Central banks in Latin America, such as the Bank of Brazil, whose headquarters is pictured here, should create measures to address the climate crisis, such as a catalog of polluting activities that should not be financed and the magnitude of exposure to climate risks, so that financial institutions in the countries stop financing fossil fuels. CREDIT: BCB

By Emilio Godoy
MEXICO CITY, Sep 10 2021 (IPS)

Despite the impact that their policies have with regard to the climate emergency, Latin America’s central banks continue to avoid applying guidelines in measures that affect the operation of credit institutions, which distances them from compliance with the Paris Agreement on climate change.

Ilan Zugman, director in Latin America of the international non-governmental organisation 350.org, which promotes an energy transition that eliminates the use of fossil fuels, pointed out that central banks have the power to regulate financial institutions to stop providing resources for polluting activities.

Central banks “can tell banks that they can’t make loans to companies that further aggravate the climate crisis. There is a lot of room for a stronger role,” he told IPS from the southern Brazilian city of Curitiba."Industries don't want to leave their activities behind. They put a lot of pressure on governments and bank executives. We need to show more clearly what is happening in terms of climate risks, the losses that governments and central banks could suffer if we don't stop the climate crisis." -- Ilan Zugman

“But so far, that hasn´t been happening in many places, there are very few examples around the world. In Latin America there is nothing like that. They are lagging behind, we see more words than actions,” he argued.

The climate crisis poses challenges for financial bond issuers, investors, insurers, lenders and banking and financial regulators, which means these entities must analyse and provide information about how it affects their business and how their business impacts society and the environment, and in particular the climate.

Latin America is a region highly vulnerable to the impacts of the climate crisis, such as more intense storms, floods, droughts and rising sea levels, and the cost of failing to take measures is extremely high, as scientists and international organisations have warned.

In this region, only the Central Bank of Brazil (BCB) has made some progress – although without yet creating a comprehensive set of rules in this regard – by applying its first regulation on risk management and socio-environmental responsibility, established in 2014.

It launched three public consultations this year on requirements for risk management, reporting and policy on social, environmental and climate responsibility, which were completed in June. The standard will take effect on Jan. 1.

The BCB will implement the disclosure requirements this year, in a first phase addressing qualitative aspects of governance, strategy and risk management, and a second on quantitative facets, such as metrics and targets.

But no Latin American central bank has reported its exposure to the consequences of the climate crisis.

Amaury Oliva, director of Sustainability, Financial Citizenship, Consumer Relations and Self-Regulation at the private Brazilian Federation of Banks (Febraban), said the sector recognises “its role and responsibility” in expanding the financing of activities that contribute to the reduction of polluting emissions and mitigation and adaptation to climate change.

“It is important to continuously improve processes to manage and mitigate the risks associated with climate issues in banks’ activities and in their business with clients, in order to maintain the stability and resilience of the financial sector in this transition process,” he told IPS from São Paulo.

In the view of Oliva, whose federation represents 119 banks, “institutions must work to inform how they are incorporating climate issues into their risk management strategies and processes.”

Over the past three years, central banks around the world have carried out analyses on the need for climate guidelines, acknowledging that the phenomenon can undermine the very stability of the financial system.

In 2020, out of Febraban’s portfolio of legal entities and companies, 51 percent represented a threat to the climate and 44 percent to the environment, according to the green taxonomy used in institutional credit balances. This was an improvement compared to 2012, when 62 percent represented climate and 50 percent environmental threats.

Hurricanes such as Nora, which was intensified by the climate crisis and hit Mexico’s northern Pacific region at the end of August, are leaving heavy economic losses, and central banks could intervene to encourage financing for sustainable activities that do not fuel climate change. CREDIT: Emilio Godoy/IPSHurricanes such as Nora, which was intensified by the climate crisis and hit Mexico’s northern Pacific region at the end of August, are leaving heavy economic losses, and central banks could intervene to encourage financing for sustainable activities that do not fuel climate change. CREDIT: Emilio Godoy/IPS

In May 2020, the central Bank of Mexico (Banxico) released the results of a survey in which the country’s banks recognised the importance of the issue and the adoption of some measures. But neither Banxico nor the private Association of Banks of Mexico have disclosed their relation to climate risks.

In July, the Financial Stability Board (FSB), which brings together financial and banking authorities from around the world, published a roadmap that focuses on addressing the financial risks of the climate crisis through corporate disclosure of such information, data, vulnerability analysis, and regulatory and oversight tools.

In April, the Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlements, a Geneva-based institution that groups central banks from around the world, published two reports on climate risk drivers and their transmission channels to the banking system, as well as financial risks and banking practices in the face of these risks.

In this region, only the central banks of Argentina, Brazil, Chile, Colombia, Mexico and Peru belong to the BCBS.

In “Climate-related financial risks: a survey on current initiatives”, carried out in April 2020 and to which only Argentina, Brazil and Mexico responded from this region, the majority of Basel Committee members considered it appropriate to address climate risks.

Most of the central banks that responded stated that they had conducted research to measure these threats but less than half had established guidelines in this regard or were in the process of doing so, without calculating their mitigation in bank capital requirements.

The Basel Committee includes 45 members from 28 jurisdictions, including central banks and industry regulators. It also has nine observers.

