Inter Press ServiceFinancial Crisis – Inter Press Service http://www.ipsnews.net News and Views from the Global South Wed, 19 Sep 2018 14:09:38 +0000 en-US hourly 1 https://wordpress.org/?v=4.8.7 Another global financial crisis for developing countries?http://www.ipsnews.net/2018/09/another-global-financial-crisis-developing-countries/?utm_source=rss&utm_medium=rss&utm_campaign=another-global-financial-crisis-developing-countries http://www.ipsnews.net/2018/09/another-global-financial-crisis-developing-countries/#respond Tue, 18 Sep 2018 09:05:35 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=157656 George Soros, Bill Gates and other pundits have been predicting another financial crisis. In their recent book, Revolution Required: The Ticking Bombs of the G7 Model, Peter Dittus and Herve Hamoun, former senior officials of the Bank of International Settlements, warned of ‘ticking time bombs’ in the global financial system waiting to explode, mainly due […]

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By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY & KUALA LUMPUR, Sep 18 2018 (IPS)

George Soros, Bill Gates and other pundits have been predicting another financial crisis. In their recent book, Revolution Required: The Ticking Bombs of the G7 Model, Peter Dittus and Herve Hamoun, former senior officials of the Bank of International Settlements, warned of ‘ticking time bombs’ in the global financial system waiting to explode, mainly due to the policies of major developed countries.

Anis Chowdhury

Recent events vindicate such fears. Many emerging market currencies have come under considerable pressure, with the Indonesian rupiah, Indian rupee and South African rand all struggling since early this year. Brazil’s real fell sharply in June, and Argentina has failed to stabilize its peso despite seeking IMF aid. As Turkey struggles to stabilize its lira, many European banks’ exposure has heightened fears of another global financial crisis.

Why the vulnerability?
Some fundamental weaknesses are at the core of this vulnerability. These include the international financial ‘non-system’ since the collapse of the Bretton Woods system in 1971, and continuing to use the US dollar as the main international reserve currency.

This burdens deficit countries vis-à-vis surplus countries and ensures near-universal vulnerability to US monetary policy. Thus, most countries accumulate dollars as a precaution, i.e., for ‘protection’, eschewing other options, such as investing in socially desirable projects.

Policy makers not only failed to address these weaknesses following the 2008-2009 global financial crisis (GFC), but also compounded other problems. Having eschewed stronger, more sustained fiscal policy interventions, monetary policy virtually became the sole policy instrument. Major central banks, led by the US Federal Reserve, embarked on ‘unconventional monetary policies’, pushing real interest rates down, even into negative territory.

Jomo Kwame Sundaram

Emerging and developing economies (EDEs) offering higher returns temporarily experienced large short-term capital inflows. The external debt of emerging market economies has grown to over $40 trillion since the GFC. The combined debt of 26 large emerging markets rose from 148% of gross domestic product (GDP) at the end of 2008 to 211% in September 2017, according to the Institute of International Finance (IIF).

Easy money raised household and corporate debt, fuelling property and financial asset price bubbles. According to the International Monetary Fund (IMF) April 2018 Fiscal Monitor, global debt peaked at $164 trillion in 2016, or 225% of global GDP, compared to 125% before the GFC. The IIF reported that global debt rose to over $247 trillion in early 2018, i.e., equivalent to 318% of GDP.

Rising debt levels pose serious downside risks for the global economy. With easy money coming to an end, as the Fed continues to ‘normalize’ monetary policy by raising the policy interest rate, capital flight to the US is undermining emerging market currencies. When debt defaults increase with interest rates while income growth remains subdued, the world becomes more vulnerable to financial crisis.

Diminished capacities
Both developed and developing countries have less policy space than during the GFC. Most governments are saddled with more debt following massive financial bail outs followed by abandonment of efforts to sustain robust recovery.

According to the IMF’s April 2018 Fiscal Monitor, average public debt of advanced economies was 105% of GDP in 2017, constraining fiscal capacity to respond to crisis. Meanwhile, monetary policy options are exhausted after a decade of ‘unconventional’ monetary policies.

General government debt-to-GDP ratios in emerging market and middle-income economies almost reached 50% in 2017 — a level only seen during the 1980s’ debt crisis. The 2017 ratio exceeded 40% in low-income developing countries, climbing by more than ten percentage points since 2012.

Playing With Fire
by Yilmaz Akyuz, former South Centre chief economist, has highlighted the self-inflicted vulnerabilities of developing countries. Public debt-GDP ratios in EDEs are likely to rise due to falling commodity prices and stagnant global trade, while they have almost no monetary policy independence due to deeper global financial integration.

Weaker global growth
While corporate sectors have been busy with mergers, acquisitions and share buybacks with cheap credit, instead of investing in the real economy, the financial sector has successfully portrayed sovereign debt as ‘public enemy number one’.

Held hostage to finance capital, governments around the world have wasted the opportunity to improve productive capacities by investing in infrastructure and social goods when real interest rates were at historic lows. At around 24% of global GDP, the global investment rate remains below the pre-crisis level of around 27%, with investment rates in EDEs either declining or stagnant since 2010.

Failure to address the falling wages’ share of GDP, rising executive pay and asset price bubbles, due to ‘easy’ monetary policy, have continued to worsen growing income inequality and wealth concentration. Meanwhile, deep cuts in government spending and public services, while reducing top tax rates, cause anger and resentment, often blamed on ‘the other’, contributing to the spread of ‘ethno-populism’.

In turn, growing inequality limits aggregate demand, which has been maintained by unsustainably raising household debt, i.e., perverse ‘financial inclusion’.

Perfect storm?
Turbulence in currency markets is due to developing countries’ limited economic policy space. A decade after the GFC, developing countries still experience lower growth and investment rates.

Financial sectors of emerging market economies now have more and deeper links with international financial markets, also reflected in high foreign ownership of stocks and government bonds, with large sudden capital outflows causing financial crises.

Meanwhile, recent commodity price drops have accelerated the rising indebtedness of low-income countries. According to the IMF, 24 out of 60 (40%) are now either already facing debt crises or are highly vulnerable—twice as many as five years ago, with a few already seeking Fund bail-outs.

The problem is compounded by declining concessional aid from OECD countries. Also, more creditors are not part of the Paris Club, obliged to deal with sovereign debt on less onerous terms. Meanwhile, growing trade and currency conflicts are worsening the woes of those already worse-off.

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Crisis Drives Nicaragua to an Economic and Social Precipicehttp://www.ipsnews.net/2018/09/crisis-drives-nicaragua-economic-social-precipice/?utm_source=rss&utm_medium=rss&utm_campaign=crisis-drives-nicaragua-economic-social-precipice http://www.ipsnews.net/2018/09/crisis-drives-nicaragua-economic-social-precipice/#respond Mon, 17 Sep 2018 18:07:02 +0000 Jose Adan Silva http://www.ipsnews.net/?p=157649 Five months after the outbreak of mass protests in Nicaragua, in addition to the more than 300 deaths, the crisis has had visible consequences in terms of increased poverty and migration, as well as the international isolation of the government and a wave of repression that continues unabated. Álvaro Leiva, director of the non-governmental Nicaraguan […]

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Great Recession, greater illusionshttp://www.ipsnews.net/2018/09/great-recession-greater-illusions/?utm_source=rss&utm_medium=rss&utm_campaign=great-recession-greater-illusions http://www.ipsnews.net/2018/09/great-recession-greater-illusions/#comments Tue, 11 Sep 2018 08:01:04 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=157551 In 2009, the world economy contracted by -2.2%. Growth in all developing countries declined from around 8% in 2007 to 2.6% in 2009 as the developed world contracted by -3.8% in 2009. The collapse of the Lehmann Brothers investment bank in September 2008 symbolized the US financial crisis that triggered the Great Recession of 2008-2009. […]

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By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY and KUALA LUMPUR, Sep 11 2018 (IPS)

In 2009, the world economy contracted by -2.2%. Growth in all developing countries declined from around 8% in 2007 to 2.6% in 2009 as the developed world contracted by -3.8% in 2009. The collapse of the Lehmann Brothers investment bank in September 2008 symbolized the US financial crisis that triggered the Great Recession of 2008-2009.

Demonstrations against austerity measures in Athens (May, 2010). Credit: Nikos Pilos/IPS

Demise of Keynesian consensus
In its immediate aftermath, a new consensus reversed the neoliberal Washington Consensus of the last two decades of the 20th century. Proclaimed by the G20’s London Summit of 2 April 2009, it envisaged return to Keynesian macroeconomic policies, including large-scale fiscal stimulus, supported by expansionary monetary policy.

The new policies were largely successful in tempering the recession, although much more should have been done. But with modest recovery, public debt, not economic stagnation, was soon sold as public enemy number one again.

G20 leaders at the June 2010 Toronto Summit turned to ‘fiscal consolidation’, with monetary policy accommodation to ‘contain’ its contractionary consequences, and ‘structural’ (mainly labour market) reforms, ostensibly to boost growth, especially in advanced economies. Meanwhile, despite G20 leaders’ pledges eschewing protectionism, trade restrictions grew.

Synchronized fiscal consolidation precipitated some Eurozone sovereign debt crises. Soon, several Eurozone countries experienced double dip recessions, as unemployment in Greece and Spain rose well over 25% following punitive policies required to qualify for European Union and International Monetary Fund (IMF) funding which mainly went to creditors.

Economists’ complicity
Misleading, ideologically-driven empirical analyses claimed to support the new policy reversal. Alesina and his associates promoted the idea of ‘expansionary fiscal consolidation’, that contractionary government expenditure cuts would be more than offset by private spending expansion due to boosted investor confidence.

Then, Reinhart and Rogoff exaggerated the dangers of domestic debt accumulation. Although soon exposed for major methodological flaws and suppressing relevant information, these studies had served their purpose.

The IMF Fiscal Monitor ahead of the June 2010 G20 Summit grossly exaggerated public debt’s destabilizing effects, advocating rapid fiscal consolidation instead. Later, the IMF admitted it had underestimated the fiscal multiplier and hence potential growth from such debt!
Faltering recovery and rising unemployment in the Eurozone caused the public debt-GDP ratio to rise instead. Meanwhile, supposedly unavoidable short-term pain caused prolonged suffering for millions without the promised medium- and long-term gains.

UN ahead of the curve
Besides the Bank of International Settlements’ legendary William White, the United Nations was ahead of the curve, not only in warning of the impending crisis, but also by providing appropriate policy advice, albeit largely ignored.

For example, the United Nations 2006 and 2007 World Economic Situation and Prospects (WESP) warned of instability and growth slowdowns due to disorderly adjustment of growing macroeconomic imbalances among major world economies. WESP warned that falling US house prices could cause defaults to spike, triggering bank crises.

The IMF and the OECD simply ignored such warnings, projecting rosy futures, and a ‘soft landing’ at worst. The April 2007 IMF World Economic Outlook (WEO) emphatically dismissed widely held concerns about disorderly unwinding of global imbalances, claiming economic risks had subsided. The July 2007 issue claimed: “The strong global expansion is continuing, and projections for global growth in both 2007 and 2008 have been revised up”.

The OECD June 2007 Economic Outlook insisted that the US slowdown was not heralding a period of worldwide economic weakness. “Rather, a ‘smooth’ rebalancing was to be expected, with Europe taking over the baton from the United States in driving OECD growth… Indeed, the current economic situation is in many ways better than what we have experienced in years.”

Although the IMF’s November 2008 WEO belatedly acknowledged the crisis’ severity, it forecast global recovery of 2.2% in 2009, suggesting the worst was over, thus supporting the reversal from fiscal expansion to consolidation. Depicting the ‘green shoots’ of recovery as self-sustaining, fiscal stimulus was abandoned after selective financial bailouts.

The IMF and OECD recommendations of structural reforms and fiscal consolidation have since failed to provide the long awaited, sustained global economic recovery.

The President of the UN General Assembly set up a commission led by Nobel laureate Joseph Stiglitz to study the crisis’ impact, especially for development, and recommend policies to prevent future crises. Yet, most remain unaware of its wide-ranging findings and policy recommendations, including international financial architecture reforms and reregulating finance to better serve the real economy.

The UN Secretary-General proposed a Global Green New Deal in 2009 to accelerate economic recovery and job creation while addressing sustainable development, climate change and food security. It envisioned massive, multilateral, cross-subsidized public investments in renewable energy and smallholder food production in developing countries.

The UN also consistently advocated policy coordination and warned against prematurely ending recovery efforts.

Missed opportunity, heightened vulnerability
With UN and similar policy advice largely ignored, global economic recovery has remained tepid for the last decade. This has prompted the ‘secular stagnation’ thesis obscuring the role of political and policy failures and missed opportunities.

Unconventional monetary policy, e.g., ‘quantitative easing’, has also widened income and wealth gaps besides fuelling financial asset bubbles. Earlier capital inflows are now exiting following monetary policy normalization in the West and new fears of emerging market vulnerabilities.

Having failed to ensure robust recovery despite accumulating more debt, both developed and developing countries have less policy and fiscal space to address the looming problems threatening them.

Meanwhile, the redistributive potential of fiscal policy has been weakened by reducing progressive direct taxes and increasing regressive indirect taxes, while cutting social expenditure. Also, powerful vested interests have blocked attempts to limit obscene executive remuneration and enforce minimum wages, arguing that such measures discourage business and job creation.

Also, the hyped notion of ‘inclusive inequality’ has served to justify rising economic disparities, by arguing that deregulation has enabled wealth accumulation and middle class expansion.

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Global Economy Vulnerable a Decade Afterhttp://www.ipsnews.net/2018/07/global-economy-vulnerable-decade/?utm_source=rss&utm_medium=rss&utm_campaign=global-economy-vulnerable-decade http://www.ipsnews.net/2018/07/global-economy-vulnerable-decade/#respond Mon, 30 Jul 2018 14:32:37 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=156954 Ten years ago, deteriorating confidence in the value of US sub-prime mortgages threatened a liquidity crisis. The US Federal Reserve injected considerable capital into the market, but could not prevent the 2008-2009 global financial crisis (GFC). The 2008 meltdown exposed the extent of finance-led international economic integration, with countries more vulnerable to financial contagion and […]

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By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY & KUALA LUMPUR, Jul 30 2018 (IPS)

Ten years ago, deteriorating confidence in the value of US sub-prime mortgages threatened a liquidity crisis. The US Federal Reserve injected considerable capital into the market, but could not prevent the 2008-2009 global financial crisis (GFC).

The 2008 meltdown exposed the extent of finance-led international economic integration, with countries more vulnerable to financial contagion and related policy ‘spillovers’ exacerbating real economic volatility. It also revealed some vulnerabilities of the post-Second World War (WW2) US-centred international financial ‘architecture’ – the Bretton Woods system – modified after its breakdown in the early 1970s.

Jomo Kwame Sundaram

Robert Triffin, the leading international monetary economist of his generation, had long expressed concerns about the use of a national currency as the major reserve currency. International liquidity provision using the greenback required the US to run balance-of-payments deficits, ensuring US monetary policy spillovers to the world economy while eroding confidence in the greenback.

The Bretton Woods system was under increasing strain from the late 1960s, as US President Johnson funded the increasingly unpopular Vietnam War by issuing debt, rather than through higher taxes. The system finally broke down when the Nixon administration unilaterally cancelled the US commitment to dollar (gold) convertibility in August 1971.

What emerged was a ‘non-system’ for Triffin. Since then, the US dollar, issued by fiat, has relied on the greenback’s own credibility and legitimacy to continue as de facto world currency.

Current ‘non-system’
In 1985, Triffin identified three systemic problems of the international financial ‘non-system’. First, “its fantastic inflationary proclivities, leading to world reserve increases eight times as large over a brief span of fifteen years” since the breakdown of the Bretton Woods system.

