then, is that one should focus on ways of reducing the underlyingproblems: corruption, tax evasion, and so forth. The international flowsare only a manifestation of these problems. Cut down on corruption, taxevasion, and the rest, and the IFFs will take care of themselves.The argument for focusing on causes rather than symptoms is a commonone in many domains of policy. For example, many analysts arguethat crime is a manifestation less of individual failings or moral turpitudethan of social failure (Sykes, Cullen, and Merton 1992). Thus, theysay, the most effective way of responding to crime is not detection andpunishment of offenders, which treat only the symptom, but eliminationof social inequality, improving the conditions in which the poorlive, and better schools and social programs, which treat the true causes