In addition, the Financial Stability Board, which brings together financiers, insurers, large non-financial corporations, accounting and consulting firms, as well as credit rating agencies, has created a Task Force on Climate-related Financial Disclosures (TCFD).

This group aims to make recommendations that promote informed investment, credit and underwriting decisions, as well as to help stakeholders better understand the concentration of carbon-footprint assets in the financial sector and the system’s exposure to climate risks.

It has issued recommendations on governance, strategies, risk management, metrics and targets, and plotted four scenarios based on a rapid energy transition, a two degree Celsius global temperature rise and a path of climate inaction, estimating transition and physical risks, respectively.

The Paris Agreement was signed in the French capital in December 2015 at the conclusion of the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change, and its core objective is to keep global temperatures from increasing more than 1.5 degrees Celsius.

This goal is considered to be the minimum necessary to avoid irreversible climatic and, consequently, human catastrophes.

But to achieve this, greenhouse gas emissions must be cut by 50 percent by 2030, and to reach this goal it is essential to curb the extraction and burning of fossil fuels.

Against this backdrop, at least four global voluntary standards initiatives on sustainable finance are underway. The most recent is the Net-Zero Banking Alliance, launched in April, which includes 53 banks from 27 countries whose total assets amount to 37 trillion dollars, almost a quarter of global banking assets.

But the banking and financial system continues to provide funds to the fossil fuel sector, especially gas, whose methane makes it even more polluting than carbon dioxide (CO2).

For Zugman, the solution is clear: outlining a classification of activities that excludes fossil fuels from financing.

“We have only seen some promises and agreements, but for 2022 or later. There are no timelines, clear goals or transparency that would enable us to monitor this. There are many mechanisms that need to be improved,” he said.

“Industries don’t want to leave their activities behind. They put a lot of pressure on governments and bank executives. We need to show more clearly what is happening in terms of climate risks, the losses that governments and central banks could suffer if we don’t curb the climate crisis,” he said.

The activist lamented that banks continue to lend to fuel the climate crisis and insisted that they should no longer do so.

However, he pointed out that there are multilateral entities, such as the International Monetary Fund, the World Bank and the Inter-American Development Bank, that have incorporated climate risks in their assessments of global financial stability and in their credit lines.

From 2022, the Organisation for Economic Co-operation and Development (OECD), which groups the world’s richest economies, will use a tool to monitor climate and transitional financial risks towards a low-carbon economy, as well as their potential impact on financial performance, natural capital and sustainable growth.

The question is when these tools will translate into concrete measures to stop the financing of polluting activities, while the climate emergency continues to wreak havoc in the region.

The central banks of Latin American countries should decisively join these policies to work from the financial sector to contain the climate crisis, said Zugman.

Successive poor harvests have diminished Ndodana Makhalima’s household food stocks and the family’s nutrition status.

A subsistence farmer in Lupane, about 110 kilometres north of Zimbabwe’s second city, Bulawayo, 56 year-old Makhalima has learnt to live with hunger on his door step.

Farmers will have limited access to climate smart agricultural knowledge and skills as cash strapped Zimbabwe cuts technical assistance from agricultural extension officers. Credit: Busani Bafana/IPS

“In the past I could eat umxhanxa (a mix of maize and melon) and inkobe (a mix of maize, cow peas, and groundnuts) throughout the year, but not anymore,” Makhalima said.

“My silo is empty and my family has nothing to eat. I think today’s children will never know the kind of body-building foods we ate when I was young,” he said, highlighting the extent of compromised household
nutrition across rural Zimbabwe.

The country’s rural-based subsistence farmers are facing a myriad of challenges with the Famine Early Warning Systems Network (FEWSNET) warning of another drought during the 2015/16 season, which could further compromise already dire nutritional needs in a country where the UN World Food Programme (WFP) says millions will require food assistance.

But it is the financing of the sector, once a major contributor to the country’s GDP, that has further dwindled hopes for relief for Makhalima and millions of other rural farmers.

Zimbabwe requires millions of dollars to fund irrigation schemes dotted across the country and while the climate ministry and the meteorological services department announced a cloud seeding exercise in October to boost rainfall, this is yet to take off.

The meteorological office also announced it would be buying an aeroplane for cloud seeding, but the department has previously complained of financial constraints that have affected its operations. It is not clear where financing for the aircraft will come from. Experts however say cloud seeding can be done when there are particular clouds that favour the exercise.

Announcing the national budget on 26 Nov, Finance Minister Patrick Chinamasa said agriculture will require 1, 7 billion dollars, while setting aside 28 million dollars to fund farming inputs for 300,000 vulnerable rural households.

Under the scheme, small-holder farmers will receive maize and small grain seed and fertiliser.

But farmer unions say more will be required beyond these hand-outs as the country’s rain-fed agriculture faces
prolonged dry spells.
”The importance of this sector lies in its contribution to export earnings of around 30 per cent, 60-70 per cent of employment and about 19 per cent of GDP, that way providing a major source of livelihood for over 70 per cent [of the population],” Chinamasa told parliament in his budget presentation.

According to Chinamasa, agriculture production, which saw a plunge of 51 per cent from the 2013/14 season, will recover by 1.8 per cent despite the climate ministry’s warning that 2015/16 will be a
drought year.
The day after the budget presentation, Minister Chinamasa told a breakfast meeting that Zimbabwe would sign a 60-million dollar agreement with the UN International Fund for Agriculture Development (IFAD) to finance irrigation which the agriculture ministry is touting as a solution to boost agriculture production.

