Almost nine decades ago, newly elected US President Franklin Roosevelt introduced the New Deal
in 1933 in response to the Great Depression. The New Deal consisted of a number of mutually supportive initiatives, of which the most prominent were: a public works programme financed by budget deficits; a new social contract to improve living standards for all working families, including creation of the US social security system; and financial regulation to protect citizens’ assets and channel financial resources into productive investments.
The International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO), all dominated by rich countries, have long promoted trade liberalization as a ‘win-win
’ solution for “all people—rich and poor—and all countries—developed and developing countries”, arguing that “the gains are large enough to enable compensation to be provided to the losers”.
Industrial policy refers to the promotion of new investments and technology by governments to encourage the growth and development of specific economic sectors. However, scepticism
persists about the feasibility and desirability of using industrial policy, especially of the ability to ‘pick winners’, often accused of leading to ‘propping-up failing industries’.
Public or state development banking will be vital to achieving the Sustainable Development Goals, argues UNCTAD’s Trade and Development Report 2019
Ongoing World Bank led efforts
seek to leverage private finance via shadow banking by using public money to guarantee handsome returns managed by giant investment houses
. Such financialization introduce new costs and risks
to financing investments for sustainable development, decent work and renewable energy.
The OECD Secretariat published its proposed ‘unified approach
’ to reform international tax rules to address tax challenges posed by digitalization on 9 October 2019.
Under current rules, there is little chance of a company being taxed without its physical presence in the country concerned. But digitalization enables many businesses to remotely conduct economic activities affecting a national economy without a direct physical presence.
Two decades into the 21st century, all too many people still associate being ‘overweight’ with prosperity, health and wellbeing, mainly because being thin has long been associated with being emaciated due to hunger, undernourishment and malnutrition.
Overweight and obesity can easily be assessed by anthropometric measures, including the body mass index (BMI) and waist circumference. But BMI thresholds for overweight and obesity may differ by ethnic group or country.
A conjuncture of developments, short- and medium-term, have conspired to further slow the world economy. In recent months, the International Monetary Fund (IMF), among others, has acknowledged that global economic prospects are worsening, forcing it to make not one, but at least five consecutive growth forecast revisions, all downward.
The United Nations (UN) Sustainable Development Goals (SDGs) can only be achieved by 2030 with the political will to change international economic rules and mobilize resources needed for a massive public sector-led investment push to reinvigorate world economic progress sustainably, says UNCTAD’s Trade and Development Report 2019
Rapid financial globalization is due not only to financial innovations, but also to choices made by national policymakers, often with naïve expectations, trusting promoters’ promises of steady net inflows of financial resources.
Smoking-related diseases are the major causes of premature death worldwide. Every year, six million smoking-related deaths are reported worldwide. If current smoking trends persist, 8 million deaths can be expected by 2030, of which four-fifths will occur in lower- and middle-income countries.
Large transnational corporations (TNCs) are widely believed to be paying little tax. The ease with which they avoid tax and the declining corporate tax rates over the decades have deprived developing countries of much needed revenues besides undermining public faith in the tax system.
The US-China trade war has flared up again less than two weeks after US President Donald Trump delayed new tariffs of US$160 billion on Chinese imports until December, purportedly to avoid harming the holiday shopping season.
Recently, Christine Lagarde
, outgoing Managing Director of the International Monetary Fund (IMF), argued that developing ‘countries need a seat at the table’ to design rules governing international corporate taxation.
This acknowledges recent IMF findings
that developing countries lose approximately USD200 billion in potential tax revenue yearly, about 1.3 per cent of their GDP, due to companies shifting profits to low-tax locations. Oxfam estimated
in 2018 that extreme poverty could be eradicated for USD107 billion annually, i.e., about half the lost revenue.
The harmful effects of falling corporate tax rates
have been acknowledged in a recent International Monetary Fund (IMF) research paper
. This trend, since the early 1980s, has been especially detrimental for developing countries, which rely on direct taxation
much more than developed economies.
According to their own internal evaluations, both the World Bank (WB) and the International Monetary Fund (IMF) have huge credibility deficits due to the policy conditionalities and advice they have dispensed to developing countries in recent decades.
July 2019 saw the 75th anniversary of the historic conference of 44 countries held at the Bretton Woods (BW) resort in New Hampshire during July 1-22, 1944.
At BW, John Maynard Keynes, representing the UK, and Harry Dexter White, for the USA, both sought a new international monetary system following the Great Depression, which many attributed to the functioning of the gold standard before World War II.
International financial institutions (IFIs) have typically imposed wide-ranging policy reforms – called ‘conditionalities’ – in exchange for country governments to secure access to financial assistance.
While IFIs may demand anti-corruption policies, other IFI policy conditionalities, such as the privatization of state-owned enterprises (SOEs), can create new rentier opportunities, undermining government will and capacity to curb corruption.
On 17 June, a Facebook white paper
proposed a new global digital currency it plans to launch in the first half of 2020. The Libra will be managed by a ‘not for profit’ Swiss-based Facebook-led consortium of ‘for profit corporations’, with Uber, eBay, Lyft, Mastercard and PayPal among its founding members.
For decades, the two Bretton Woods institutions have rejected the contribution of industrial policy (IP), or government investment and technology promotion efforts, in accelerating and sustaining growth, industrialization and structural transformation.
Finally, two International Monetary Fund (IMF) staff members, Reda Cherif and Fuad Hasanov, have broken the taboo. They embrace industrial policy, arguing against the current conventional wisdom that East Asian industrial policies cannot be successfully emulated by other developing countries.
The relationship between finance and the real economy is arguably at the root of the contemporary economic malaise. Unlike earlier acceptance of simple linear causation, recent recognition of a curvilinear relationship between finance and economic growth
, implying ‘diminishing returns’, has important implications.
With growing economic conflicts triggered by US President Donald Trump’s novel neo-mercantilist approach to overcoming his nation’s economic malaises, many voices now argue that bad free trade agreements are better than nothing.
After US withdrawal following Trump’s inauguration in early 2017, there is considerable pressure on signatory governments to quickly ratify the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the successor to the TPP.