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.
Financialization has involved considerable ‘innovation’, often of opaque, complex and poorly understood financial instruments. These instruments typically have large debt components involving leveraging, deepening connections across markets and borders.
The emergence and growth of financialization from the 1980s has been driven by several factors operating at various levels – national and international, ideological and political, and of course, technological. The 1971 collapse of the Bretton Woods (BW) international monetary system arguably paved the way for financial globalization.
Finance has not stopped at dominating the real economy. The tentacles of finance have reached into significant, if not most parts of society
characterises modern society, where finance is dominant, as a ‘portfolio society’, in which aspects of social life have been securitized and transformed into a kind of capital or investment to be managed.
The terrible feeling I had on waking up and seeing the Italian voting results at the recent European elections was that my country was suddenly full of strangers. How could the majority of Italians reconfirm a government which has been the most inefficient in history, quarrelling on everything every single day and looking with total indifference to the looming problem of how to establish the next budget without clashing with the European Union or squeezing Italian citizens? Its irresponsible debate on the Italian finances has now led to a spread (difference of value) of 290 points with the Germans.
Over recent decades, the scope, size, concentration, power and even the purpose and role of finance have changed so significantly that a new term, financialization, was coined to name this phenomenon.
Financialization refers to a process that has not only transformed finance itself, but also, the real economy and society. The transformation goes beyond the quantitative to involve qualitative change as finance becomes dominant, instead of serving the needs of the real economy.
After the failure and abuses of privatization and contracting-out services from the 1980s, there has been renewed appreciation for the role of the state or government. Earlier promoters of privatization have taken a step backward, only to take two more forward to instead promote public-private partnerships (PPPs).
Mozambique, which was affected by an unprecedented two tropical cyclones over a matter of weeks, is still reeling from the impact a month after the latest disaster. But resultant devastation caused by the cyclones could impact the country’s elections as concerns are raised over whether the southern African nation can properly hold the ballot scheduled for later this year.
Development is a very uneven process, accompanied by heterogeneity in outcomes across sectors, across regions and across income groups. Such process, Albert Hirschman elegantly established about 60 years ago, constantly generates tensions and demands for redistribution of resources and power. In this sense, conflict is inherent to development.
Privatization has not provided the miracle cure for the problems (especially inefficiencies) associated with the public sector. The public interest has rarely been well served by private interests taking over from the public sector. Growing concern over the mixed consequences of privatization has spawned research worldwide.
On 25 April, Joseph Biden announced his candidacy for the US presidency, declaring that his decision was based on fears of Trump being re-elected:
Over the last four decades, growing concentration of market power in the hands of oligopolies, if not monopolies, has been greatly enabled by ostensibly neo-liberal reforms, worsening wealth concentration and gross inequalities
in the world.
The World Bank has successfully promoted its ‘Maximizing Finance for Development
’ (MFD) strategy by embracing the United Nations’ Sustainable Development Goals, internationally endorsed in September 2015.
It has also secured support from the G20 of twenty biggest economies, and effectively pre-empted alternative approaches at the third UN Financing for Development summit in Addis Ababa in mid-2015.
At the risk of reiterating what should be obvious, the question of private or public ownership is distinct from the issue of competition or market forces. Despite the misleading claim that privatization promotes competition, it is competition policy, not privatization, that promotes competition.
Trump´s electoral success was preceded by a rise of chauvinistic politics in most of Europe, paired with electoral triumphs of far-right candidates in several other countries. A development accompanied by revelations of corrupt leaders laundering and transferring illegally obtained money, aided by financial institutions finding the means to do so. The world seems to move away from a rule-based order to a state of affairs dominated by might and wealth. World leaders´ private business dealings thrive within a global environment where laws intended to protect human rights are becoming increasingly ineffective. Foreign policies appear to be adapted to private gains and personal vendettas. Global financial systems seem to be crafted to facilitate kleptocracy and money laundering, while repression and violence smite whistle-blowers and daring journalists. Endeavours supported by propaganda and smear campaigns orchestrated by political/financial consultants and private investigation firms. All this is made possible through complicated schemes using the internet.
The World Bank’s Enabling the Business of Agriculture
(EBA) project, launched in 2013, has sought agricultural reforms favouring the corporate sector. EBA was initially established to support the New Alliance for Food Security and Nutrition
, initiated by the G8 to promote private agricultural development in Africa.
The World Bank has successfully built a coalition to effectively advance its ‘Maximizing Finance for Development’ (MFD) agenda. The October 2018 G20 Eminent Persons Group’s (EPG) report
includes proposals to better coordinate various international financial institutions (IFIs) in promoting financialization.
In January 2019 Venezuela’s opposition-led National Assembly swore in congressman Juan Guaidó as the country’s interim president. Guaidó’s claim to power is a severe blow against the already weakened government of Nicolás Maduro, whose re-election as president in May 2018 was widely rejected by the international community and deemed illegitimate by over 50 foreign governments.