Yet subsistence farmers, who have relied on technical assistance from agriculture extension officers, could face tougher times ahead after the finance minister announced that these officers will face the chop as part of government efforts to reduce its wage bill.
These cuts come at a time when farmers seek new farming knowledge and skills to deal with climate vulnerability blamed for poor harvests.

The Zimbabwe Vulnerability Assessment Committee (ZimVAC), established by government and which sets benchmarks for rural nutrition with support from the UN World Food Programme, says 1.5 million people or 16 per cent of the country’s rural population, are food insecure. ZimVAC notes that this is a163 per cent increase from last year.

Development agencies have tied nutrition to people’s ability to lead productive lives with access to nutrition especially emphasised for vulnerable groups such as people living with HIV and Aids. WFP is already assisting malnourished HIV and Aids and tuberculosis patients around the country through the Health and Nutrition programme, with the potential to assist millions of patients living in rural areas according to the country’s health ministry.

There are, however, concerns that failed agriculture and poor harvests that have depleted household food stocks will make it difficult for HIV and Aids patients to access much needed nutritional support — a
vital requirement in anti-retroviral therapy.

During the October World Food Day commemorations led by the UN Food and Agriculture Organisation (FAO) and WFP, FAO Sub-Regional Coordinator for Southern Africa and Representative in Zimbabwe, Swaziland and Botswana, David Phiri, noted that the UN in Zimbabwe “recognises that in order to achieve inclusive agricultural development and food and nutrition security, targeted social protection programmes should be in place.”

As part of efforts to improve agriculture production and nutrition, FAO and WFP are assisting small-holders in adopting climate smart agriculture, complementing government efforts that emphasise rehabilitation of irrigation schemes across the country.

These interventions could offer much-need relief for farmers like Makhalima, for whom agriculture is vital for nutrition and income.

(End)

By Roberto Savio
SAN SALVADOR, Aug 20 2015 (IPS)

The long saga on Greece is apparently over – European institutions have given Athens a third bailout of 86 billion euros which, combined with the previous two, makes a grand total of 240 billion euros.

Roberto Savio

There is no doubt that the large majority of European citizens are convinced that this is a great example of solidarity, and that if Greece is not now able to walk on its own feet, the responsibility will lie solely with Greek citizens and their government.

But this is only due to the fact that the media system has, by and large, ceased to provide alternative views … and some people even ignore that the bailout is a loan, and therefore increases the country’s debt.

In fact, the productive economy of Greece saw very little of that money because the bailouts were merely financial operations and Greek citizens, not only did not see anything, they have even had to pay a brutal price.

The truth behind the operation has been aptly described by Mujtaba Rahman, the respected chief Eurozone analyst for the London-based Eurasia Group, who said: “The bailout is not really about a growth plan for Greece, but a plan to make sure the European Central Bank (ECB) and the International Monetary Fund (IMF) get paid, and the euro area does not break up.”

And the purpose of this third bailout is clear. Of the famous 86 billion, 36 billion will go to pay the debt with the other European governments (and first of all Germany). Another 25 billion will go to recapitalize the Greek banks, because much capital left the country, heading for safer European banks. Another 18 billion will go to pay interest on the debt which Greece has been piling up. And, finally, seven billion will go to pay the debt of the state with Greek enterprises.“How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?”

So, seven will go to the real economy and nothing to the citizens, who will have now to go through several new drastic measures of austerity, which will further depress their standards of living and their ability to spend.

Financially, the bailouts have been a success. All the losses and bad exposure of European institutions have been passed on to Greece. Before the first bailout, French banks were exposed with bad bonds for 63 billion euros, now only for 1.6 billion with no losses. German banks have gone from 45 to five billion.

What is intriguing is that a number of studies show that until the very last moment, when it was widely known that Greece was in deep crisis, European banks and investors continued to buy Greek bonds.

Were they certain that Greece would pay? No, but they were confident that the Greek government would be rescued, and that they would therefore recover their investments, which is exactly what happened.

The financial system has now a life of its own and has nothing to do with real economy, which it dwarfs by being 40 times larger (if we judge by the volumes of daily financial transactions against the production of goods and services). Capital is untouchable and circulates freely in Europe, unlike its citizens. And now there is a great wave of legislation to introduce lower taxation for the richest one percent!

During the negotiations, one frequent accusation levelled against the Greeks was that they were unable to have their rich ship-owners pay their share of taxes. Of course, ship-owners place their money where it cannot be reached.

But is this not hypocritical when we know that there are at least two trillion euros stashed in fiscal paradises, and that, just to give one example, nobody has got Ryanair to really pay taxes? Not to mention the fact that when he was prime minister of Luxembourg, European Commission President Jean-Claude Juncker granted secret tax rebates to over a hundred international companies?

Now Agence France Press has circulated a new astonishing study from the German Leibnitz Institute of Economic Research, which says that Germany has profited from the Greek crisis to the tune of 100 billion euros, saving money through lower interest payments on funds the government borrowed amid investor “flights to safety” and “these savings exceed the cost of the crisis – even if Greece were to default on its entire debt.”