Second, “skewed investment pattern of world reserves, making the poorer and less capitalized countries of the Third World the main reserve lenders, and the richer and more capitalized industrial countries the main reserve borrowers of the system”.

Anis Chowdhury

Third, “crisis-prone propensities reflected in the amplitude” and frequency of financial crises such as the 1980s’ debt crisis causing developing countries’ ‘lost decades’. Other critics have identified further flaws.

First is the ‘recessionary bias’, due to the asymmetric burden of adjustment to payments imbalances. While deficit countries are under great pressure to adjust, especially when financing dries out during crises, surplus countries do not face corresponding pressures to correct their own imbalances.

Second is the cost of the perceived need of emerging and developing countries to ‘self-insure’ against the strong boom-bust cycles of global finance by building up large foreign exchange reserves and fiscal resources, especially after the 1997-1998 Asian financial crisis.

Such precautionary measures enabled emerging market economies to undertake strong counter-cyclical measures during the GFC. But they have huge opportunity costs as such reserves are generally held as presumably safe, liquid, low-yielding assets, such as US Treasury bonds.

Hence, Triffin complained that “the richest, most developed, and most heavily capitalized country in the world should not import, but export, capital, in order to increase productive investment in poorer, less developed, and less capitalized countries… [The] international monetary system is at the root of this absurdity.”

Reform appeals
There were renewed calls for reform of global economic governance in the wake of the GFC, especially by the 2009 UN Conference on the World Financial and Economic Crisis and Its Impact on Development.

Governance reform of the IMF and World Bank should ensure fairer, more equitable representation of developing countries. This should improve the accountability and credibility of the Bretton Woods institutions, enabling them to better address current financial and economic challenges in the world.

The UN also called for a “multilateral legal framework for sovereign debt restructuring”. Without a fair, legally binding, multilateral sovereign debt work-out mechanism, developing countries remain vulnerable to private creditors, including vulture funds.

There were renewed hopes for trade multilateralism and early successful completion of the Doha Development Round of the World Trade Organisation (WTO), giving developing countries better access to external markets, seen as vital for balanced global recovery and development. The promise to keep international trade open echoed G20 leaders’ unfulfilled commitment to eschew protectionism.

However, only a few of the modest promised reforms have been implemented, with limited changes in international financial governance, still dominated by G7 economies. After all, every financial crisis is followed by appeals for reforms, with complacency setting in with hints of recovery.

Less coping capability
Most developed country governments are now more heavily indebted than in 2008, when they bailed out large financial institutions, but failed to sustainably revive the world economy. Major monetary authorities do not have much policy space left after long pursuing unconventional expansionary policies.

Meanwhile, developing countries have been subject to increasing international integration, e.g., through global value chains, foreign financial institutional investments and increased short-term capital flows induced by the unconventional monetary policies of the US Fed, ECB and Bank of Japan, while debt-sustainability concerns for some are growing again.

These vulnerabilities have been compounded by growing trade protectionism, and dwindling precautionary reserve holdings of many developing economies as global trade has slowed. Even before President Trump’s election, developed countries had effectively killed the Doha Development Round, not least by opting for bilateral and plurilateral, instead of multilateral free trade deals.

Trump’s more explicit rejection of multilateralism in his efforts to eliminate major US bilateral trade deficits are now expected to further set back prospects for world economic recovery. Despite pious declarations to the contrary, most national policymakers typically turn from rhetoric about international cooperation to focus on domestic issues.

It has not been different this last time. A decade after the worst economic downturn since the 1930s’ Great Depression, the world economy remains vulnerable.

Anis Chowdhury, Adjunct Professor at Western Sydney University (Australia), held senior United Nations positions in New York and Bangkok.
Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

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Globalization, Inequality, Convergence, Divergencehttp://www.ipsnews.net/2018/07/globalization-inequality-convergence-divergence/?utm_source=rss&utm_medium=rss&utm_campaign=globalization-inequality-convergence-divergence http://www.ipsnews.net/2018/07/globalization-inequality-convergence-divergence/#comments Thu, 26 Jul 2018 09:52:49 +0000 Jomo Kwame Sundaram http://www.ipsnews.net/?p=156886 Economic divergence among countries and regions was never pre-ordained. According to the late cliometrician Angus Madison and other economic historians, the great divergence between the global North and South, between developed and developing countries, began around five centuries ago, from the beginning of the European, particularly Iberian colonial conquests. From about two centuries ago, around […]

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Indonesia has one of the highest rates of income inequality in Southeast Asia, according to the World Bank. Credit: Sandra Siagian/IPS

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Jul 26 2018 (IPS)

Economic divergence among countries and regions was never pre-ordained. According to the late cliometrician Angus Madison and other economic historians, the great divergence between the global North and South, between developed and developing countries, began around five centuries ago, from the beginning of the European, particularly Iberian colonial conquests.

From about two centuries ago, around the time of the Industrial Revolution, divergence accelerated with uneven productivity advances. During the 20th century, national level inequalities went down in many developed countries in the period after the First World War until around the 1970s with the rise of labour, peasant and other popular mobilizations.

Inequality, not only at the national level, but also at the international level, seems to affect the pattern of aggregate demand, particularly in developing countries, which in turn influences future investment and growth prospects and patterns.

Thus, the immediate post-Second World War period saw relatively high growth during what some Anglophone economists call the ‘Golden Age’, due to a combination of Keynesian policies at the national level in developed economies, and partially successful development policies in many newly-independent countries of Asia and Africa. However, this eventually came to an end in the 1970s for a variety of reasons.

Recent trends
Since then, inequalities have begun to grow again at the national level in many countries, but international divergence has declined in more recent decades. This recent convergence is due to significantly accelerated growth in some developing countries as expansion in some developed countries slowed. Among developing countries, growth was initially largely confined to East Asia and, to a lesser extent, South Asia, bypassing much of the rest of Asia, Africa and Latin America.

Africa suffered a quarter-century of stagnation from the late 1970s until the beginning of this century when commodity prices rose once again and China began investing in the continent. There was at least one lost decade in Latin America in the 1980s, and arguably, a second one for many on the continent in the following decade.

Such variation needs to be recognized. The recent convergence overall obscures very mixed phenomena of greater national-level inequalities in many economies, but also some international convergence due to more rapid growth in some major developing economies.

However, this convergence has begun to slow again, following the collapse of commodity prices since late 2014. This initially began with petroleum, but eventually affected almost all other commodities, especially mineral prices, slowing the decade of growth in Africa.

Divergence
The recent phenomena which many term globalization are often linked to international economic liberalization, but the strengthening of property rights has also been important. This has not only consolidated traditional property rights, but also extended property rights in novel ways, e.g., ostensibly to clarify supposedly ambiguous entitlements.

These have involved not only national legislation, but also free trade agreements and investment treaties at the international level, e.g., to consolidate ostensible asset-related entitlements, including so called intellectual property rights.

While few economic commentators may openly advocate increasing inequality, or blatantly espouse divergence, the consequences of many policies and positions associated with the conventional wisdom tend to increase divergence. For example, agricultural trade liberalization has undermined productive potential as only rich countries can afford subsidies, which most developing countries cannot afford.

For a long time, Africa used to be a net food exporter until the 1980s. Since then, it has become a net food importer. With trade liberalization, Africa was supposed to realize its true potential. Instead, Africa has lost much of its existing productive potential, not only in manufacturing, but also in agriculture.

To make matters worse, African farmers cannot compete with subsidized food imports from the EU and the USA. For example, as US consumers have a strong preference for chicken breasts, wings and legs from the US are not only flooding the Americas, but increasingly, Africa and Asia.

Convergence prospects
It is also important to consider the prospects for possible convergence in the long term due to the increased availability and affordability of capital. Besides recent Chinese international financing initiatives, quantitative easing, other unconventional monetary policies, recycling of petrodollars and private East Asian capital, as well as novel, and often illicit international financial flows may transform the horizon of possibilities.

Not unlike the Cold War and the aftermath of 9/11, the resurgence of European ethno-populism in reaction to growing economically and politically driven immigration into developed Western economies has reminded the world of the squalid conditions still prevailing in much of the global South, especially in Africa.

Perhaps more importantly, geography, rather than class, is increasingly viewed by many as the major determinant of income and welfare levels, with vastly different living standards associated with location rather than educational qualifications, occupation or productivity.

Thus, without the prospect of rapid convergence, not only nationally between wealth classes, but also internationally between rich and poor nations, the failure of economic globalization to deliver on its implicit promise of liberalizing cross-border human migration will haunt international relations, human rights and political liberalism for some time to come.

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Balancing Trade Warshttp://www.ipsnews.net/2018/07/balancing-trade-wars/?utm_source=rss&utm_medium=rss&utm_campaign=balancing-trade-wars http://www.ipsnews.net/2018/07/balancing-trade-wars/#respond Fri, 20 Jul 2018 13:53:52 +0000 Sunita Narain http://www.ipsnews.net/?p=156804 Sunita Narain* is Director-General of the Centre for Science and Environment (CSE) & Editor of Down to Earth magazine

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Sunita Narain* is Director-General of the Centre for Science and Environment (CSE) & Editor of Down to Earth magazine

By Sunita Narain
NEW DELHI, Jul 20 2018 (IPS)

A global trade war has broken out. The United States fired the first salvo and there has been retaliation by the European Union, Canada, China and even India. Tariffs on certain imported goods have been increased in a tit-for-tat reaction.

Sunita Narain

Analysts see it as a limited war in the understanding that Donald Trump is all for “free-trade”. But this view denies the fact that a tectonic shift is taking place in the world. It is a war for ascendency to global leadership; a contest between the US and China.

China is heaving its might on the world. President Xi Jinping’s Belt and Road Initiative is an open call for its global influence. In July 2017, China launched the ambitious plan to invest in the technology of the future—artificial intelligence.

There are dark (unconfirmed) whispers about how it is going about acquiring many new-age technologies by rolling over western companies operating in vast markets.

The last century belonged to the US and Europe with Russia as the communist outlier. China became mighty all because of the emergence of the free trade regime in the world. Just some 35-odd years ago, it was behind the iron curtain.

But then the World Trade Organization (WTO) was born in January 1995. China’s trade boomed. It took over the world’s manufacturing jobs. India, too, found its place by servicing outsourced businesses like telemarketing. “Shanghaied” and “Bangalored” entered the lexicon—as jobs (and pollution) moved continents.

This way, globalisation fulfilled its purpose to usher in a new era of world prosperity. Or so, we thought.

Instead, globalisation has made the world more complicated and convoluted. In early 1990s, when the discussions on the General Agreement on Tariffs and Trade (GATT) were at its peak, there was a clear North-South divide.

The then-developed world pushed for opening up of trade. It wanted markets and protection through rules on “fair” trade and intellectual property. The then developing world was worried what the free trade regime would do to its nascent and weak industrial economies.

More importantly, there were fears of what these new open trade rules would do to its farmers, who would have to compete with the disproportionately subsidised farmers of the developed world.

In 1999 tensions flared up at the WTO ministerial meet in Seattle. By this time, reality of globalisation had dawned and so it was citizens of the rich world who protested for labour rights, worried about outsourcing of their jobs and environmental abuses.

But these violent protests were crushed. The next decade was lost in the financial crisis. The new winners told the old losers that “all was well”.

Today Trump has joined the ranks of the Leftist Seattle protesters, while India and China are the new defenders of free trade. The latter in fact want more, much more of it.

But again, is it so straightforward? All these arrangements are built on the refusal to acknowledge the crisis of employment. The first phase of globalisation led to some displacement of labour and this is what Trump is griping about.

But the fact is that this phase of globalisation has only meant war between the old elite (middle-classes in the world of trade and consumerism) and the new elite. It has not been long enough or deep enough to destroy the foundations of the livelihoods of the vast majority of the poor engaged in farming. But it is getting there.

But this is where the real impact of globalisation will be felt. Global agricultural trade remains distorted and deeply contentious. The trade agreements targeted basics like procurement of foodgrains by governments to withstand scarcity and the offer of minimum support price to farmers.

Right now, the Indian government is making the right noises that it will stand by its farmers. But we will not be able to balance this highly imbalanced trade regime if we don’t recognise that employment is the real crisis.

It is time that this round of trade war should be on the need for livelihood opportunities. Global trade talks must discuss employment not just industry. It must value labour and not goods.

This is what is at the core of the insecurity in the world. It is not about trade or finance. It is about the biggest losers: us, the people and the planet.

The link to the original article follows:
https://www.downtoearth.org.in/

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Excerpt:

Sunita Narain* is Director-General of the Centre for Science and Environment (CSE) & Editor of Down to Earth magazine

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Will Trump’s Trade War Make America Great Again?http://www.ipsnews.net/2018/07/will-trumps-trade-war-make-america-great/?utm_source=rss&utm_medium=rss&utm_campaign=will-trumps-trade-war-make-america-great http://www.ipsnews.net/2018/07/will-trumps-trade-war-make-america-great/#comments Mon, 16 Jul 2018 14:26:11 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=156713 The United States has had the world’s largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion. The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of […]

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By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY & KUALA LUMPUR, Jul 16 2018 (IPS)

The United States has had the world’s largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion.

The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of $34 billion in the 1990s. In 2017, its trade deficit with Japan was $69 billion, and with Germany, $65 billion. The US also has trade deficits with both its NAFTA partners, including $71 billion with Mexico.

President Trump wants to reduce these deficits with protectionist measures. In March 2018, he imposed a 25% tariff on steel imports and a 10% tariff on aluminium, a month after imposing tariffs and quotas on imported solar panels and washing machines. On 10 July, the US listed Chinese imports worth $200 billion annually that will face 10% tariffs, probably from September, following 25% tariffs on $34 billion of such imports from 7 July.

 

Do US trade deficits reflect weakness?

The usual explanation for bilateral trade deficits is price differentials. However, the US accuses such countries of ‘unfair’ trade practices, such as currency manipulation, wage suppression and government subsidies to boost exports, besides blocking US imports.

Trump views most trade deals such as NAFTA as unfair. His team insists that renegotiating trade deals, ‘buying American’, a strong dollar and confronting China will shrink US trade deficits.

Anis Chowdhury

But the country’s overall trade deficit, offset by capital inflows, is related to the gap between its savings and investments. The US spends more than it produces, thus importing foreign goods and services. Cheap credit fuels debt-financed consumption, increasing the trade deficit.

Total US household debt rose to $13.2 trillion in the first quarter of 2018, the 15th consecutive quarter of growth in the mortgage, student, auto and credit card loan categories. American consumer debt was more than double GDP in 2017.

US government budget deficits have also been growing. From 67.7% of GDP in 2008, US government debt rose to 105.4% in 2017. The federal budget deficit was $665 billion in FY2017, rising 14% from $585 billion in FY2016.

The US budget deficit was 3.5% of GDP in 2017. According to the US Congressional Budget Office, it will surpass $1 trillion by 2020, two years sooner than previously projected, due to Trump tax cuts and spending increases.

The growing US economy may also increase the trade deficit, as consumers spend more on imported goods and services. The stronger dollar has made foreign products cheaper for American consumers while making US exports more expensive for foreigners.

Jomo Kwame Sundaram. Credit: FAO

These underlying economic forces have become more important than policies in raising the overall trade deficit, while bilateral deficits reflect specific commercial relations with particular countries. Thus, disrupting bilateral trade relations may only shift the trade deficit to others.

 

Have the cake and eat it?

So, why does the US have a structural trade deficit? As the de facto international ‘reserve currency’ after the Second World War, the US has provided the rest of the world with liquidity. Its perceived military strength means it is seen as a safe place to keep financial assets. Of about $10 trillion in global reserves in 2016, for example, around three fifths were held in US dollars.

