INTER PRESS SERVICE

International financial institutions (IFIs) have typically imposed wide-ranging policy reforms – called ‘conditionalities’ – in exchange for country governments to secure access to financial assistance. While IFIs may demand anti-corruption policies, other IFI policy conditionalities, such as the privatization of state-owned enterprises (SOEs), can create new rentier opportunities, undermining government will and capacity to curb corruption.

Facebook and Friends Threaten to Libralize the World

By Anis Chowdhury and Jomo Kwame Sundaram

On 17 June, a Facebook white paper proposed a new global digital currency it plans to launch in the first half of 2020. The Libra will be managed by a ‘not for profit’ Swiss-based Facebook-led consortium of ‘for profit corporations’, with Uber, eBay, Lyft, Mastercard and PayPal among its founding members.

Industrial Policy Finally Legitimate?

For decades, the two Bretton Woods institutions have rejected the contribution of industrial policy (IP), or government investment and technology promotion efforts, in accelerating and sustaining growth, industrialization and structural transformation. Finally, two International Monetary Fund (IMF) staff members, Reda Cherif and Fuad Hasanov, have broken the taboo. They embrace industrial policy, arguing against the current conventional wisdom that East Asian industrial policies cannot be successfully emulated by other developing countries.

Financialization Undermines Real Economy

The relationship between finance and the real economy is arguably at the root of the contemporary economic malaise. Unlike earlier acceptance of simple linear causation, recent recognition of a curvilinear relationship between finance and economic growth, implying ‘diminishing returns’, has important implications.

A Bad Free Trade Agreement Is Worse than Nothing

By Jomo Kwame Sundaram and Nazran Zhafri Ahmad Johari

With growing economic conflicts triggered by US President Donald Trump’s novel neo-mercantilist approach to overcoming his nation’s economic malaises, many voices now argue that bad free trade agreements are better than nothing. After US withdrawal following Trump’s inauguration in early 2017, there is considerable pressure on signatory governments to quickly ratify the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the successor to the TPP.

Financialization Promotes Dangerous Speculation

Financialization has involved considerable ‘innovation’, often of opaque, complex and poorly understood financial instruments. These instruments typically have large debt components involving leveraging, deepening connections across markets and borders.

Driving Financialization

The emergence and growth of financialization from the 1980s has been driven by several factors operating at various levels – national and international, ideological and political, and of course, technological. The 1971 collapse of the Bretton Woods (BW) international monetary system arguably paved the way for financial globalization.

Transforming Society, Financialization Destroys Social Solidarity

By Michael Lim Mah Hui and Jomo Kwame Sundaram

Finance has not stopped at dominating the real economy. The tentacles of finance have reached into significant, if not most parts of society. Gerald Davis characterises modern society, where finance is dominant, as a ‘portfolio society’, in which aspects of social life have been securitized and transformed into a kind of capital or investment to be managed.

Finance’s New Avatar

Over recent decades, the scope, size, concentration, power and even the purpose and role of finance have changed so significantly that a new term, financialization, was coined to name this phenomenon. Financialization refers to a process that has not only transformed finance itself, but also, the real economy and society. The transformation goes beyond the quantitative to involve qualitative change as finance becomes dominant, instead of serving the needs of the real economy.

Public-Private Partnerships Fad Fails

After the failure and abuses of privatization and contracting-out services from the 1980s, there has been renewed appreciation for the role of the state or government. Earlier promoters of privatization have taken a step backward, only to take two more forward to instead promote public-private partnerships (PPPs).

Privatization Solution Worse than Problem

Privatization has not provided the miracle cure for the problems (especially inefficiencies) associated with the public sector. The public interest has rarely been well served by private interests taking over from the public sector. Growing concern over the mixed consequences of privatization has spawned research worldwide.

Neoliberal Reforms Strengthening Monopoly Power and Abuses

Over the last four decades, growing concentration of market power in the hands of oligopolies, if not monopolies, has been greatly enabled by ostensibly neo-liberal reforms, worsening wealth concentration and gross inequalities in the world.

Coping With World Bank-Led Financialization

The World Bank has successfully promoted its ‘Maximizing Finance for Development’ (MFD) strategy by embracing the United Nations’ Sustainable Development Goals, internationally endorsed in September 2015. It has also secured support from the G20 of twenty biggest economies, and effectively pre-empted alternative approaches at the third UN Financing for Development summit in Addis Ababa in mid-2015.

Privatization Promotes Collusion and Corruption

At the risk of reiterating what should be obvious, the question of private or public ownership is distinct from the issue of competition or market forces. Despite the misleading claim that privatization promotes competition, it is competition policy, not privatization, that promotes competition.

CORRECTED VERSION: World Bank Dispossessing Rural Poor

The World Bank’s Enabling the Business of Agriculture (EBA) project, launched in 2013, has sought agricultural reforms favouring the corporate sector. EBA was initially established to support the New Alliance for Food Security and Nutrition, initiated by the G8 to promote private agricultural development in Africa.

World Bank Financialization Strategy Serves Big Finance

The World Bank has successfully built a coalition to effectively advance its ‘Maximizing Finance for Development’ (MFD) agenda. The October 2018 G20 Eminent Persons Group’s (EPG) report includes proposals to better coordinate various international financial institutions (IFIs) in promoting financialization.

Has Privatization Benefitted the Public?

In most cases of privatization, some outcomes benefit some, which serves to legitimize the change. Nevertheless, overall net welfare improvements are the exception, not the rule. Never is everyone better off. Rather, some are better off, while others are not, and typically, many are even worse off. The partial gains are typically high, or even negated by overall costs, which may be diffuse, and less directly felt by losers.

World Bank Financializing Development

The World Bank has successfully legitimized the notion that private finance is the solution to pressing development and welfare concerns, including achieving the Sustainable Development Goals (SDGs) through Agenda 2030. A recent McKinsey report estimates that the world needs to invest about US$3.3 trillion, or 3.8 per cent of world output yearly, in economic infrastructure, with about three-fifths in emerging market and other developing economies, to maintain current growth.

Belt and Road Initiative vs Washington Consensus