Meanwhile, a large number of studies point out how, by having a positive balance of trade with its European partners, Germany is in fact sucking capital from Europe.

Interpreting the third bailout and its conditions of austerity as a mere economic operation would be to commit a great error.

No economist can believe that Greece will be able to pay back and not only because it has always had a fragile economy, with little industry and with tourism as its main source of income (aggravated by decades of mismanagement and the corruption of its traditional parties, the very parties that European leaders would like to see come back).

Greece is already in recession and now the doubling of VAT is going to compress consumption further, also because there will now be further reductions in pensions and public salaries (which have been already cut by 20 percent).  It is widely believed that the Greek debt will now reach 200 percent of its GDP, up from 170 percent prior to the bailout.

How could any economist, even in the first year of studies, fail to understand that, by cutting consumption and raising taxes you are bound to depress an already depressed economy?

Well, it is no coincidence that the IMF, which is the Rotary Club of conservative economists, has refused to join this bailout. The IMF has said it will not put in any money unless European creditors (which is a diplomatic way of saying Germany) accept a restructuring of the Greek debt.

It is clear that the bailout has not been a technical but a political operation. Many European leaders, starting with Juncker himself, intervened in last month’s internal Greek referendum, asking Greeks to vote against Prime Minister Alexis Tsipras. They indicated clearly and openly, in a campaign that the Wall Street Journal repeated in the United States, that the revolt against austerity and the neoliberal economy should be stopped dead in its tracks to avoid political contagion.

For her part, German Chancellor Angela Merkel has declared on German television that she has come to the conclusion that °Tsipras has changed°. This has an air of dejà vu … was it not then British Prime Margaret Thatcher who, intent on destroying the trade unions, launched her famous TINA slogan – There Is No Alternative?

And is there no alternative to this kind of Europe? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Federico Lavopa
BUENOS AIRES, Aug 12 2015 (IPS)

The investor-state dispute settlement (ISDS) system has come under increasing criticism in recent years.

Inconsistent decisions, poorly reasoned awards, lack of transparency, parallel proceedings, serious doubts about arbitrator’s impartiality and the sheer size of the compensations sought by investors and awarded by arbitration tribunals are just some examples of the flaws that have been pointed out by detractors of the system.

Federico Lavopa

The dozens of cases that were initiated against Argentina as a result of the outburst of one of its worst economic and financial crises in late 2001 became an often-quoted sad illustration of many of these shortcomings of the ISDS system.

Apart from the tragic consequences entailed by the economic and political crisis which was faced by Argentina, in particular in 2001/2002, which included a fall in gross domestic product (GDP) per capita of 50 percent, an unemployment rate of over 20 percent, a poverty rate of 50 percent, strikes, demonstrations, violent clashes with the police, dozens of civil casualties and a succession of five presidents in 10 days, Argentina received a flood of claims from foreign investors that were filed under different ISDS mechanisms and, in particular, before the International Centre for Settlement of Investment Disputes (ICSID).

Indeed, in the period 2003-2007, claims against Argentina represented one-quarter of all the cases initiated within the framework of the ICSID Convention. These claims before international arbitral tribunals challenged the changes to the economic rules that Argentina had implemented to contain the effects of perhaps the worst economic cycle of its history.

After 1991, Argentina had embarked on an economic deregulation and liberalisation programme. Among others, this programme included the convertibility of the Argentine peso and the creation of a currency board to maintain parity between the peso and the U.S. dollar by limiting the local money supply to the amount of Argentina’s foreign exchange reserves. “If all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars”

This economic and pro-market programme was accompanied by a strong emphasis on the attraction of foreign investment which, among other aspects, resulted in the conclusion of 58 bilateral investment treaties (BITs) – 55 of which came into effect.

It also included a mass privatisation process of public companies which, at that time, represented an important part of the domestic economy.

This market-oriented model reached its limits in the late 1990s, and in May 2003 a new president took office, whose government reformed the regulatory framework for the economy – particularly that for the public services privatised over the 1990s – and introduced a package of emergency laws which implied a considerable change in the conditions under which foreign investors and, in particular, public services providers had to run their business in Argentina.

As a consequence, many of them decided to resort to the investor-state dispute settlement mechanisms embodied in the dozens of bilateral investment treaties that Argentina had signed in the 1990s. In total, in the period 2001-2012, exactly 50 cases were filed against Argentina.

A striking characteristic of the Argentinian experience is the amount of requests for compensations made by the companies that sued Argentina. According to estimates made when the peak of cases following the crisis was reached, if all investors that sued Argentina had obtained 100 percent of their claims, the total amount that the country should have had to bear would have been at around 80 billion dollars.

This sum would have been practically impossible to pay, even if Argentina had not been undergoing a period of acute economic crisis, because it represented approximately 13 percent of Argentina’s GDP for 2013.

Although Argentina’s response to this flood of cases was varied and it is still early to offer definite figures, it is already possible to conclude that, in general, arbitration tribunals were prone to render awards in favour of investors.

Almost 45 percent of the cases have received a condemnatory award, although most of these cases could still be reversed by annulment proceedings, whereas only 15 percent of the arbitration proceedings ended up with a final decision completely in favour of Argentina. The remaining 30 percent are mostly cases which resulted in an agreement between the parties or which were altogether suspended.