US supply of international liquidity by issuing the global reserve currency offers several economic advantages. It also earns seigniorage from issuing the main currency used around the world, due to the difference between the face value of a currency note and the cost of issuing it.

With growing foreign demand for dollars, the US can run deficits almost indefinitely by creating more debt or selling assets. Demand for dollar-denominated assets, e.g., US Treasury bonds, raises their prices, lowering interest rates, to finance both consumption and investment.

While foreign investors buy low-yielding, short-term US assets, Americans can invest abroad in higher-yielding, long-term assets. The US usually reaps higher returns on such investments than it pays for debt, labelled America’s ‘exorbitant privilege’.

Thus, for the US to enjoy the ‘exorbitant privilege’ of the dollar’s role as the major reserve currency, it must run a chronic trade deficit. Therefore, giving up the dollar’s global reserve currency status will have major implications for the US economy, finances and living standards.

 

Can the US win Trump’s trade war?

Barry Eichengreen noted that countries in military alliances with reserve-currency issuing countries hold about 30% more of the partner’s currency in their foreign-exchange reserves than countries not in such alliances. Instead, Trump has prioritized reducing trade deficits to strengthen the US dollar and dominance while disrupting some old political alliances.

As the US retreats from the global diplomatic stage, use of other reserve currencies, including China’s renminbi, has been growing, especially in Europe and Africa. Thus, ironically, as Trump wages trade wars on both foes and friends, China will probably gain, both geopolitically and economically.

The resulting global economic shift will not only hurt the US dollar and economy through the exchange rate and borrowing costs, but also its geopolitical dominance.


Anis Chowdhury
, Adjunct Professor at Western Sydney University (Australia), held senior United Nations positions in New York and Bangkok.
Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

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Economic crisis managementhttp://www.ipsnews.net/2018/06/economic-crisis-management/?utm_source=rss&utm_medium=rss&utm_campaign=economic-crisis-management http://www.ipsnews.net/2018/06/economic-crisis-management/#respond Sat, 30 Jun 2018 12:03:00 +0000 Rashid Amjad http://www.ipsnews.net/?p=156497 Do forgive the people of this country if they cannot make sense of our present economic predicament. On one hand, they are told repeatedly (and correctly) that the economy has started reaping the benefits of CPEC — the ‘game changer’ — in the form of significantly reduced load-shedding, an upturn in investment and a not […]

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By Rashid Amjad
Jun 30 2018 (Dawn, Pakistan)

Do forgive the people of this country if they cannot make sense of our present economic predicament. On one hand, they are told repeatedly (and correctly) that the economy has started reaping the benefits of CPEC — the ‘game changer’ — in the form of significantly reduced load-shedding, an upturn in investment and a not unimpressive recovery in economic growth. At the same time, they are told that the economy is in dire straits!

A severe foreign exchange crisis threatens to reverse significantly the recent economic upturn. Our import bill exceeds our export earnings, including remittances, and if we add to it the repayments due on foreign loans, the gap is immense: $25 billion or over eight per cent of GDP. The country’s foreign exchange reserves are fast running out. We have already reached the critical level of just two months of imports. The alarm bells are ringing as foreign exchange reserves continue to lose almost $1bn a month. We must now wake up to the reality that, unless we can raise $8bn to $10bn in new loans and obtain a roll-over of existing debts, we could well face default on our debt payments — which is a polite way of saying ‘bankruptcy’.

The current state of economic affairs requires that some important decisions be taken.

The economic problem we now face cannot be traced solely to the previous government’s stubborn refusal to adjust the overvalued exchange rate. Our economic managers appear to have lost the plot over the last two years. For one, they were unable to keep track of CPEC-funded investment flows, whose exact form of financing has never been made transparent. The second and perhaps more important reason for our plight is that the federal and some provincial governments decided to go on a spending spree — launching projects, oblivious to their cost and foreign exchange implications. This is not new: the last two governments were equally guilty.

The current state of economic affairs cannot be allowed to continue. Some important decisions may need to be taken in the crunch, even by the interim government in the national interest. The simple reason for this is that, unless some immediate measures are taken to restore business confidence and, most importantly, to calm the foreign exchange market, the exchange rate will continue to fall. In the extreme scenario, we could enter a freefall situation. Given this uncertainty, anybody with some staying power will not be willing to part with their US dollars, betting that the rupee will fall even more. Those wanting foreign exchange will be chasing less and less available in the market.

Yet, nobody will bail us out, whether it is the IMF or anyone else, without imposing ‘conditionalities’ — primarily to ensure that they get their money back. Here, our team of negotiators (from the finance ministry and State Bank) must learn some lessons from the past. The last two governments entered into agreements with the IMF almost immediately upon coming into power. The 2008 agreement with the IMF was an unmitigated disaster in terms of its impact on growth, which fell from near 6pc to less than 1pc. The economy never quite recovered after that. The 2013 agreement, partly due to the groundwork done by the interim finance team, was able to avoid this shock through a more gradual decline in the fiscal deficit. However, agreeing almost immediately to a reforms agenda was unwise. To the extent possible, the new government should seek some time to finalise the content and sequencing of economic reforms, for which it can take full ownership and deliver.

The immediate challenge will be to agree to a stabilisation package, at an appropriate speed and sequencing of adjustment, that protects the country’s economic interests. Despite its weak bargaining position, the government should work towards a stabilisation package in which the burden of adjustment primarily falls in a sequenced way on the fiscal deficit rather than on the exchange rate. This is not to deny that we need to adjust the exchange rate, but we must keep this limited to its current overvaluation. We must remain fully aware that the cost of a very steep devaluation is especially high for our heavily indebted economy. Doing so would also raise the value of imports, especially oil products, fuelling inflation and eroding competitiveness. To that extent, it would neutralise the gains from devaluation. Most importantly, it would increase the cost of our defence preparedness, which in the current volatile situation cannot be compromised at any cost.

Of course, cutting the fiscal deficit is not without cost, even if the decline is made gradual. A 2pc drop in the fiscal deficit would reduce our current GDP growth of around 6pc to near half this amount. Most importantly, to counteract this, we must put in place measures that allow the recent growth momentum to build on the revival of manufacturing and upturn in exports and create the climate to encourage the much-awaited revival in private investment. All this will ensure that the decline in GDP growth is minimised. The emphasis here should be on reversing the anti-export trade and tariff regime and making a serious attempt at cutting down on losses from public-sector enterprises. This should entail including workers and their elected representatives in any restructuring negotiations.

Over the medium to long term, the policy focus must shift to expediting coal mining in Thar (which could finally remove our dependency on imported oil and gas), preserving and supplementing our water resources, and switching the emphasis in education from merely increasing numbers to improving the quality of education imparted and the social skills of our graduates.

If seriously and successfully monitored and implemented, this agenda will likely keep the newly elected government busy through its term in office. Come 2023, it will be judged on these achievements. Inshallah.

The writer is professor at the Lahore School of Economics and former vice chancellor of the Pakistan Institute of Development Economics.

This story was originally published by Dawn, Pakistan

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Trump is Here to Stay and Change the Worldhttp://www.ipsnews.net/2018/06/trump-stay-change-world/?utm_source=rss&utm_medium=rss&utm_campaign=trump-stay-change-world http://www.ipsnews.net/2018/06/trump-stay-change-world/#respond Mon, 18 Jun 2018 15:05:37 +0000 Roberto Savio http://www.ipsnews.net/?p=156274 Donald John Trump, 45th and current president of the United States, has been seen in many illustrious circles as an anomaly that cannot last. Well, it is time to look at reality. If we put on the glasses of people who have seen their level of income reduced and are afraid of the future, Trump […]

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By Roberto Savio
ROME, Jun 18 2018 (IPS)

Donald John Trump, 45th and current president of the United States, has been seen in many illustrious circles as an anomaly that cannot last. Well, it is time to look at reality.

If we put on the glasses of people who have seen their level of income reduced and are afraid of the future, Trump is here to stay, and he is a result and not a cause.

Roberto Savio

In his year and a half of government, Trump has not lost one of his battles. He has changed the political discourse worldwide, established new standards of ethics in politics, a new meaning of democracy, and his electoral basis has not been shrinking at all.

His critics are the media (which a large majority of Americans dislike), the elite (which is hated) and professionals (who are considered to be profiting at the expense of the lower section of the middle class).

There is now a strong divide with the rural world, the de-industrialised parts of the United States, miners with their mine closed, etc. In addition, white Americans feel increasingly threatened by immigrants, minorities, corporations and industries which have been using the government to their advantage. At every election their number shrinks by two percent.

Let us not forget that Trump was elected by the vote of the majority of white woman, in a country which is the bedrock of feminism.

I know that this could create some irate reactions. The United States is home to some of the best universities in the world, the most brilliant researchers as shown by the number of Nobel prizes awarded , very good orchestras, libraries, museums, a vibrant civil society, and so on. But the sad reality is that those elites count, at best, for no more than 20 percent of the population.

In 80 percent of cases, TV news is the only source of information on international affairs. Newspapers are usually only local, with exception of a few (Wall Street Journal, New York Times, Washington Post, Los Angeles Times, in all less than ten), and have a readership of 35 percent of the population.

You have only to travel in the US hinterland to observe two striking facts: it is very rare to meet somebody who knows geography and history even minimally, and everybody is convinced that the United States has been helping the entire world for which nobody is grateful.

An investigation by the New York Times found out that Americans were convinced that their country has been giving at least 15 percent of its budget for support and philanthropy. In fact, in recent decades the real figure has been below 0.75 percent. At the same time, it has a number of institutes of international studies of the highest level with brilliant analysts, plus a large number of international NGOs. But only 34 percent of the member of the Senate, and 38 percent of members of the House of Representatives have a passport…

The country is divided into two worlds. Of course, the same happen in every country, and in Africa or Asia the division between elite and low-level population is even more extreme. But the United States is an affluent country, where for more than two centuries efforts have been made on the fronts of education and integration in a country which has also been called the “melting pot”, and where it is widely believed that it is the best – if not the only – democracy in the world.

Trump, therefore, has an easy and captive electorate, made up of strong believers, and we cannot understand why, if we do not go over the history of American politics, which is in fact parallel to the political history of Europe. The calls for a lengthy analysis which is what is missing in today’s media, and in which recent US politics can be divided (very roughly) into three historical cycles.

The first, from 1945 to 1981), saw the political class convinced that the priority was to avoid a new world war. For this, institutions for peace and cooperation had to be built, and individuals were to be happy with their status and destiny.

Internationally, that meant the creation of the United Nation, multilateralism as a way to negotiate on the basis of participation and consensus, and international cooperation as a way to help poor countries develop and reduce inequalities. Domestically, this was to be done by giving priority to labour over capital. Strong trade unions were created and in 1979 income from labour accounted for 70 percent of total income. A similar trend was also the seen in Europe.

The second cycle ran from 1981 to 2009, the year Barack Obama was named president. On behalf of the corporate world, Ronald Reagan had launched the neoliberal wave. He started by shutting down the trade union of air traffic controllers, and went on to dismantle much of the welfare and social net built over the previous four decades, eliminating regulations, giving free circulation to capital, creating unrestricted free trade, and so on.

That led to delocalisation of factories, the decline of trade unions and their ability to negotiate, and a very painful reduction of the labour share of wealth, which fell from 70 percent in 1979 to 63 percent in 2014, and has continued to decline ever since.

Unprecedented inequalities have become normal and accepted. Today, an employee at Live Nation Entertainment, an events promotion and ticketing company, who earns an average of 24, 000 dollars would need 2,893 years to earn the 70.6 million dollars that its CEO, Michael Rapino, earned last year.

Reagan had a counterpart in Europe, Margaret Thatcher, who dismantled trade unions, ridiculed the concept of community and common goods and aims (“… there is no such thing as society. There are individual men and women and there are families …” ), partly followed by Gerard Schroeder in Germany. Globalisation became the undisputed new political vision, far from the rigid ideologies which had created communism and fascism, and were responsible for the Second World War. The market would solve all problems, and governments should keep their hands off.

Reagan was followed by Bush Sr., George H. W. Bush. who somewhat moderated Reagan’s policies. While he started the war with Iraq, he did not go on to invade the entire country. And he was followed by a Democrat, Bill Clinton, who did not challenge neoliberal globalisation but tried to ride it, showing that the left (in American terms) could be more efficient than the right. To give just one example, it was Clinton who completed deregulation of banks by repealing the Glass-Steagall Act which separated savings and investment banking. That led to the transfer of billions of dollars from savings to investments, or speculation, with the result that today banks consider customer activity less lucrative than investments, and finance has become a sector that is totally separate from the production of goods and services. There are now 40 times more financial transactions in one day than output from industry and services, and finance is the only sector of human activity without any international control body.

Markets are now more important than the vote of citizens given that, in many cases, it is they that decide the viability of a government. Furthermore, this has become a sector with no ethics: since the financial crisis of 2008, banks have paid a whopping amount of 321 billion dollars in penalties for illegal activities.

Clinton’s conviction that the left could be successful also had its counterpart in Europe, like Reagan had Thatcher. It was Tony Blair, who constructed a theoretical design for explaining the submission of the left to neoliberal globalisation: this was the so-called Third Way which was, in fact, was a centrist position that tried to reconcile centre-right economic and centre-left social policies.

However, it became clear that neoliberal globalisation was in fact lifting only a few boats and that capital without regulation was becoming a threat. Social injustices continued to increase and legions of people in the rural area felt that towns were syphoning off all revenues and that the elite was ignoring them, and unemployed workers and the impoverished middle class no longer felt old loyalties to the left, which was now considered representative of the elite and professionals.

In the United States the Democratic Party, which also held a neoliberal view with Clinton, began to change its agenda from an economic approach to one of human rights, defending minorities, Afro-Americans and immigrants, and advocating their inclusion in the system.

The fight was no longer between corporations and trade unions, and Obama was the result of that fight, the champion of human rights also as an instrument of international affairs. In fact, while he had a brilliant agenda on human rights, he did very little on the social and economic front, beside the law on national health. But his alliance of minorities and progressive whites was a personal baggage, who could not pass on to an emblematic figure of the establishment like Hillary Clinton.

That led to a new situation in American politics. Those on the left began to see defence of their identity (and their past) as the new fight, now that the traditional division between left and right had waned. Religious identity, national identity, fight against the system and those who are different, become political action.

It should be stressed that the same process happened in Europe, albeit in a totally different cultural and social situation. Those left out deserted the traditional political system to vote for those who were against the system, and promised radical changes to restore the glories of the past.

Their message was necessary nationalist, because they denounced all international systems as merely supporting the elites who were the beneficiaries. It was also necessarily to find a scapegoat, like the Jews in the thirties. Immigrants were perfect because they aroused fear and a perceived loss of traditional identity, a threat in a period of large unemployment.

The new political message from the newcomers was to empower those left out, those who felt fear, those who had lost any trust in the political class, and promise to give them back their sovereignty, reject intruders and take power away from the traditional elites, the professionals of politics, to bring in real people.

Since the end of the financial crisis in 2008 – which brought about even further deterioration of the social and economic situation) – those parties known as populist parties started to grow and they now practically dominate the political panorama.

In the United States, the Republicans of the Tea Party, radical right-wing legislators, were able to change the Republican party, pushing out those called compassionate conservatives because they had social concern. In Europe, the media were startled to see workers voting for Marine Le Pen in France, but the left had lost any legitimacy as representative of the lower incomes; technological change led to the disappearance of social identities, like workers.

In a period of crisis, there was no capability for redistribution. The left had now found itself in the middle of a crisis of identity and it will not emerge from it soon.

Let us now come to today. In November 2016, to universal amazement, (and his own) Trump was elected president of the United States, and just four months later, in March 2017, Brexit came as a rude awakening for Europe. The resentful and fearful went to the polls to get Great Britain out of Europe. The fact that the campaign was plagued by falsehood – recognised by the winners after the referendum – was irrelevant. Who was against Brexit? The financial system, the international corporations, the big towns like London, university professors: in other words, the system. That was enough.