All in all, of the 80 billion dollars of the possible amount of compensations calculated when the peak of cases against Argentina was reached following the crisis, Argentina has so far received final rulings involving the payment of 900 million dollars.

The first salient conclusion is that the ISDS system has a very low capacity to adapt to totally exceptional circumstances for which it does not seem to have been designed. Despite the efforts of Argentinian attorneys to show that the measures implemented in the post-crisis period were adopted in an emergency context, being so exceptional as to justify any breach of the substantial clauses of the BITs, few tribunals were prepared to sustain this defence.

This notwithstanding, and with most of these cases having already been dealt with, the upcoming scenario for Argentina seems much less drastic than that forecast when the peak of cases was reached.

While they represent a heavy burden for a developing country like Argentina, so far the compensations actually paid amount to a small portion of the sum initially estimated.

The Argentinian case also represents a worrisome example of the failure of the ISDS system to ensure coherence and soundness in its decisions.

Although the dozens of cases submitted against Argentina addressed exactly the same package of measures (the post-crisis emergency laws) and  had to assess very similar arguments of the different claimants and a practically identical series of defences put forward by the Argentinian government, the conclusions at which they arrived have shown striking differences.

Additionally, some of the decisions have been subject to strong criticism and/or declared null and void by annulment committees.

Finally, the experience of Argentina shows the difficulties that arbitration tribunals might encounter when trying to scrutinise the economic policy choices made by governments. On top of the sensitiveness of examining sovereign decisions of States, arbitrators might find themselves in the awkward situation of deciding on highly technical matters which they are clearly ill-equipped to assess.

The case of Argentina thus represents a sad example of the urgent need to reconsider and reform the ISDS system. Yet, the lessons to be drawn from this experience do not seem to lead to clear conclusions about which direction to take.

On the one hand, the system has proved to be extremely inflexible, which prevented it from addressing the exceptional peculiarities of the Argentinian case. On the other hand, however, the wide margin of discretion available for the arbitral tribunals resulted in the adoption of inherently poor decisions, and with high levels of incoherence among them. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  This column is based on a paper with the same title published as South Centre Investment Policy Brief No 2, July 2015, available here.

Excerpt:

These Zimbabwean farmers with their harvested sorghum are at the mercy of climate change, while the government struggles with meagre financing and tall ambitions to take adequate action. Credit: UNDP-ALM

By Ignatius Banda
BULAWAYO, Zimbabwe , Aug 2 2015 (IPS)

With the U.N. Climate Change conference later this year in Paris fast approaching, Zimbabwe’s climate change commitments face the slow progress on an issue that continues to stalk other developing countries – climate finance.

As it prepares for the U.N. Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21), Zimbabwe – like many others in the global South – is grappling with radical climate shifts that have seen devastating exchanges of floods and droughts every year, and still awaits green bailout funds from developed nations, with officials here telling IPS, “this support should come in the forms of technology.”

The country’s halting progress on the climate front is being blamed by local climate researchers on the country’s failure to invest in state-of-the-art climate monitoring technology. More still needs to be done as the country heads to Paris, says Sherpard Zvigadza, Programmes Manager, Climate Change and Energy, for the Harare-based ZERO Regional Environment Organisation (ZERO)."The country [Zimbabwe] needs to partner with those in the private sector who are making an effort to develop projects or reduce their footprint, and implement a reward-based strategy so that both individuals and corporates are encouraged to support the government’s policies" – Steve Wentzel, director of Carbon Green Africa

“Zimbabwe should strengthen systematic observation, ensuring improved real-time observations and availability of meteorological data for research,” Zvigadza told IPS.

These concerns arise from what is seen here as repeated failure by the poorly-funded Meteorological Services Department to adequately monitor climate patterns and put in place effective early warning systems for disaster preparedness.

However, these constraints have not stopped Zimbabwe, which for the past two decades has seen a wilting of international financial support for crafting ambitious climate change interventions.

Recurrent climate-induced disasters have shown that this not the time to treat anything as “business as usual”, says Elisha Moyo, principal climate change researcher in the Climate Change Management Department of the Ministry of Environment, Water and Climate.

And these efforts have brought together civic society organisations (CSOs), farmers and ordinary Zimbabweans in what is expected to shape the country’s negotiations in Paris.

CSOs point to the fact that Zimbabwe has been identified by GLOBE International, which brings together legislators from all over the world, as having on the most comprehensive environmental laws in southern Africa, and say that this should be a stimulus for helping the country make greater strides in climate governance.

According to a climate ministry brief issued last month, Zimbabwe’s climate policy seeks, among others, weather and climate modelling, vulnerability and adaptation assessments, mitigation and low carbon development.

However, as tall as these ambitions sound, the climate ministry has acknowledged that in the absence of adequate financing the country could still be far from meeting its United Nations Framework Convention on Climate Change (UNFCC) commitments.

“There is a need to expand current projects as well as develop new projects throughout the country for the country to position itself to be able to raise funding for these developments,” said Steve Wentzel, director of Carbon Green Africa, a Zimbabwe-based company established to facilitate the generation of carbon credits through validating Reducing Emissions from Deforestation and Forest Degradation (REDD) projects.