Here, I have deliberately lumped together the United States and Europe (the European Union) to show that globalisation has had a global impact. A United States, which had been the creator and guarantor of the international system, started to withdraw from it under Reagan when he felt that it was becoming a straitjacket for the United States.

This started the decline of the United Nations: on American initiative, trade was taken away from the United Nations and the World Trade Organisation (WTO) was created. Globalisation has two engines, trade and finance, and both are now out of the United Nations, which has become an institution for health, education, children, woman and other non-productive sectors, according to the market. It is no coincidence that Trump is now fighting against the globalisation that United States invented, and one of its main enemies is the WTO.

An old maxim is that people get the government they deserve. But we should also be aware that they are being pushed by a new alliance: the alternative right alliance. In all countries it has the same aim: destroy what exists. This network is fed at the same time by Russia and the United States. American alt-right ideologues like Steve Bannon are addressing European audiences to foster the end of the European Union, with clear support from the White House. The populists in power, like Viktor Orban in Hungary or Matteo Salvini in Italy (as well those not in power, like Le Pen) all consider Trump and Vladimir Putin as their points of references. Such alliances are new, and they will become very dangerous.

And now we come to Mr. Trump. After what has been said above, it is clear why he should be considered a symptom and not a cause, while his personality is obviously playing an additional important role. It should be noted that he has not lost any important battle since he came to power. He has been able to take over the Republican party completely, and it is now de facto the Trump Party.

In the primaries for the November 2017 elections (for all House of Representative seats and 50 percent of those of the Senate), he intervened to support candidates he liked, and their opponents always lost. In South Carolina, conservative Katie Arrington, who won against a much stronger opponent, Mark Sanford, declared in her acceptance speech: our party is the Trump party.

Trump knows exactly what his voters think, and he always acts in a way that strengthens his support, regardless of what he does. He is a known sexist, and is now involved in a scandal with a porno star? He has moved the US embassy in Israel to Jerusalem and he now has the support of the evangelists, a very large and puritan Protestant group which is an important source of votes. (Interestingly, Guatemala and Paraguay which decided to move their embassies to Jerusalem are also run by evangelists.)

Trump has refused to disclose his incomes and taxes, and he has not formally separated himself from his companies. In the United States, this is usually is enough to force people to resign.

He has removed from his cabinet all the representatives of finance and industry he had put in on his arrival (in order to be accepted by the establishment) and replaced them with right-wing hawks, highly efficient and not morons, from National Security Advisor John Bolton to Secretary of State Mike Pompeo. He has managed to obtain Gina Hastel, a notorious torturer, as director of the CIA with the votes of Democrats.

He has turned his back on a highly structured treaty with Iran (and other four major countries) to forge a totally unclear agreement with North Korea, which creates problems with Japan, an American ally by definition. He has decided to side with Israel and Saudi Arabia against Iran, because that move has the support of a large American sector.

In addition to narcissism, what moves Trump are not values but money. He has quarreled with all historical allies of the United States and he is now engaging in a tariff war with them, while starting one with China, simply on the basis of money. However while erratic, Trump is not unpredictable. All that he has done, he announced during his electoral campaign.

Trump believes he is accountable to no one, and has created a direct relationship with his electors, bypassing the media. According to The Washington Post’s Fact Checker blog, which keeps track of Trump’s many misstatements, untruths and outright lies, he exceeded 3,000 untrue or misleading statements in his first 466 days – on average, 6.5 untruths a day. Nobody cares. Very few are able to judge.

When a president of United States announces that he is abandoning the treaty with Iran, because they are the main financier of ISIS and Al Qaida, the lack of public reaction is a good measure of the total ignorance of most Americans.

Americans have no idea that Islam is divided between Sunni and Shiite, and that the terrorists are Sunni and based on an extreme interpretation of Islam, Wahhabism, or Salafism. Iranians, who are not Arabs, are Shiite, and are considered apostate by the Sunni extremists; Iran has lost thousands of men in the fight against ISIS.

This ignorance helps Trump win Republican voters, no matter what.

The fact that Trump knows exactly what his voters feel and think feeds his narcissism. After his meeting with North Korea’s Kim Jong-un, at a press conference he said of previous US presidents: “I don’t think they’ve ever had the confidence, frankly, in a president that they have right now for getting things done and having the ability to get things done”.

He does not tolerate any criticism or dissent, as his staff well knows. The result is that he is surrounded by yes men, like no president before. His assistant for trade, Peter Navarro, has declared that there should be a special place in hell for foreign leaders who disagree with Trump.

According to the large majority of economists, the tariff war that he has now started now with US allies plus China will bring growth down all over the world, but nobody reacts in the United States. It is all irrelevant to his voters. He now has a 92 percent rate of confidence, the highest since the United States has existed.

Considering all he has done in less than two years against the existing order leads us to consider that the real danger is that he will be re-elected, and leave office only in 2024. By then, the changes in ethics and style will have become really irreversible.

With many candidates in various countries looking to him as a political example, he will certainly be able to change the world in which we have grown and which, albeit with many faults, has been able to bring about growth and peace.

It is true that the traditional political system needs a radical update, and it does appear able to do so. Meanwhile, it is difficult to foresee how a world based on nationalism and xenophobia – with a strong increase in military spending worldwide, and many other global problems from climate change to no policy for migration, and a global debt that has reached 225 percent of GNP in ten years – will be able to live without conflicts,

What we do know is that the world which emerged from the Second World War, based on the idea of peace and development, the world which is in our constitutions, will disappear.

Democracy, can be a perfect tool for the legitimacy of a dictator. This is what is happening in the various Russias, Turkeys, Hungarys or Polands. A strongman wins the elections, then starts to make changes to the constitution in order to have more power. The next step is to place cronies in institutional positions, reduce the independence of the judiciary, control the media, and so on. That is then followed by acting in name of the majority, against minorities.

This is not new in history. Hitler and Mussolini were at first elected, and today many “men of providence” are lining up.

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Warnings of a New Global Financial Crisishttp://www.ipsnews.net/2018/06/warnings-new-global-financial-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=warnings-new-global-financial-crisis http://www.ipsnews.net/2018/06/warnings-new-global-financial-crisis/#respond Mon, 11 Jun 2018 13:37:05 +0000 Martin Khor http://www.ipsnews.net/?p=156146 Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank of International Settlements, the bank of central banks.

Credit: Bigstock

By Martin Khor
PENANG, Malaysia, Jun 11 2018 (IPS)

There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank of International Settlements, the bank of central banks.   

The warnings come at a moment when there are signs of international capital flowing out of some emerging economies, including Turkey, Argentina and Indonesia.

Some economists have been warning that the boom-bust cycle in capital flows to developing countries will cause disruption, when there is a turn from boom to bust.

All it needs is a trigger, which may then snowball as investors in herd-like manner head for the exit door.  Their behaviour is akin to a self- fulfilling prophecy: if enough speculative investors think this is the time to move back to the global financial capitals, then the exodus will happen, as it did in previous “bust” phases of the cycle.

Soros recently told a seminar in Paris:  “The strength of the dollar is already precipitating a flight from emerging-market currencies.   We may be heading for another major financial crisis. The economic stimulus of a Marshall Plan for Africa and other parts of the developing world should kick in just at the right time.”

There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank of International Settlements, the bank of central banks.

Martin Khor

If Soros is right about an imminent crisis, its trigger could come from another European crisis.   Or it could be outflow of funds from several developing countries. Some had received huge inflows when returns were low or even zero in the rich countries.  With US interest rates and bond prices going up, the reverse flow is now taking place and it is only the start with more expected to take place.

Soros’ prediction may not be widely shared.  “Honestly I think that’s ridiculous,” said the head of investment bank Morgan Stanley commenting on Soros.

The Soros warning reminded me of a South Centre debate held in Geneva in April, when we hosted two eminent main speakers to launch their book, “Revolution Required: The Ticking Bombs of the G7 Model.”

The authors were Peter Dittus, former Secretary General of the Bank of International Settlements (BIS), and Herve Hamoun, the former Deputy General Manager of BIS.  The BIS is a club of 60 central banks, known as the bank for central banks.

You can’t get a more respected conservative establishment than the BIS, also famous for the quality of its research.

Yet the two recently retired top BIS leaders wrote a book in simple direct language warning of “ticking time bombs” in the global financial system waiting to explode because of the reckless and wrong policies of the major developed countries. Nothing short of a revolution in policy is required, to minimise the damage of a crisis that is about to come, they say.

At the Geneva meeting, Dittus and Hannoun pointed to several problems or “time bombs” that had developed in the developed countries, with potential to harm the world.

The main problem is what they call the G7 debt-driven growth model.  The major countries, except Germany, have lax fiscal policies with high government liabilities as percent of GDP.  In particular the United States has an irresponsible fiscal policy which it has exported to other G7 countries, except Germany.

The unprecedented asset price bubble engineered by G7 central banks is a ticking time bomb that is ready to burst, after seven years of near zero interest rates and speculative excesses in bonds, stocks and real estate. The Federal Reserve has dealt with the bursting of every asset bubble of the last 20 years by creating another, larger bubble.

The US administration has expanded new expenditure and tax cuts by over a trillion dollars, with no funding other than more debt. This “reckless behaviour”, leading to a US fiscal deficit projected to be around 1 trillion USD in 2019, was made possible by the permissive monetary policy conducted by the Fed since 2009, the silence or complacency of the big three US based ratings agencies, and the IMF’s blessing.

The G7 central banks have also become the facilitators of unfettered debt accumulation, according to the authors. The near zero or negative nominal interest rates are a huge incentive to borrow and extreme monetary policies have destroyed any incentive to fiscal rectitude.

G7 total debt in 3rd quarter 2017 was around USD 100 trillion. Together the US, the UK, Canada, Japan and the Eurozone account for 64% of the world total debt.

The authors assert the G7 extreme monetary policies since 2012 have undermined the foundations of the market economy.

There are now centrally planned financial markets and the break up of key elements of the market economy model.

Long term interest rates are manipulated, valuations of all asset classes are deeply distorted, sovereign risk in advanced economies is deliberately mispriced, and all these do not reflect fundamentals.

They warn that the unprecedented asset price bubble engineered by G7 central banks is a ticking time bomb that is ready to burst, after seven years of near zero interest rates and speculative excesses in bonds, stocks and real estate. The Federal Reserve has dealt with the bursting of every asset bubble of the last 20 years by creating another, larger bubble.

They also warn that the quantitative easing policy of recent years may shift to a worse policy of government debt monetisation.

Although central banks have made it very clear that large scale government bond purchases are a temporary measure taken for monetary policy reasons, they are slipping into a different concept – that of a permanent intervention of central banks in government bond markets.

This is seen as a way to solve the sovereign debt crisis in major advanced economies, by transferring a growing part of government debt to the central bank: 43 per cent of G7 government bonds in major reserve currencies are now held by central banks and other public entities

G7 central banks are at risk of heading towards the slippery slope which ultimately leads to government debt monetization.

G7 central banks at the cross roads: normalisation or debt monetisation?

They are facing a dilemma, the authors point out.  They have to choose between highly risky scenarios: policy normalisation or government debt monetization?

For the time being, the Fed and the Bank of Canada are leaning towards normalization, albeit at a slow pace, while the ECB and the Bank of Japan are dangerously heading towards a continuation in a way or another of the debt monetization experiment.

Here is the dilemma: G7 central bank’ policy normalisation is the only option consistent with their mandate and with a return to the rules of a market economy. But when G7 Central Banks eventually exit from their unconventional policies, they will contribute to the bursting of the asset price bubbles engendered by their monetary experiment.

This could well be the worst financial crisis ever experienced, as the level of debt and the artificial level of asset prices have no precedent.

But an even worse systemic crisis would result from the continuation of current unconventional policies leading central banks to cross the rubicon of government debt monetisation. The perpetuation of these policies, with their zero or negative interest rate policy and large-scale purchases of government debt, would encourage fiscal deficits and the continued expansion of public debt.

Public debt monetisation, through the transfer of always more government bonds on G7 central banks balance sheets, would destroy the market economy as it would pave the way for an unlimited expansion of the public sector, say the authors.

The above shows why the former BIS officials believe a new financial crisis is brewing.  Changing the recent policy will lead to an explosion, but continuing with the same policy while buying time will lead to an even bigger crisis.

Their analysis of the crisis in the G7 countries matches that of Yilmaz Akyuz, the South Centre’s Chief Economist and author of the book, Playing With Fire.

Akyuz goes further, in analysing the impact a global crisis will have on developing countries.  Since the 2009 global crisis, the developing countries have built up new and increased vulnerabilities to global financial shocks.

Their financial sector has established even more and deeper links to international financial markets, shown for example by high percentage of the ownership of foreign funds and investors in the domestic stock markets and in government bonds of developing countries.

Therefore if there is a significant or big outflow of these foreign funds, the some economies may suffer from loss of foreign reserves, currency depreciation, higher external debt servicing, higher import prices, falling prices of houses and equities and in worse cases an external debt crisis.  A few developing countries are already facing crisis and seeking IMF bail-outs.

Many developing countries still have strong economic fundamentals.  But in many cases, their economies are weakening in one way or other, and the worsening global economic prospects (including the real possibility of a trade war) do not augur well.  The conditions for an external-debt problem have increased.

It would thus be wise for them to monitor and analyse what is happening globally, as these will significantly affect the economy. Scenarios should be established on what may happen externally, including the onset of a new global crisis, how this may affect the economy in various ways, and to prepare for various measures that can be taken.  Crisis prevention and crisis aversion should now be a priority.

Dealing with the domestic economic issues should go together with preparations to cope with changing external situations. Though we may not be able to control what happens abroad, we can take measures to respond appropriately.

 

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Excerpt:

Martin Khor is Executive Director of the South Centre, a think tank for developing countries, based in Geneva

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Greece: SDGs a Way to End Economic Crisis?http://www.ipsnews.net/2018/06/greece-sdgs-way-end-economic-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=greece-sdgs-way-end-economic-crisis http://www.ipsnews.net/2018/06/greece-sdgs-way-end-economic-crisis/#respond Fri, 08 Jun 2018 16:50:43 +0000 Maged Srour http://www.ipsnews.net/?p=156119 Seven years after being on the verge of a financial collapse, Greece is now seeing better times. Its economic accounts have clearly improved but what is not under the spotlight is how the Greek people are still paying for the effects of the crisis. During these past years, the country has achieved some partial gains. […]

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Greece is now seeing better times: its economic accounts have clearly improved but the Greek people are still paying for the effects of the crisis

A Greek flag waving in the locality of Oia, Greece. Credit: Matt Artz on Unsplash

By Maged Srour
ROME, Jun 8 2018 (IPS)

Seven years after being on the verge of a financial collapse, Greece is now seeing better times. Its economic accounts have clearly improved but what is not under the spotlight is how the Greek people are still paying for the effects of the crisis.

During these past years, the country has achieved some partial gains. It is the first time, since 2011, that economic accounts of Greece are so encouraging that the country is looking with some optimism to the month of August 2018 when the last phase of European aid will be over definitely.

The purchasing power of the people has fallen by approximately 29% and unemployment has reached 23% for adult workers and, a stunning 40% for young people

The surplus during the first nine months of 2017 was 2.2% higher related to the 1.75% imposed by the European Union. The GDP growth was 1.9% in 2017 and estimates show it will reach 2.5% in 2018.

Among the most significant levers of the Greek recovery is the increase of its exports. In particular, the production and sale of liqueurs, as well as the car industry are both stimulating growth. Tourism remains a pillar of the Greek economy. In 2017, it was 17% higher than the year before.