“The country needs to partner with those in the private sector who are making an effort to develop projects or reduce their footprint, and implement a reward-based strategy so that both individuals and corporates are encouraged to support the government’s policies,” Wentzel told IPS.

“If the country is serious about moving away from business as usual, awareness raising is key for all stakeholders, including the general population as well as industry,” Zvigadza told IPS. “A vigorous campaign is needed across the country. More importantly, Zimbabwe’s national climate change response strategy has to be operationalised so that the challenges are addressed according to different local circumstances.”

Yet, by the climate ministry’s own admission, progress has remained slow due to the continuing problem of lack of funds, which Moyo believes should be tapped from the richer nations.

“As Africa, and supported by other developing countries from other regions, we believe the rich countries have not yet shouldered a fair share of the burden and should lead by example, in terms of cutting emissions and also providing financial support to poorer nations as stated in the Climate Change Convention,” Moyo told IPS.

And Zimbabwe certainly does need the money. The climate ministry is already wallowing in reduced state funding after the Finance Ministry slashed its national budget from 93 million dollars in 2014 to 52 million this year.

Meanwhile, domestic economic considerations are one of the obstacles to implementation of the country’s troubled climate change policy. Despite seeking to promote clean energy, power generation is still largely fossil fuel-based, where instead of cutting emissions, relatively cheaper coal feeds power generation.

The climate ministry policy brief says the country needs to “reduce greenhouse gas emissions from energy production transmission and use”, but economic hardships have made this a tall order where millions also rely on highly-polluting firewood for fuel.

“We are compiling the “intended nationally determined contributions (INDCs) and have been conducting consultations and data collection around the country especially with reference to the energy sector, which has a high potential of emission reductions through adoption of
renewable energy wherever possible,” Moyo told IPS.

INDCS are the post-2020 climate actions that countries say they will take under a new international agreement to be reached at COP21 in Paris, and to be submitted to the United Nations by September.

For its climate change ambitions to succeed, Zimbabwe must go back to the grassroots, says Wentzel, but unfortunately “there is a lack of knowledge of climate changes issues,” he told IPS.

As Washington Zhakata, Zimbabwe’s lead climate change negotiator put it: “The road to the Paris summit remains unclear with many stumbling blocks on the road.”

Edited by Phil Harris   

By Emma Bonino
ROME, Jul 24 2015 (IPS)

“A serious political and social crisis will sweep through the euro countries if they do not decide to strengthen the integration of their economies. The euro zone crisis did not begin with the Greek crisis, but was manifested much earlier, when a monetary union was created without economic and fiscal union in the context of a financial sector drugged on debt and speculation.”

Emma Bonino

These words, which are completely relevant today, were written by a group of federalists, including Romano Prodi, Giuliano Amato, Jacques Attali, Daniel Cohn-Bendit and this author, in May 2012.

Those with a federalist vision are not surprised that the crisis in Greece has dragged on for so many years, because they know that a really integrated Europe with a truly central bank would have been able to solve it in a relatively short time and at much lower cost.

In this region of 500 million people, another example of the inability to solve European problems was the recent great challenge of distributing 60,000 refugees among the 28 member countries of the European Union. Leaders spent all night exchanging insults without reaching a solution.

Unless the federalist programme – namely, the gradual conversion of the present European Union into the United States of Europe – is adopted, the region will not really be able to solve crises like those of Greece and migration.

It can be stated that European federalism – which would complete Europe’s unity and integration – is now more necessary than ever because it is the appropriate vehicle for overcoming regional crises and starting a new phase of growth, without which Europe will be left behind and subordinated not only to the United States but also to the major emerging powers.“Unless the federalist programme – namely, the gradual conversion of the present European Union into the United States of Europe – is adopted, the region will not really be able to solve crises like those of Greece and migration”

Furthermore, its serious and growing social problems – such as poverty, inequality and high unemployment especially among young people – will not be solved.

Within the federalist framework there is, at present, only the euro, while all the other institutions or sectoral policies (like defence, foreign policy, and so on) are lacking.

Excluding such large items of public spending as health care and social security, there are however other government functions which, according to the theory of fiscal federalism (the principle of subsidiarity and common sense), should be allocated to a higher level, that of the European central government.

Among them are, in particular: defence and security, diplomacy and foreign policy (including development and humanitarian aid), border control, large research and development projects, and social and regional redistribution.

Defence and foreign policy are perhaps considered the ultimate bastions of state sovereignty and so are still taboo. However, the progressive loss of influence in international affairs among even the most important European countries is increasingly evident.

To take, for instance, the defence sector: as Nick Witney, former chief executive of the European Defence Agency, has noted: “most European armies are still geared towards all-out warfare on the inner-German border rather than keeping the peace in Chad or supporting security and development in Afghanistan.

“This failure to modernise means that much of the 200 billion euros that Europe spends on defence each year is simply wasted,” and “the EU’s individual Member States, even France and Britain, have lost and will never regain the ability to finance all the necessary new capabilities by themselves.”

It should be noted that precisely because the mission of European military forces has changed so radically, it is nowadays much easier, in principle, to create new armed forces from scratch (personnel, armaments, doctrines and all) instead of persisting in the futile attempt to reconvert existing forces to new missions, while at the same time seeking to improve cooperation between them.

Why should it be possible to create a new currency and a new central bank from scratch, and not a new army?

Common defence spending by the 28 European Union countries amounts to 1.55 percent of European GDP. Hence, a hypothetical E.U. defence budget of one percent of GDP appears relatively modest.

However, it translates into nearly 130 billion euros, which would automatically make the E.U. armed forces an effective military organisation, surpassed only by that of the United States, and with resources three to five times greater than those available to powers like Russia, China or Japan.

It would also mean saving an estimated 60 to 70 billion euros, or more than half a percentage point of European GDP, compared with the present situation.

Transferring certain government functions from national to European level should not give rise to a net increase in public spending in the whole of the European Union, and could well lead to a net decrease because of economies of scale.

Taking the example of defence, for the same outlay a single organisation is certainly more efficient than 28 separate ones. Moreover, as demonstrated by experiences with the North Atlantic Treaty Organization (NATO) during the Cold War, efforts to coordinate independent military forces always produced disappointing results and parasitic reliance on the wealthier providers of this common good. (END/COLUMNIST SERVICE)

Translated by Valerie Dee/Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Daya Thussu
LONDON, Jul 22 2015 (IPS)

The formal opening of the BRICS Bank in Shanghai on Jul. 21 following the seventh summit of the world’s five leading emerging economies held recently in the Russian city of Ufa, demonstrates the speed with which an alternative global financial architecture is emerging.

The idea of a development-oriented international bank was first floated by India at the 2012 BRICS summit in New Delhi but it is China’s financial muscle which has turned this idea into a reality.

Daya Thussu

The New Development Bank (NDB), as it is formally called, is to use its 50 billion dollar initial capital to fund infrastructure and developmental projects within the five BRICS nations – Brazil, Russia, India, China and South Africa – though it is also likely to support developmental projects in other countries.

According to the 43-page Ufa Declaration, “the NDB shall serve as a powerful instrument for financing infrastructure investment and sustainable development projects in the BRICS and other developing countries and emerging market economies and for enhancing economic cooperation between our countries.”

The NDB is led by Kundapur Vaman Kamath, formerly of Infosys, India’s IT giant, and of ICICI Bank, India’s largest private sector bank. A respected banker, Kamath reportedly said during the launch that “our objective is not to challenge the existing system as it is but to improve and complement the system in our own way.”

The launch of the NDB marks the first tangible institution developed by the BRICS group – set up in 2006 as a major non-Western bloc – whose leaders have been meeting annually since 2009. BRICS countries together constitute 44 percent of the world population, contributing 40 percent to global GDP and 18 percent to world trade.“Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way” – Kundapur Vaman Kamath, head of the New Development Bank (NDB)

In keeping with the summit’s theme of ‘BRICS partnership: A powerful factor for global development’, the setting up of a developmental bank was an important outcome, hailed as a “milestone blueprint for cooperation” by a commentator in The China Daily.

The Chinese imprint on the NDB is unmistakable. The Ufa Declaration is clear about the close connection between the NDB and the newly-created Asian Infrastructure Investment Bank (AIIB), also largely funded by China. It welcomed the proposal for the New Development Bank to “cooperate closely with existing and new financing mechanisms including the Asian Infrastructure Investment Bank.” China is also keen to set up a regional centre of the NDB in South Africa.

If economic cooperation remained the central plank of the Ufa summit, there is also a clear geopolitical agenda.

The Global Times, China’s more nationalistic international voice, pointed out that the establishment of the NDB and the AIIB will “break the monopoly position of the International Money Fund (IMF) and the World Bank (WB) and motivate [them] to function more normatively, democratically, and efficiently, in order to promote reform of the international financial system as well as democratisation of international relations.”

The reality of global finance is such that any alternative financial institution has to function in a system that continues to be shaped by the West and its formidable domination of global financial markets, information networks and intellectual leadership.

However, China, with its nearly four trillion dollars in foreign currency reserves, is well-placed to attempt this, in conjunction with the other BRICS countries. China today is the largest exporting nation in the world, and is constantly looking for new avenues for expanding and consolidating its trade relations across the globe.

China is also central to the establishment of the Shanghai Cooperation Organisation (SCO), a Eurasian political, economic and security grouping whose annual meeting coincided with the seventh BRICS summit. Founded in 2001 and comprising China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, the SCO has agreed to admit India and Pakistan as full members.

Though the BRICS summit and the SCO meeting went largely unnoticed by the international media – preoccupied as they were with the Iranian nuclear negotiations and the ongoing Greek economic crisis – the economic and geopolitical implications of the two meetings are likely to continue for some time to come.

For host Russia, which also convened the first BRICS summit in 2009, the Ufa meeting was held against the background of Western sanctions, continuing conflict in Ukraine and expulsion from the G8. Partly as a reaction to this, camaraderie between Moscow and Beijing is noticeable – having signed a 30-year oil and gas deal worth 400 billion dollars in 2014.

Beijing and Moscow see economic convergence in trade and financial activities, for example, between China’s Silk Road Economic Belt initiative for Central Asia and Russia’s recent endeavours to strengthen the Eurasian Economic Union. The expansion of the SCO should be seen against this backdrop. Moscow has also proposed setting up SCO TV to broadcast economic and financial information and commentary on activities in some of the world’s fastest growing economies.