However, despite these positive signs, the reality on the ground is bitter sweet. The purchasing power of the people has fallen by approximately 29% and unemployment has reached 23% for adult workers and, a stunning 40% for young people. Greece might not risk that default that was feared a few years ago but the ordinary people are facing tough challenges even to meet some basic needs such as covering rents and paying bills.

The people in general are far from being out of the crisis. However, while living this situation of high unemployment and uncertainty about their future, the Greeks have started, during these past few years, to turn back to the land in order to earn money.

Agriculture is the main sector that has not suffered in a substantial way and, has been constantly showing (relatively) positive signs. According to the Panhellenic Confederation of Unions of Agricultural Cooperatives, during the first years of the crisis, between 2008 and 2010, agriculture created 32,000 new jobs and the majority of these jobs were taken up by Greek nationals.

Those who owned a plot of land, in some cases inherited, on a small island or in the countryside, decided to leave the dramatic situation in Athens and return to their lands to work on ecotourism or farming.

Greece is now seeing better times: its economic accounts have clearly improved but the Greek people are still paying for the effects of the crisis

Credit: Vesela Vaclavikova on Unsplash

Additionally, many young people started to show interest in the faculties of agriculture, as applications for such courses tripled in the past few years. However, among those who decided to abandon the urban areas to live and work in the rural ones, the majority are aged between 40 and 60 years old. The majority of these people had lost their jobs just before retirement, waiting to receive their pension.

According to the Food Sustainability Index (FSI) 2017, which was developed in collaboration between the Barilla Center for Food and Nutrition (BCFN) and the Economist Intelligence Unit with the objective to “promote knowledge on food sustainability”, Greece earned a positive score in sustainable agriculture.

The FSI ranks 34 countries according to their food system sustainability. It aims to highlight issues across three pillars: food loss and waste, sustainable agriculture and nutritional challenges. Despite having only a mid-level score for food loss and waste, and minimal scores for the policy response to food loss, “Greece earned a high score for sustainable agriculture, with a strong performance for the air category (GHG emissions), and for sub-indicators such as diversification of agricultural system, land ownership and sustainability of water withdrawal serving to bring up the score in the land and water categories”.

When considered in conjunction with the water scarcity situation of the country, this high score in the agricultural sector gains an additional prize. Indeed, according to the FSI, the average number of months of freshwater scarcity in Greece is six and despite that, the country has been able to maintain a high level of performance in the sector.

Not surprisingly, Greece has recently showed interest in sharing its high expertise and level of innovations in agro-technology with Qatar in a bid to develop and support the tiny Gulf country’s agriculture sector and self-sufficiency initiatives.

Greece’s third bailout is due to expire in August 2018 and the Hellenic country aims to return to a path of growth after years of crisis and uncertainty. During the Fourth Agricultural Business Summit, which took place in Larissa on May 3, 2018, organized by The Economist under the auspices of the Greek Ministry of Rural Development and Food, experts and policymakers gathered to discuss the priorities and challenges that need to be resolved as of 2018 and beyond in the field of agriculture in relation to business.

The analysts discussed if Greece could play a leading role in South-East Europe and whether the Greek Agribusiness sector will be able to transform uncertainty into stability, competitiveness and growth.

It is hard to forecast with accuracy the outcome of the next following months and years but, the fact that the Greek establishment (academia, businesses, policymakers, etc.) is showing its willingness to act and implement a concrete roadmap to end the crisis through the SDG Agenda, means that the country strongly believes in Agenda 2030which is the driving force to start growing again.

In addition, a study, published by SEV Business Council for Sustainable Development and conducted by the Climate Change and Sustainability Services Practice of Ernst & Young in Greece highlighted “to identify the current status in Greece, regarding the level of awareness, readiness and willingness of Greek companies towards integrating the SDGs in their strategy”. One of the key findings of the study brings some optimism for the future of Greece.

For example, regarding awareness and readiness on SDGs among Greek companies, the study revealed that “senior executives, regardless of company size, have a high level of knowledge of sustainable development issues related to the Goals. The engagement and awareness of middle management executives on sustainable development issues related to the Goals constitute a crucial factor for their successful implementation”.

Beginning in August 2018, the economic system of Greece will once again have to walk on its own legs. Many analysts believe that the commitment of Greek authorities in the past few years in planning and implementing a sustainable agenda will help Athens to develop in the next future without the support of the EU and IMF.

By the end of 2018, we will undoubtedly have the first answers to this dilemma and the 2019 elections will also tell us if the Greek people view the government’s efforts of the past few years as the best it could do and achieve.

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Renewed Crises in Emerging Economies and the IMF ‒ Muddling Through Again?http://www.ipsnews.net/2018/06/renewed-crises-emerging-economies-imf-%e2%80%92-muddling/?utm_source=rss&utm_medium=rss&utm_campaign=renewed-crises-emerging-economies-imf-%25e2%2580%2592-muddling http://www.ipsnews.net/2018/06/renewed-crises-emerging-economies-imf-%e2%80%92-muddling/#respond Tue, 05 Jun 2018 14:02:06 +0000 Yilmaz Akyuz http://www.ipsnews.net/?p=156062 Yilmaz Akyüz is chief economist, South Centre, Geneva and former Director of the Division on Globalization and Development Strategies, UNCTAD, Geneva

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A group of demonstrators protest in the Argentine city of Rosario against the wave of lay-offs of public employees since President Mauricio Macri took office. Credit: Courtesy of Indymedia.org

A group of demonstrators protest in the Argentine city of Rosario against the wave of lay-offs of public employees since President Mauricio Macri took office. Credit: Courtesy of Indymedia.org

By Yilmaz Akyüz
GENEVA, Jun 5 2018 (IPS)

It is now more than a decade and a half since the last severe currency crisis in a major emerging economy ‒ that was in Argentina in 2001-2002 following a series of crises in Russia, Turkey and Brazil.  It is now common knowledge that such crises generally occur when countries fail to manage surges in capital inflows so as to prevent build-up of fragility including currency appreciations, large and persistent current account deficits, increased leverage and currency and maturity mismatches in balance sheets.  

The absence of a major crisis in the Global South since the early years of the new millennium owes not so much to judicious management of the surge in capital inflows that had begun in the early 2000s and continued with full force after the global financial crisis, as to persistently benign global financial conditions resulting from exceptional monetary policies in the US, Europe and elsewhere in advanced economies and favourable global risk appetite.

Even though there has been no fundamental reversal of these policies, the arrival of Minsky moment appears to be imminent with markets, in expectations of normalization of monetary policy in the US, getting nervous about the risks they have taken by investing heavily in emerging economies with poor economic fundamentals in search for yield in conditions of low global interest rates and ample supply of liquidity.

Yilmaz Akyüz, chief economist of the South Centre, Geneva.

The first serious signs have appeared in Argentina with the recently elected government of Macri knocking on the doors of the IMF. But Argentina is perhaps only the tip of an iceberg. Several other emerging economies are equally and even more susceptible to sudden stops and reversals of capital flows and currency and balance of payments crises.

In typical IMF interventions in previous crises, liquidity support was provided mainly to keep debtor countries current on their payments to international creditors and to maintain the capital account open.  As a result, obligations to private creditors were translated into debt to the IMF. Simultaneously, austerity was imposed on debtors by means of hikes in domestic interest rates, fiscal retrenchment, cuts in employment, wages and pensions in order to achieve a sharp turnaround in the current account, primarily through import compression, and to restore confidence among international creditors and investors.

This approach to crisis management was widely criticised on several grounds.  A strong case was made that the combination of debtor austerity and creditor bailout would lead to inequality between debtors and creditors in the incidence of the burden of the crisis, create moral hazard by allowing creditors to avoid the full consequences of the risks they have taken and are paid for, and endanger the financial integrity of the Fund.

Inequalities could also be created among creditors; in the event of a default and restructuring, those who exit first could escape without haircut, leaving the others to take the full brunt of debt write-offs. Profit opportunities are also created for vulture funds, at the expense of genuine creditors as well as the debtor, as seen in the case of Argentina.

Considerable scepticism was also expressed within the Fund about the wisdom of using public money to bail out private creditors and investors.  During the earlier episodes of crises, the IMF Board recognized the need for involving the private sector in forestalling and resolving financial crises, but insisted on voluntary mechanisms, notably collective action clauses (CACs) and automatic rollover clauses in debt contracts and informal negotiations between debtors and creditors.

However, as these proved ineffective and some advanced economies started to oppose bailouts, the IMF Board agreed that in extreme circumstances, if it is not possible to reach agreement on a voluntary standstill, members may find it necessary, as a last resort, to impose one unilaterally, and that since there could be a risk that this action would trigger capital outflows, a member would need to consider whether it might be necessary to resort to the introduction of more comprehensive exchange or capital controls.

No protection against litigation was offered, but it was suggested that the Fund could signal its acceptance of a standstill imposed by a member by lending into arrears to private creditors.  The Fund staff went further and proposed a formal Sovereign Debt Restructuring Mechanism (SDRM) to facilitate sovereign bond workouts.  However, this did not elicit adequate support and had to be abandoned. The issue was soon forgotten with a rapid recovery of capital inflows to emerging economies and bounce back of economic activity in crisis-hit countries.

However, private sector involvement in crisis resolution was back on the agenda again with the onset of the Eurozone crisis.  The Fund turned its attention to sovereign debt restructuring after misjudging the sustainability of the Greek debt, very much in the same way as it had done with Argentina about a decade earlier, pouring in money to bail out private creditors.

It restarted searching ways and means for involving the private sector in crisis resolution so as to “limit the risk that Fund resources will simply be used to bail out private creditors” and to ensure that private creditors made some concessions and took some losses on their holdings as a condition for Fund lending.

Subsequently it was suggested that the sovereign approaching the Fund for assistance were to be asked to find ways of rolling over all bonds and commercial loans falling due within the life of the Fund programme.  This would be necessary whether external payments difficulties are perceived to be as one of liquidity or solvency which is often difficult to identify with a reasonable degree of precision ex ante.

This so-called “reprofiling” was again to be market-based and voluntary.  However, no statutory mechanism was proposed for bailing in the private creditors in the event of failure of a voluntary agreement.  In such an event, as long as the IMF stood firm in refusing lending without private sector involvement, the debtor would have had no option but to impose unilateral standstills on its obligations to private creditors, but without any statutory protection against litigation.  Although various proposals were made outside the Fund to address the holdout problem and protect debtors against litigation, the matter was once again put aside without being resolved.

The stakes are now getting higher because of massive amounts of external liabilities that emerging economies built up in the past ten years.  These are not only in debt contracted in reserve currencies, notably by private corporations, but also unprecedented amounts of foreign holdings in local deposit, bond and equity markets.

Furthermore, most emerging economies have eliminated or significantly reduced restrictions over capital outflows by residents. Consequently, exit of nonresidents from local markets and capital flights by residents now constitute bigger sources of potential drain on reserves of emerging economies than external debt contracted in reserve currencies.

Emerging economies are widely commended for large amounts of international reserves they have accumulated in the new millennium.   However, in the large majority of cases these came from capital inflows rather than current account surpluses. Cumulatively, all G20 emerging economies except China and Russia have registered current account deficits since the beginning of the millennium, at a total amount of some $2 trillion while their external labilities have increased by over $4 trillion.

Reserves accumulated is less than a quarter of the increase in total liabilities while the rest of capital inflows (new liabilities) has been used for financing current account deficits or private acquisition of assets abroad – assets that would not necessarily return at times of interruption and reversal of non-resident capital inflows.

As of end 2016, on average, the reserves of deficit G20 emerging economies were less than one-third of their total non-FDI external liabilities including debt issued internationally and non-resident holdings in local deposits, bonds and equities.   In many cases these holdings plus short-term forex debt reach or exceed international reserves. In most cases reserves would be totally inadequate to provide a reliable buffer against a generalized exit of non-residents and a widespread capital flight by residents.

Given the dismal record of the IMF in crisis intervention and management, many emerging economies are loath to go back to the IMF in the event of a severe currency and liquidity crisis, except those such as Argentina whose neo-liberal policies are strongly supported by the IMF.  In any case at some $800 billion, the lending capacity of the IMF would be too small to take on the task. The level of liquidity that may be needed by many emerging economies in the event of capital reversals exceed by a large margin what the IMF could provide under exceptional financing.

Most emerging economies would also be highly reluctant to resort to unilateral debt standstills and exchange controls in view of their exposure to creditor litigation and chronic dependence on international lenders and investors.  On the other hand, not much relief could be expected from South–South multilateral arrangements for liquidity provision, notably the Chiang-Mai Initiative Multilateralization (CMIM) of East Asian countries and the Contingent Reserve Arrangement (CRA) of BRICS.

These are not only small in size but also have design problems. The CMIM has never been called upon, even during the global crisis. It does not include a common fund but a series of promises to provide liquidity, with each country reserving the right not to contribute to the specific request by a member.  Its size is $240 billion and access beyond 30 per cent of quotas is tied to an IMF program.

The CRA is also designed to complement rather than substitute the existing IMF facilities. Its size is even smaller, $100 billion, and access beyond 30 per cent is also tied to the conclusion of an IMF programme. Thus, these regional arrangements do not provide escape from IMF conditionality and surveillance.

That leaves bilateral swaps among central banks and bilateral lending by governments of reserve-currency countries, notably the US, and surplus emerging economies with ample international reserves such as China.  A very large part of bilateral swaps established by the US Federal Reserve is with other advanced economies.

Those with emerging economies (Brazil and Mexico) are too small to provide much relief.   In the words of the former chair of the US Federal Reserve, Janet Yellen, expanding the swap lines to serve as a safety net for countries encountering balance of payments pressures is not within the Fed’s mandate and therefore is a complete non-starter.  China has swaps with over 30 countries. But these are mostly with advanced economies and designed to support trade and investment and to promote the international use of renminbi rather than boost reserves.

To sum, as recognised by the IMF, the global financial safety net including international reserves, Fund resources, bilateral swap arrangements, regional financing arrangements is “fragmented with uneven coverage” and “too costly, unreliable and conducive to moral hazard”.

Given the aversion of emerging economies to the IMF and unilateral debt standstills and exchange controls, the next crisis is likely to be even messier than the previous ones. Some countries may seek and succeed in getting bilateral support from China or some reserve-currency countries according to their political stance and affiliation.

For instance, one of the most vulnerable emerging economies, Turkey, is likely to approach China, Russia or some Gulf states with strong reserve positions rather than the IMF if its currency goes into a free fall. In such cases, crisis intervention would become even more politicised than in the past and a lot less reliant on multilateral arrangements.

By failing to establish an orderly and equitable system of crisis resolution, the IMF may very well find its role significantly diminished in the management of the next bout of crises in emerging economies. In other words, multilateralism, however imperfect, could face another blow in the sphere of finance after trade.

 

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Excerpt:

Yilmaz Akyüz is chief economist, South Centre, Geneva and former Director of the Division on Globalization and Development Strategies, UNCTAD, Geneva

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Wider Views for More Equal Societieshttp://www.ipsnews.net/2018/05/wider-views-equal-societies/?utm_source=rss&utm_medium=rss&utm_campaign=wider-views-equal-societies http://www.ipsnews.net/2018/05/wider-views-equal-societies/#comments Wed, 02 May 2018 01:08:45 +0000 Oscar A. Garcia http://www.ipsnews.net/?p=155570 Inequalities are on the rise. Since 1980, 1% of the richest people have received double income than the 50% of the poorest. After several years of decline, hunger is also on the rise. The report on the State of Food Security and Nutrition in the World estimates that the number of chronically undernourished people in […]

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By Oscar A. Garcia*
ROME, May 2 2018 (IPS)

Inequalities are on the rise. Since 1980, 1% of the richest people have received double income than the 50% of the poorest. After several years of decline, hunger is also on the rise. The report on the State of Food Security and Nutrition in the World estimates that the number of chronically undernourished people in the world increased from 777 million in 2015 to 815 million in 2016. If we go deeper into the analysis we observe that three-quarters of the world’s extremely poor and food-insecure people live in rural areas.

Oscar A. Garcia

Poorest and excluded

Along the path to economic growth, millions of people are excluded. They are individuals who belong to groups that are discriminated against and excluded within their own societies. This discrimination may be on grounds of religion, ethnicity, gender and/or disability. Inequalities are multi-dimensional, multi-layered and cumulative; untangling such complexities is a challenge we must act on. Without understanding the root causes of inequalities, we cannot remove the inequalities themselves, along with the immense barriers they create and which prevent the world’s poorest – those at the “bottom of the pyramid” – from thriving. Without transforming the restrictions that reinforce the deep-seated causes of chronic poverty, substantial progress is unlikely.

Comprehensive analysis to enlighten the path

The discourse needs to shift its focus to the structural issues of inequality, whether economic, political or social. Why is it that tens of millions of people are without clean water? Why is it that poor women do not have access to land? Why is that millions are without food and adequate living conditions? The answers and the realities go far deeper than the issue of poverty alone, and we must arrive at the last corner of those realities and the spaces where people are discriminated against.

Countering inequalities requires robust evidence and more disaggregated data. It also requires going beyond traditional approaches. We need to improve our analytical frameworks, ask the right evaluation questions, talk to poor people and understand their needs, based on which a revitalized development agenda on inequality will emerge. High levels of inequalities can be brought down if we are able to create redistributive policies geared toward shared prosperity, social justice, and democracy for all people.

These and other issues will be discussed at the International Conference “Rural Inequalities: Evaluating approaches to overcome disparities“, organized by the Independent Office of Evaluation of IFAD, and held on 2-3 May in Rome.

*Oscar A. Garcia, is Director of the Independent Office of Evaluation of the International Fund for Agricultural Development, IFAD, a specialized agency of the United Nations.

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Blending Finance Not SDG Financing Silver Bullethttp://www.ipsnews.net/2018/04/blending-finance-not-sdg-financing-silver-bullet/?utm_source=rss&utm_medium=rss&utm_campaign=blending-finance-not-sdg-financing-silver-bullet http://www.ipsnews.net/2018/04/blending-finance-not-sdg-financing-silver-bullet/#respond Mon, 30 Apr 2018 13:42:21 +0000 Anis Chowdhury and Jomo Kwame Sundaram http://www.ipsnews.net/?p=155535 After largely failing to provide 0.7 per cent of their Gross National Income (GNI) in aid to developing countries for almost half a century since making the commitment, donor countries have recently promoted blended finance (BF) as a solution to the financing for development challenge. Blending refers to combining public development funds (in the form […]

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By Anis Chowdhury and Jomo Kwame Sundaram
SYDNEY & KUALA LUMPUR, Apr 30 2018 (IPS)

After largely failing to provide 0.7 per cent of their Gross National Income (GNI) in aid to developing countries for almost half a century since making the commitment, donor countries have recently promoted blended finance (BF) as a solution to the financing for development challenge. Blending refers to combining public development funds (in the form of grants, technical assistance or interest indemnification) with loans from private lenders.

Credit: OECD

Following adoption of Agenda 2030 for the Sustainable Development Goals (SDGs), the OECD and the World Economic Forum (WEF) claimed that “blended finance represents an opportunity to drive significant new capital flows into high-impact sectors, while effectively leveraging private sector expertise in identifying and executing development investment strategies”.

Potential and progress
The OECD and WEF launched the multi-year ReDesigning Development Finance Initiative (RDFI) in 2013 to promote public-private cooperation for sustainable development. The RDFI defines BF as “the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets”.

The RDFI promoted BF at the Third International Conference on Financing for Development (FfD3) in Addis Ababa in July 2015. A BF pioneer claimed BF had been effective in targeted development interventions and would complement traditional overseas development aid (ODA) such as grants.

The European Council endorsed BF as a tool of development cooperation in 2014, with other donors following suit. Multilateral development banks (MDBs) have enthusiastically embraced BF, issuing From Billions to Trillions: Transforming Development Finance, which claimed that it ensures “the best possible use of each grant dollar”. The Canadian minister of international development echoed this in Turning billions into trillions: The power of blended finance.

In a 2017 report, the OECD argued that BF can help bridge the US$2.5 trillion annual investment gap for SDGs in developing countries. The European Union (EU), the single largest promoter of BF, has made the European Fund for Sustainable Development key to its External Investment Plan (EIP) to address investment gaps in 18 countries of Southeastern Europe, Central and West Asia, and Africa, with a budget of €2.6 billion and guarantees of €1.5 billion.

According to the 2018 Inter-Agency Task Force (IATF) report on Financing for Development, 17 of 23 DAC members are engaged in BF, often through intermediaries such as development banks and finance institutions. It also noted that 167 new blended finance facilities, with approximately US$31 billion in commitments, and 189 blended finance funds were launched during 2000-2016.

A 2016 OECD survey found US$81.1 billion from the private sector mobilized through five instruments (guarantees, syndicated loans, credit lines, direct investments in companies, and shares in collective investment vehicles) during 2012-2015.

What’s the catch?
The IATF Report noted the lack of a universally agreed definition of BF, while a 2017 OXFAM-EURODAD report listed six different definitions. All accept ODA (e.g., grants), but other non-ODA official finance (e.g., export credit) are also included. Confusingly, terms such as ‘leveraging’, ‘mobilizing’ and ‘catalyzing’ are used interchangeably.

Thus, monitoring BF’s actual magnitude and development impact is difficult. BF often lacks transparency and accountability, with insufficient information made public. Noting the confusion, OXFAM-EURODAD argued that BF can be problematic: it is not necessarily pro-poor and mainly serves middle-income countries.

Like others, they also found donor country private corporations favoured, as with tied aid. When relying on external private finance, BF often crowded out host country financial sectors. Furthermore, BF projects may not be aligned with national plans, and usually do not involve stakeholder participation, undermining country ownership. An evaluation of the EU’s EIP found no reliable evidence of BF mechanisms actually aligned with and contributing to development objectives.

Worsening inequality

The IATF found BF has largely bypassed LDCs so far. ¬In 2016, the MDBs mobilized US$49.9 billion in private co-financing, with only US$1 billion going to LDCs, where infrastructure gaps are greatest. An OECD survey found that only 7 per cent of private finance was for projects in LDCs. According to the 2017 OECD report, between 2012 and 2015, most private financing mobilized by ODA was for middle income countries, with little trickling to LDCs. It also noted that private capital was greatest for finance and energy.

The IATF also observed that BF tends to target investment areas where the business case is clearer—such as energy, growth, infrastructure, climate action and, to a lesser extent, water and sanitation. BF is much smaller for areas such as ecosystems, reflecting such investments’ strong ‘public good’ character, with public finance generally more effective.

OXFAM-EURODAD noted that by pooling public resources and using ODA to subsidize private companies usually owned and domiciled in OECD countries, BF diverts aid from social programmes and essential services. Clearly, private finance is not guided by the same interests and principles as public finance, and cannot be presumed to serve the public interest.

Labelling BF a ‘honey trap’, The Economist noted, “Private investors do not typically fund the construction of rural roads in Africa, say, or vaccination drives in villages, even though the returns on such investments are often enormous. That is because the returns are either hard to monetize, or the risks are too great for the private sector to tolerate.”

It is unclear how public development funds, channelled through risky commercial financial services, will effectively mobilize private resources for sustainable development. There is no evidence that current BF practices are achieving development outcomes that would not have happened otherwise. After all, existing BF mechanisms do not safeguard the public interest and achieve development objectives.

The IATF report noted limited evidence of any additional development impact due to BF. Many BF projects do not monitor development impacts, while the few evaluations made are rarely publicly available. The limited evidence available suggests a modest impact on poverty.

Going forward
ODA nevertheless remains crucial for low-income countries. Private finances cannot achieve what public finances can, especially for social development and environmental protection. Public finance is more predictable and effective in providing public goods. Despite much enthusiasm for using ODA or public funds to leverage private finance, many unanswered questions remain, suggesting BF is no silver bullet.

Caution is needed as the development community ascertains the pros and cons of using public money to ‘leverage’ private finance. First steps would include a universally acceptable BF definition and a monitoring framework to ascertain the additionality of alternative BF mechanisms for both finance and development impacts.

Additionally, BF should respond to recipient country’s development strategies in the spirit of the 2015 Addis Ababa FfD Action Agenda which recognizes its potential while urging caution.

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Improving Our Anti-money Laundering Operations Will Help Prevent Great-Power Warhttp://www.ipsnews.net/2018/04/improving-anti-money-laundering-operations-will-help-prevent-great-power-war/?utm_source=rss&utm_medium=rss&utm_campaign=improving-anti-money-laundering-operations-will-help-prevent-great-power-war http://www.ipsnews.net/2018/04/improving-anti-money-laundering-operations-will-help-prevent-great-power-war/#respond Fri, 20 Apr 2018 12:32:47 +0000 Clay R. Fuller http://www.ipsnews.net/?p=155364 Clay R. Fuller is a Jeane Kirkpatrick Fellow at the American Enterprise Institute (AEI)*

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Clay R. Fuller is a Jeane Kirkpatrick Fellow at the American Enterprise Institute (AEI)*

By Clay R. Fuller
WASHINGTON DC, Apr 20 2018 (IPS)

Interest is growing in illicit finance because great-power competition is playing out in boardrooms, stock markets, trade wars, and compliance departments. The US anti-money laundering (AML) regime needs an update that enhances national security and sets an example for the rest of the world.

Clay R. Fuller

The US leads in crafting and enforcing global standards of financial integrity and accountability. However, like most US economic regulations, the current AML regime is a haphazard, ad hoc patchwork riddled with loopholes and inefficiencies.

An illicit finance bill should encourage communication between and within compliance and law enforcement, safeguard individual privacy rights, and help smaller businesses and financial institutions. It has been 17 years since the last AML overhaul. It is time to address the clear and present danger — dirty money.

National security concerns

For the past thirty years Western democracies have actively and passively sought out economic integration with authoritarian states. Westerners hoped (and many still do) that modernization would create middle classes that demand rights. Investors and businesses simply saw new markets as opportunities to turn a profit.

Profits came to fruition, but economic integration morphed into a sort of messy imbroglio, or a rules-based liberal order entangled with opaque, violent, and kleptocratic authoritarians eager to bend the rules in their favor.

Currently, kleptocrats and their ilk can store and move wealth in the US anonymously. Some profit from breaking drug laws, others evade taxes, and many set up simplistic fraud schemes. Dastardly agitators use anonymous capital to support political and economic espionage, nationalistic violence, and religious zealotry.

The absence of clear and transparent rules in non-democracies (and among thieves) breeds instability, uncertainty, and violence. A simple first step toward protecting the US from these negative externalities is to require legal entities to register and verify their beneficial ownership (BO) at the time of incorporation.

Two examples

The General Services Administration apparently cannot identify the ultimate beneficial owners of up to a third of high security leases. This means that unidentified Russians can, and might, own the buildings that the FBI leases to investigate Russian activities.

An investigative report recently uncovered thousands of planes in the US registered to companies known to use secrecy tactics to provide services to non-US citizens. Planes transport drugs — and, post 9/11, well.

New reporting and securing individual privacy rights

Thresholds for currency transaction reports (CTRs) and suspicious activity reports (SARs) are not adjusted for inflation. The estimated 55,000 SARs that the Financial Crimes Enforcement Network (FinCEN) receives every day are not being efficiently communicated or leveraged with simple, cheap, and powerful data science tools.

Legislation should ensure that reporting data (BO, SARs, and CTRs) will never be made public. But data sharing within and between financial institutions and law enforcement needs to be increased and modernized.

The problem is that privacy is now protected by effectively deputizing the financial sector. In the current threat environment, this puts a massive amorphous burden on compliance departments. That cost is ultimately passed on to the consumer and hamstrings the effectiveness of law enforcement.

One solution is for FinCEN to host a basic BO dataset (such as name, address, ID) that compliance departments can access and search, verifying their own due diligence findings. This allows FinCEN to leverage big data analytical tools to easily find trends in CTRs and SARs. Also, more sensitive information remains in private hands.

How legislation can help smaller competitors

A small American shipping company has to turn a profit in order to pay its employees and stay open. A drug cartel-owned shipping company in the same town has no need to turn a profit. All it has to do is not get caught. It can and does swallow up fair competitors by seeking out legit accounts to cover its illegitimate activity.

Second, large government contracts have “set asides” for small businesses. Shell companies defraud the government by underbidding fairly competing small businesses for these set asides and then providing shoddy product or engaging in other schemes. Congress could also make it cheaper and easier for businesses to become a publicly-traded company.

Bottom Line: Updating the AML regime for the explicit purposes of creating a better business environment strikes a pragmatic balance between the duty of government to provide the public good of national security and the privacy necessary for free enterprise. Doing it before great-power competition turns into great-power war might just be what prevents that calamity and ushers in a brighter future.

The link to the original article in the AEI policy blog:
https://www.aei.org/publication/anti-money-laundering-and-great-power-war/

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Excerpt:

Clay R. Fuller is a Jeane Kirkpatrick Fellow at the American Enterprise Institute (AEI)*

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Another Debt Crisis for Poor Countries?http://www.ipsnews.net/2018/04/another-debt-crisis-poor-countries/?utm_source=rss&utm_medium=rss&utm_campaign=another-debt-crisis-poor-countries http://www.ipsnews.net/2018/04/another-debt-crisis-poor-countries/#comments Wed, 18 Apr 2018 13:27:50 +0000 Masood Ahmed http://www.ipsnews.net/?p=155329 Masood Ahmed is President of the Center for Global Development*

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Masood Ahmed is President of the Center for Global Development*

By Masood Ahmed
WASHINGTON DC, Apr 18 2018 (IPS)

When the world’s finance ministers and central bank governors assemble in Washington later this month for their semi-annual IMF meeting, they will no doubt set aside time for yet another discussion of the lingering debt problems in the Eurozone or how impaired bank debt could impact financial stability in China.

Masood Ahmed

They would do well to also focus on another looming debt crisis that could hit some of the poorest countries in the world, many of whom are also struggling with problems of conflict and fragility and none of which has the institutional capacity to cope with a major debt crisis without lasting damage to their already-challenged development prospects.

Nearly two decades ago, an unprecedented international effort—the Heavily Indebted Poor Countries (HIPC) Debt initiative—resulted in writing off the unsustainable debt of poor countries to levels that they could manage without compromising their economic and social development.

The hope was that a combination of responsible borrowing and lending practices and a more productive use of any new liabilities, all under the watchful eyes of the IMF and World Bank, would prevent a recurrence of excessive debt buildup.

Alas, as a just-released IMF paper points out, the situation has turned out to be much less favorable. Since the financial crisis and the more recent collapse in commodity prices, there has been a sharp buildup of debt by low-income countries, to the point that 40 percent of them (24 out of 60) are now either already in a debt crisis or highly vulnerable to one—twice as many as only five years ago.

Moreover, the majority, mostly in Sub-Saharan Africa, have fallen into difficulties through relatively recent actions by themselves or their creditors. They include, predictably, commodity exporters like Chad, Congo, and Zambia who have run up debt as they adjusted (or not) to revenue loss from the collapse in oil and metals prices.

But they also include a large number of diversified exporters (Ethiopia, Ghana, and the Gambia among others) where the run-up in debt is a reflection of larger-than-planned fiscal deficits, often financing overruns in current spending or, in a few cases, substantial fraud and corruption (the Gambia, Moldova, and Mozambique).

The increased appetite of sovereign borrowers has been facilitated by the willingness of commercial lenders looking for yield in a market awash with liquidity, and by credit from China and other bilateral lenders who are not part of the Paris Club.

It is striking that between 2013-16, China’s share of the debt of poor countries increased by more than that held by the Paris Club, the World Bank and all the regional development banks put together.

Nor do traditional donors come out entirely blameless. Concessional funding for low-income countries from the (largely OECD) members of the DAC fell by 20 percent between 2013–16, precisely the period in which their other liabilities increased dramatically.

As for the IMF and World Bank, while it may have been wishful thinking to hope they could prevent a recurrence of excessive debt, it was not unreasonable to expect that they would have been more aware as this buildup was taking place and sounded the alarm earlier for the international community.

There is also a plausible argument that excessively rigid rules limiting the access of low-income countries to the non-concessional funding windows of the IMF and World Bank left no recourse but to go for more expensive commercial borrowing, with the consequences now visible.

How likely is it that these countries are heading for a debt crisis, and how difficult will it be to resolve one if it happens? The fact that there has been a near doubling in the past five years of the number of countries in debt distress or at high risk is itself not encouraging.

And while debt ratios are still below the levels that led to HIPC, the risks are higher because much more of the debt is on commercial terms with higher interest rates, shorter maturities and more unpredictable lender behavior than the traditional multilaterals.

More importantly, while the projections for all countries are based on improved policies for the future, the IMF itself acknowledges that this may turn out to be unrealistic.

And finally, the debt numbers, worrying as they are, miss out some contingent liabilities that haven’t been recorded or disclosed as transparently as they should have been but which will need to be dealt with in any restructuring or write-off.

The changing composition of creditors also means that we can no longer rely on the traditional arrangements for dealing with low-income country debt problems. The Paris Club is now dwarfed by the six-times-larger holdings of debt by countries outside the Paris Club.

Commodity traders have lent money that is collateralized by assets, making the overall resolution process more complicated. And a whole slew of new plurilateral lenders have claims that they believe need to be serviced before others, a position that has yet to be tested.

It is too late to prevent some low-income countries from falling into debt difficulties, but action now can prevent a crisis in many others. The principal responsibility lies with borrowing country governments, but their development partners and donors need to raise the profile of this issue in the conversations they will have in Washington.

There is also an urgent need to work with China and other new lenders to create a fit-for-purpose framework for resolving low-income country debt problems when they occur.

This is not about persuading these lenders to join the Paris Club but rather about evolution towards a new mechanism that recognizes the much larger role of the new lenders, and demonstrates why it is in their own interest to have such a mechanism for collective action.

Traditional donors also need to look at their allocation of ODA resources, which face the risk of further fragmentation under competing pressures, including for financing the costs in donor countries of hosting refugees.

Finally, the assembled policymakers should urge the IMF to prioritize building a complete picture of debt and contingent liabilities as part of its country surveillance and lending programs, and to base its projections for future economic and debt outcomes on more realistic expectations.

They should also commission a review to examine the scope for increased access to non-concessional IFI funding for (at least) the more creditworthy low-income borrowers.

It is the poor and vulnerable that pay the heaviest price in a national debt crisis. They have the right to demand action by global financial leaders to make such a crisis less likely.

*Masood Ahmed previously led the World Bank’s Heavily Indebted Poor Countries debt relief initiative, which has to-date brought relief from debt burdens to 36 of the world’s poorest nations.

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Excerpt:

Masood Ahmed is President of the Center for Global Development*

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The UN tells private enterprise leaders that “Business as Usual Won’t Work”.http://www.ipsnews.net/2018/04/un-tells-private-enterprise-leaders-business-usual-wont-work/?utm_source=rss&utm_medium=rss&utm_campaign=un-tells-private-enterprise-leaders-business-usual-wont-work http://www.ipsnews.net/2018/04/un-tells-private-enterprise-leaders-business-usual-wont-work/#comments Wed, 11 Apr 2018 17:42:20 +0000 Will Higginbotham http://www.ipsnews.net/?p=155241 As global citizens face an array of issues from unemployment to discrimination, affecting their livelihoods and potential, a UN agency called upon businesses to employ a new, sustainable, and inclusive model that benefits all. Business leaders from around the world convened at the United Nation’s 2018 Economic and Social Council (ECOSOC) partnership forum to hear […]

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By Will Higginbotham
UNITED NATIONS, Apr 11 2018 (IPS)

As global citizens face an array of issues from unemployment to discrimination, affecting their livelihoods and potential, a UN agency called upon businesses to employ a new, sustainable, and inclusive model that benefits all.

2018 ECOSOC Partnership Forum. Credit: UN Photo/Loey Felipe

Business leaders from around the world convened at the United Nation’s 2018 Economic and Social Council (ECOSOC) partnership forum to hear how the private sector can work with governments to improve global economic opportunities.

“The private sector is an indisputable partner in reducing global inequalities and improving employment opportunities for all” the UN Deputy Secretary-General Amina Mohammed told the audience.

Mohammed stressed that the private sectors contribution to development was essential if the world is to meet the 2030 Sustainable Development Goals (SDGs).

However, in order for this to happen Mohammed said that “business as usual simply won’t work.”

Instead, leaders were challenged to commit to align their business goals with the SDGs by investing in sustainable business models.

“I would also like to take the opportunity to challenge the business leaders present here today to make bold commitments to a more inclusive future for all,” said Marie Chatardova, president of the ECOSOC.

Chatardova reminded the leaders of the UN’s Business and Sustainable Development Commissions recent research that found that investment in sustainable models could create some $12 trillion dollars in economic opportunities by 2030.

“Investing in sustainable development goals – it’s a ‘win-win partnership,” she said.

Calling for Inclusion

Today, 192 million people are unemployed. Eight per cent of the global population live in poverty. There is a mounting youth unemployment crisis. Women, indigenous and disabled persons continue to face barriers to equitable and meaningful employment.

Attendees highlighted the importance of sustainable business models that prioritize diversity and inclusivity by getting women, youth, indigenous and disabled persons into the workforce.

In panel discussions, many business leaders spoke of their companies’ ongoing diversity programs.

Sara Enright, director of the Global Impact Sourcing Coalition (GISC), pointed to Impact Sourcing – an example of inclusive business practice.

Impact sourcing, Ms Enright told the forum is: “when a company prioritises suppliers who are hiring and providing career development to people who otherwise have limited prospects of formal employment.”

The GISC is a global network of 40 business that include – Google, Microsoft, Aegis, and Bloomberg – that have committed to impact sourcing.

In March, GISC members were challenged to hire and provide training to over 100,000 new workers by 2020. Enright said so far ten companies have responded to the challenge, pledging to hire over 12,000 workers across Kenya, Nepal, Cambodia and the United States.

Enright said she expected many more companies to sign up and stressed that the GISC would monitor and measure the outcomes.

The UN applauded GISC’s work as an inspiring example of the private sector working collaboratively and inclusively to meet the SDGs vision.

Curb Your Corruption

Another issue that arose during the forum was corruption in development.

Last year global development funding reached $143 trillion dollars, of which the UN estimates that over 30 percent of funds failed to reach their intended destinations.

The UN told business leaders that if they commit to using technology that better tracks where money goes in development, then it will help curb corruption.

Bob Wigley, chairman of UK Finance, encouraged businesses to invest in technologies like ‘Block Chain’.

Block-chain, or Distributed Ledger Technology, is a digitized public record book of online transactions that was developed in 2008 with the rise of online currency ‘bitcoin’.

It is an entirely decentralized means of record keeping, meaning it is operated on a peer-to-peer basis rather than one central authority.

Wigley said the technology allows the direct tracking of online payments, ensuring that it is delivered correctly.

“If I was the recipient of state aid or wanting to know where my funds are going exactly then I’d be using block-chain systems, not the antiquated bookkeeping that gives rise to potential corruption every time a payment trickles from one set of hands to another,” he said.

“Think of how embracing and enhancing block chain technology could ensure accountability and transparency – things that are critical to meeting the SDGs,” Wigley continued.

A Race to the Top

Whilst many businesses are committing to the SDGs and implementing sustainable initiatives, more still needs to be done to unlock the full potential of the sector.

Kristine Cooper from United Kingdom insurance company Avia said it is a question of creating ‘competition’ between business by tracking them in their commitment and delivery.

“Lots of companies are doing great things in diversity and SDG commitments and how they do business to meet these goals, but it’s hard to know who’s doing really well, there is no consistency with reporting,” Cooper said.

“The system lacks the incentives to make right decisions and make organizations live up their responsibility.”

Ranking companies and holding them accountable, Cooper said, would create a “race to the top” and in the process, truly unleash “the power of the corporate and private sector in meeting development goals”.

Discussion points from this meeting will be further discussed in ECOSOC meetings held in May 2018, as well as at the High-level Political Forum on Sustainable Development in July 2018.

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International Community Ramps Up Action on Venezuela Crisishttp://www.ipsnews.net/2018/04/international-community-ramps-action-venezuela-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=international-community-ramps-action-venezuela-crisis http://www.ipsnews.net/2018/04/international-community-ramps-action-venezuela-crisis/#comments Tue, 10 Apr 2018 21:13:04 +0000 Tharanga Yakupitiyage http://www.ipsnews.net/?p=155223 One year into the most recent series of protests and a humanitarian crisis with no end in sight, international groups have called for action to help protect Venezuelans. A complex political and economic crisis in Venezuela has left millions without access to basic services and resources, prompting UN agencies and human rights groups like Human […]

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Venezuelans arrive in Pacaraima, border city with Venezuela, and wait at the Federal Police, the entity responsible for receiving Venezuelans seeking asylum or special stay permits in Brazil, 16 February 2018. Credit: UNHCR/Reynesson Damasceno

By Tharanga Yakupitiyage
UNITED NATIONS, Apr 10 2018 (IPS)

One year into the most recent series of protests and a humanitarian crisis with no end in sight, international groups have called for action to help protect Venezuelans.

A complex political and economic crisis in Venezuela has left millions without access to basic services and resources, prompting UN agencies and human rights groups like Human Rights Watch to speak up and urge action.

“Venezuela needs help to tackle and overwhelming crisis,” said singer Ricardo Montaner alongside Human Rights Watch at the launch of the #TodosConVenezuela, or Together with Venezuelans, campaign.

“Join me. It’s not just my job or yours, it’s something we should all do. Tell your friends—let’s do this together,” he continued.

The campaign, launched ahead of the Summit of the Americas where world leaders will discuss the situation in Venezuela, asks the public to tweet at Latin American presidents to confront Venezuela President Nicolas Maduro about government abuses.

Such abuses include the suppression of dissent as government critics are often arbitarily detained and prosecuted in military tribunals.

An estimated 700 civilians have been prosecuted in military courts for offenses such as rebellion and treason.

Numerous UN Special Rapporteurs also found “excessive and indiscriminate use of force” during anti-government protests.

“Protests must not be criminalized,” they said.

Meanwhile, Venezuela has been facing a severe economic crisis since global oil prices plummeted in 2014.

The South American nation now has the highest inflation rate in the world which now exceeds 6,000 percent, making it nearly impossible for Venezuelans to access medicine and food and causing a health crisis.

In one year alone, maternal mortality and infant mortality increased by 65 percent and 30 percent respectively. Over 80 percent of the country now live in poverty.

Driven by the lack of access to basic services as well as political tensions, almost two million Venezuelans have left the country, causing the humanitarian crisis to spill over.

Carlos Miguele Machado told Human Rights Wach that he left his home country because he could not find medicine that his wife needed after undergoing thyroid surgery.

“I had to travel far, go from pharmacy to pharmacy looking for the medicine, and I could not find it—and it is very expensive in the black market,” he said.

Both Colombia and Brazil have seen the largest numbers of migrants crossing their borders in recent months. To date, over 1 million Venezuelans have reached Colombia while Brazil estimates that over 800 enters its country every day.

“As the complex political and socio-economic situation in their country continues to worsen, arriving Venezuelans are in more desperate need of food, shelter, and health care. Many also need international protection,” said UN High Comissioner for Refugees (UNHCR) spokesperson William Spindler.

As public services in Brazil become more and more stretched in response to the inflows, UNCHR has ramped up its efforts to help register and house Venezuelans. The agency has opened up new shelters for vulnerable Venezuelans which are already almost at capacity.

In order to implement its regional response plan, UNCHR made an appeal of $46 million to donors. So far, it is only four percent funded.

Similarly, the International Organizaation for Migration (IOM) launched a regional action plan to strengthen response to the large-scale of flows of Venezuelans.

“IOM’s Regional Action Plan…represents a call for the international community to contribute to and strengthen the government efforts to receive and assist Venezuelans, so that those efforts may be sustained,” said IOM’s Regional Director for South America Diego Beltrand, encouraging host countries to adopt measures to help regularize Venezuelans’ stay.

World Food Programme Director David Beasely also urged the international community step up international donor funding in order to prevent the “humanitarian catastrophe” unraveling at the Colombian border.

“This could turn into an absolute disaster in unprecedented proportions for the Western Hemisphere,” Beasely said while visiting Colombia.

“I don’t think people around the world realize how bad the situation is and how much worse it could very well be,” he continued, pointing to the case of Syria’s crisis which began with a minor food emergency.

The upcoming presidential vote in May in Venezuela could determine the future of the country and its citizens.

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Ten reflections on today’s crisishttp://www.ipsnews.net/2018/04/ten-reflections-todays-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=ten-reflections-todays-crisis http://www.ipsnews.net/2018/04/ten-reflections-todays-crisis/#respond Tue, 10 Apr 2018 18:51:49 +0000 Roberto Savio http://www.ipsnews.net/?p=155221 Roberto Savio is founder of IPS Inter Press Service and President Emeritus

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Roberto Savio is founder of IPS Inter Press Service and President Emeritus

By Roberto Savio
ROME, Apr 10 2018 (IPS)

It is now clearly evident that w e are in a period of transition, even though we remain uncertain as to its outcome.

The political, economic and social system that has accompanied us since the end of the Second World War is no longer sustainable.

Roberto Savio

Roberto Savio

The exponentially growing inequalities have, according to Amnesty International, taken us back almost to levels seen in Victorian times – albeit now at a global level. Ten years ago, 652 people had the same wealth as 2.3 billion people. Now there are eight.

Today’s eighteen-year-olds, according to projections of the International Labour Organization, will retire with an average pension of 632 Euros a month.

Despite official warnings, we are, with great indifference, breaching the 2 degrees centigrade temperature limit beyond which our planet will undergo irreversible changes.

Our financial system today operates largely disentangled from the economy in a parallel world privy of international controls, and where financial transactions on any given day are forty times higher than the production of goods and services around the planet.

The main banks have paid, since 2009, over $800 billion in fines for illegal operations. We must also note that political participation (voting in elect ions) has declined, from an average of 86% in 1960, to 63.7% today.

A profound analysis is very complex and involves all aspects of our life. But it is possible to identify important points for reflection and debate and on which we can jointly explore.

Hopefully they will also lead us to reflect on other points, since the theme of the crisis is in fact holistic and touches on all aspects of our lives. Reflect ions such as these are always subjective. What follows are facts that this writer experienced personally.

REFLECTION NO. 1: The crisis has distant roots.

It was in 1973 that the United Nations General Assembly unanimously adopted a global governance plan, which aimed at reducing inequalities among its members: it was called the New International Economic Order. This plan was born with the support of the United States (even though originally launched by Mexico and Algeria).

The post-war international system, including the United Nations, was put together on the initiative of the United States, by the principal victors of the Second World War.

They were keen on preserving peace and pursuing development, after a war in which they lost about half a million soldiers out of a total population of 140 million people (in comparison, Germany lost more than 15 million out of 78 million inhabitants, and more than two million civilians, against none in t he United States and twenty million in the Soviet Union).

The United Nations was therefore born with Washington’s commitment to contribute 25% of its budget (contrast this with the present day when the T rump administration threatens US withdrawal).

But until the Cancun Summit in 1981, which brought together the twenty-two most important heads of state in the world (communist countries excluded), we lived with the illusion of the end of inequality, based on a world democracy, where the majority of countries decide the course to follow for the common good.

At Cancun, the newly elected US President Ronald Reagan announced that the United States no longer accepted to be subject to the rules of an abstract world democracy.

The United States was an exceptional country, and on this basis would decide her foreign and economic policy.

Attending the same meeting was the UK Premier, Margaret Thatcher, who would become Reagan’s most important European ally.

In Cancun, a different vision of the world was born: society does not exist – only individuals (Thatcher). It is not the factories polluting, but the trees (Reagan). Poverty produces poverty: wealth produces wealth. As such, the rich should be taxed as little as possible because they distribute wealth.

REFLECTION NO. 2: Shortly after Cancun, in 1989, the Berlin Wall fell and with it, the end of ideologies, the straitjackets that gave us both Nazism and Communism.

The driving idea that followed was that we must be pragmatic. Politics must solve concrete problems, not pursue utopias. But the solution of a given problem without consideration for the final vision of the society (right or left, does not matter) is actually called utilitarianism; and politics aimed at administration and not at ideas reduces political participation and increases corruption.

Without programs driven by ideals, the politician’s personality (possibly telegenic), measured on TV and not in the streets, became the main tool for electoral campaigns supported by marketing campaigns, not ideas or programs.

REFLECTION NO. 3: At the same time, neoliberal globalization became the single most powerful guiding thought – think of Thatcher’s TINA “There is n o alternative”.

It was based on the socioeconomic and political model of the so-called Washington Consensus, the development paradigm imposed by the International Monetary Fund, the World Bank and the US Treasury. It envisaged the adoption of the following reforms: macroeconomic stabilization, liberalization (of trade, investment and finance), privatization and deregulation.

It eliminated the barriers of national protection everywhere, reduced non-productive expenditure (education, health, social assistance), and promoted free competition among states.

Known as Kissinger’s dictum: “the new paradigm of American supremacy”, developing countries were forced to submit to the economic rules imposed by the North.

Kissinger did not see that once free trade was imposed, China and other countries would emerge as winners.

It is interesting to note that before the fall of the Berlin Wall, the term globalization does not appear in the media.

REFLECTION NO. 4: The reaction of the left to this “pensee unique” was the “Third Way” which was successfully proposed and promoted by Tony Blair.

In substance, it argued that it was time to abandon the old ideas of the le ft and ride the wave of globalization, accepting the lack of alternatives.

Social democracy, from Blair (in UK) to Renzi (in Italy), sought to transform itself into a transversal party, one that embraced the center, with an active policy on concrete facts stripped of outdated ideological cages.

The result? The parties of the left were abandoned in droves by their voter s, and the 2008 crisis, largely due to the absence of controls on American banks and subsequently those in Europe (and with left-leaning governments in power in most Western countries), eliminated its ability to redistribute surpluses.

Blue-collar workers and middle classes in crisis, all victims of globalization, sought new defenders who promptly appeared in the form of Le Pen, Farage, Wilders and so on, and today will still vote for Salvini and the 5 Star Movement (in Italy).

REFLECTION NO. 5: Numerous historians believe that greed and fear were amongst the main engines of change in history.

Riccardo Petrella, in his latest book “In the Name of Humanity”, believes t hat these engines were made using three traps: In the name of God, in the name of the nation and in the name of profit.

There is no doubt that since the fall of the Wall, the values of globalization (competition, profit, individualism, exaltation of wealth), together with t he disappearance of social justice, solidarity, transparency, equity, etc. from political debate have created an ethics based on greed.

And twenty years later, in 2009, the economic and financial crisis, first in the United States with the sub-prime collapse, and then in Europe with sovereign bonds, gave way to a second cycle – that of fear.

REFLECTION NO. 6: The cycle of fear, in whose grip we are fully now (without having abandoned that of greed, and the traps of God, the Nation and Profit are once again being put to good use) has led to the emergence of a new right – which is not based on ideas, but emotions.

Brexit and Trump are easy-to-see phenomena. But the phenomenon is much deeper. We are in a liquid society, not structured around ideologies or class. And in such societies, it is easy for leaders, riding the waves of fear and greed, to easily rise to the forefront.

The 2009 crisis kicked off the massive immigration from countries invaded b y the West, to depose dictators and automatically introduce democracy (but the disintegration of Yugoslavia, a modern and European country, after Tito’s death, should have warned us).

Democracy did not immediately take over – rather we have seen chaos, civil war, bloodshed and destruction. In 2003, George W Bush began the invasion of Iraq.

In 2011, civil war broke out in Syria and rapidly became a confrontation between Arab, European, American and Russian forces (leading to over six million displaced persons and over half a million dead).

In 2013, Sarkozy pushed for an invasion of Libya ostensibly to depose Gaddafi.

From the ruins of Iraq we have seen the emergence of ISIS, terrorism in the name of God, for a return to original Islam (Wahhabism, financed by Saudi Arabia in excess of 80 billion dollars in the last twenty years).

All of this took place fifteen years after the veterans of the US-funded war against the Russian occupation in Afghanistan gathered together as Al-Qaeda under B in Laden to launch the first attack in history on American soil.

As the famous cartoonist El Roto in El Pais remarked, “we send bombs and they send us refugees”. The resultant refugees are caught in the jaws of two traps: in the name of God and of the country.

Today in Europe, the identity and sovereignty parties are the second largest political force, outnumbering the socialists. If European elections were held today, the radical right would have forty million votes.

It is in government in Hungary, Poland, the Czech Republic, Slovakia and Austria, but it also plays a key role in the governments of the Netherlands and now, Germany, since the AFD won 92 seats in the last elections.

Viktor Orban of Hungary has launched the so-called “illiberal democracy”, Poland denounces the secularism of the European Union and has called for a great m arch with the populists and sovereigns of all Europe, to the cry of “In the name of God”.

The Visegrad Group (Hungary, Czech Republic, Slovakia, Poland, and now Austria) denounces the capitulation of Europe to Islam and is creating an East-West fracture of a Europe, which joins the North-South fracture on the vision of economy: austerity or solidarity.

But there is something new. The United States is intervening in Europe, openly supporting nationalist and xenophobic right-wing parties, which at the same time look not only to Trump but also to Putin (who is also intervening in Europe an elections), as a point of reference.

As Italy’s Salvini shouted at an electoral campaign rally at Piazza del Popolo in Rome “good work Putin and Trump”.

As a result, in a rapidly aging Europe (for example, in Italy young people between 18 and 25 years are only 3% of those entitled to vote), immigration has become a great flag of the populist and xenophobic right wing.

Meanwhile, the International Monetary Fund has launched a warning: Europe needs to rapidly absorb 20.5 million immigrants, to support its pension system and productivity.

Statistics show that immigrants contribute to the system more than they cost; they constitute the great majority of the new small businesses; that their dream is to be quickly integrated into the system. But there is no debate on migration, and what kind of immigrants to welcome.

They are now all seen as dangerous invaders, intent on destroying European identity, on crime, and taking work away from European citizens, the latter victims of intense unemployment.

Even Trump, in a country made up of immigrants, has made immigration control one of his battle cries. A tragic phenomenon is that young people, much les s so than pensioners, are no longer politically active.

Since time immemorial, young people burst onto the political scene to change the world they found. Had they voted, Brexit would not have happened.

But the political system, by and for the elderly, ignores them. In Italy, t he Renzi government allocated 30 billion Euros to save four banks. In the same year the total in the budget for Italian youth was a paltry two billion.

From the creation of the United Nations in 1945, we have gone from a global population of 2.5 billion people to 7.5 billion people today.

The growth will stop only in 2050, when we will be 9.5 billion people. In the period to 2050, Africa will double her population. Either we are able to find accords to govern mobility flows according to needs, or we will have to shoot on immigrants, as some already propose.

REFLECTION NO. 7: Intellectuals and political scientists are increasingly surprised by the passivity of citizens who seem completely anaesthetized and no longer react to anything, even if politics goes against their interests. The history of Brexit, for instance, has been the subject of many analyses.

How is it possible that the most depressed areas, which received so much from Europe, voted to leave Europe?

How is it that Poland, the largest recipient of European funds (three times the Marshall plan) votes against Europe?

How is it possible that Trump, who promised to drain the swamp from the special interests in favour of the people ignored by the same special interests and government, now is a firm ally of big capital and the military (not excluding his family interests) and the voters remain faithful?

Today 92% of those who voted for him say they are ready to re-elect him.

There are many possible interpretations to this paradoxical situation. But as Talleyrand said, every people has the government it deserves.

And we should recognize that since the 2009 crisis, the political class has lost the most credit. We should be examining the impact of reality shows like “Big Brother” TV since 1989: the feeling of extraneousness from political power.

Like the shelter of a virtual space, like the Internet, it has contributed to an individualism that is the result of frustration and the lack of debate on ideas.

The macroscopic example of this anesthesia is climate change. Citizens see it every day in their daily lives: impressive photos of disappearing glaciers, snowfall in the Sahara, hurricanes, forest fires, storms …

They also have all the data of the scientific community, which in Paris, obliged the world’s governments to sign an insufficient agreement without controls. But they do not need to study, to know.

They can also see how governments speak, but do not act. They continue to spend to finance the fossil (fuel) industry three times what they invest in the renewable energy industry.

Italy even called a referendum to continue exploiting the oil fields in the South. The Spanish government is fighting its electricity producers, who want to c lose their coal-fired power stations.

In the same Spain, pensioners have organized an impressive march to defend their pensions: but no country has announced a march to raise awareness on the climate peril we face.

On the surprising absence of citizens’ reactions to vital problems, one could write a lot. And this is the basis of the epochal change in which we find ourselves.

REFLECTION NO. 8: The impact of technology: Let us consider the impact of the imminent fourth industrial revolution.

Let us recall: the first was at the beginning of the 1800s, when mechanization replaced the individual work, with mechanical looms taking over. It was easy to recycle the workers, who passed from the frame of the house to that of the factory.

The second was at the end of the 1800s, thanks to the use of machines powered by mechanical energy and the use of new energy sources such as the use of steam which led to the birth of, and development of railway networks, the construction of steam ships and faster means of communication, to important discoveries in the chemical and medical fields, to the assembly line, electricity, telephone, etc.

Even here, thanks to the transfer from the fields to the factories, humans remained vital for production. And the political battles born out of the desire for a fair recognition of work done gave way to what we now consider modern politics.

The Third Revolution began after the end of the Second World War, where technology increasingly changed the way people work, culminating in the internet revolution today.

And we are now on the cusp of the fourth revolution, which is based on Artificial Intelligence and robotics.

Today this accounts for 17% of the production of goods and services but it is estimated that this will be 30% by 2030.

The automation of the transportation sector will lay waste to six million jobs as taxi drivers, truck drivers, drivers of public transport in Europe find their services no longer needed. This automation will totally change the transport system, the automotive industry, insurance companies, etc.

But this time, will the taxi drivers be able to recycle themselves in a society that will privilege technological knowledge over traditional work?

We are rushing headlong towards a structural problem, which politics, with its short-term horizons, seems determined to ignore.

Will this transition risk increasing unemployment, fear, social and political tensions? It is just an example of how large the gap between politics, technology, finance and globalization has become.

REFLECTION NO. 9: The crisis of multilateralism: From the ruins of the Second World War, the conscience was born that only through multilateral cooperation could one seek lasting peace, after the tragedies provoked by nationalism and the idea of domination over others.

International organizations such as the United Nations, with all its agencies and funds, from UNICEF to FAO, from the World Health Organization to the International Atomic Energy Agency, were born; and in Europe the great project of the European Community, together with all the regional projects, from ASEAN to the Organization of African Unity, the Organization of American States, Mercosur, etc.

Today, the whole multilateral system is in crisis. Trump’s trade wars are destroying the multilateral trade system.

From Roosevelt’s world democracy to Reagan’s free trade and competition, we have moved on to American interests only, America first.

Next on the horizon are monetary wars. The idea of competing and not cooperating, greed as a value to replace the value of cooperation, which helps the weak and controls the powerful is ending.

But just as Kissinger did not see that free competition would one day turn against the United States, Trump does not see that opening a politics of confrontation could turn against the United States one day. Russia, China and the United States are returning to the era of gunboat policy, which seemed to have disappeared.

The present and the immediate future seem a dangerous re-enaction of the Thirties, which resulted in the Second World War.

Are those who vote for nationalism aware of this? As Pope Francis says, we are already in a fractional Third World War … we have exceeded the number of refugees at the time. To wars in the name of the homeland in Africa, we are adding those in the name of God, from Rohingya to Burma, to Islamic terrorists … we have spent decades breaking down walls, and we are creating more than before …

The future seems to go against the interests of humanity, which now knows planetary threats that did not exist in the 1930s, from climate to nuclear, in a process of social and economic Darwinism whose outcome we can only imagine.

REFLECTION NO. 10: It is evident that the final reflection is the need to find a governability of globalization and the Fourth Industrial Revolution. It is not true that we lack ideologies.

Neoliberal globalization is an ideology of an unprecedented force, which ha s produced new phenomena, such as global finance, a multinational system stronger than governments, where the example of the use of Facebook to use citizens as merchandise, to influence political and commercial choices, shows us how profound the crisis of democracy is.

We are entering a dystopian world described by the pioneers of science fiction: the world of Orwell and Clark, based on the machines and power of the few.

Only ten years ago, the ascent to total power like Xi in China, Erdogan in Turkey or Putin in Russia was unthinkable. Both Brexit and Trump were unthinkable.

It was unthinkable that tax havens could amass the colossal figure of 80 trillion dollars. It was unthinkable that eight people could have the same wealth as 2.3 billion people. It was unthinkable that Norway would see a winter whose temperatures would be close to those of spring.

Ten years ago, the financial crisis opened a period of deep and dramatic transformations. With this rhythm of the acceleration of history, as Toynbe e called it, where will we be in ten years?

We must immediately find a dialogue between everyone, which can only be based on the rediscovery of common values, on the construction of peace and cooperation, on international law as a basis for relations between states, and rediscover the sense of sharing, peace and social justice as the basis for cohabitation, which brings man back to the center of society – not capital, finance or greed, and which frees us from fear.

Will we be able to find the way to do it?

In these 10 reflections, I have found it useful to consider where we have come from and contemplate as to where we are headed.

We are called upon to reflect keenly as to our fate: ours is a society that is increasingly becoming barbaric, one in which we read and dialogue less.

We spend twice as much on advertising as we do on education; the average voter is today lost and without a compass to guide them.

The reader is not obliged to agree with me. You are welcome to your own views and reflections. After all, what matters is that we reflect!

The post Ten reflections on today’s crisis appeared first on Inter Press Service.

Excerpt:

Roberto Savio is founder of IPS Inter Press Service and President Emeritus

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I Am a Migrant: Integrating Through Syrian ‘Hummus’http://www.ipsnews.net/2018/04/migrant-integrating-syrian-hummus/?utm_source=rss&utm_medium=rss&utm_campaign=migrant-integrating-syrian-hummus http://www.ipsnews.net/2018/04/migrant-integrating-syrian-hummus/#respond Wed, 04 Apr 2018 07:45:46 +0000 Maged Srour http://www.ipsnews.net/?p=155140 Khaled left Syria in 2015, when his country was already in its fourth year of war. He is 27 years old and can clearly remember what his life was like then in Damascus: a happy life, with a happy family, in a happy country. Despite coming from a land now devastated by war, Khaled does […]

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