Whatever the outcome, it is clear that a new international developmental agenda is being created, backed by powerful nations, and to the virtual exclusion of the West.

China is the driving force behind this. Despite its one-party system which limits political pluralism and thwarts debate, China has been able to transform itself from a largely agricultural self-sufficient society to the world’s largest consumer market, without any major social or economic upheavals.

China’s success story has many admirers, especially in other developing countries, prompting talk of replacing the ‘Washington consensus’ with what has been described as the ‘Beijing consensus’. The BRICS bank, it would seem, is a small step in that direction.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Tamira Gunzberg
BRUSSELS, Jul 18 2015 (IPS)

Today Jul. 18 is Mandela Day, the annual international day in honour of the late Nelson Mandela, the first democratically-elected President of the Republic of South Africa.

The day was instated by the United Nations after Nelson Mandela made a call for the next generation to take on the burden of leadership in addressing the world’s social injustices. Mandela said, “It is in your hands now”.

Tamira Gunzburg

Today, then, is a moment to reflect on whether we are indeed rising to that occasion. One of the scourges of humanity today, in Mandela’s own words, is poverty. And 2015 is a year rife with opportunities to make historic strides in the fight against extreme poverty. Halfway through the year, what have our leaders made of this potential?

Many of them will have just arrived home from an international summit held in Addis Ababa, Ethiopia, this week. The summit was meant to land an international agreement on how to finance development going forward. Against difficult odds, world leaders indeed signed up to an agreement that could start to reshape how developing countries are supported in their progress towards growth and prosperity.

But over the months of negotiation preceding the summit, some key areas were watered down. For example, one measure to curb illicit financial flows, involving the public disclosure of multinational companies’ tax reports, was weakened.

A proposed commitment to prioritise the poorest countries by directing half of development assistance there suffered the same fate.

The result is a final agreement that, as it stands, is not ambitious enough to be able to successfully end extreme poverty.“Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings” – Nelson Mandela, Trafalgar Square, 3 February 2005

Mandela Day is perfectly timed because his legacy reminds us that now is not the time to give up. Indeed, in just two months’ time, another historic opportunity will be within reach.

At the U.N. General Assembly in New York, world leaders will come together once again, this time to adopt a new set of Global Goals that will shape the future of our planet and its people.

The previous set of anti-poverty goals, the Millennium Development Goals, set in 2000 and due to expire this year, indeed played a critical role in drastically bringing down global average levels of hunger, child mortality, and extreme poverty.

But this time around, the Global Goals are all about finishing the job. In order to reach the very last person at the end of the very last mile, leaders will have to put the most vulnerable at the centre of their efforts from the get-go.

When this new blueprint is unveiled in September, we expect leaders to underpin the goals and objectives with the means and actions needed to actually achieve them by the 2030 deadline.

It would be the perfect opportunity for big donors like the European Union to prioritise the poorest countries by announcing they will direct half of their development aid to the least developed countries.

There are plenty more ways in which individual countries can step up and guarantee that the Global Goals are launched with the best chances of succeeding. I, for one, am optimistic about the prospects of that happening.

Part of that optimism I derive from my South African heritage. My mother, who grew up in South Africa under the cloud of apartheid, always tells me that she grew up convinced the world as she knew it would never change. And then one day it did.

We have Nelson Mandela to thank for that. But also many others who believed that a better world was possible, and who worked tirelessly to change the status quo.

In the year 2015, our generation faces formidable challenges of its own, but looking back at incredible transformations like South Africa’s shows that anything is possible.

In the last twenty years, we already halved the proportion of the world’s population living in extreme poverty, and virtually eliminating it by 2030 is entirely possible if our leaders get it right.

There is no better day than today to contemplate the role each and every one of us can play in making sure we do not fail on that count.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Zambian farmer Neva Hamalengo (right) knows what it means to lose crops to the ravages of weather and have no insurance coverage. Credit: Friday Phiri/IPS

By Friday Phiri
MOYO, Pemba District, Zambia, Jul 6 2015 (IPS)

In the advent of unpredictable weather, smallholder rain-dependent agriculture is increasingly becoming a risky business and the situation could worsen if, as seems likely, the world experiences levels of global warming that could lead to an increase in droughts, floods and diseases, both in frequency and intensity.

Neva Hamalengo, a 40-year-old farmer from Moyo in Pemba district, Southern Zambia, knows what it means to lose everything in a blink of an eye – not only did a storm wipe out an entire hectare of market-ready tomatoes worth about 15,000 kwacha (2,000 dollars), but he also suffered maize crop failure due to a month-long drought.

“I expect very poor yields this season,” he told IPS. “We suffered crop damage through a storm and when crops needed the rains to recover, we had a severe drought.”

To make matters worse, his smallholder business had no insurance cover and, admitting that he “knew nothing about insurance,” Hamalengo said that would love to see insurance education incorporated into agricultural extension services.“When small-scale farmers are financially literate, they are able to guide fellow farmers to uptake a particular financial product such as insurance or credit … and avoid making poor decisions” – Allan Mulando, WFP Zambia

Hamalengo’s situation represents the predicament faced by most smallholder farmers – who are generally excluded from financial services – and confirms arguments by some experts that the risk of running an uninsured business is far greater if climate is involved.

While financial inclusion is considered a key enabler for reducing poverty, the statistics in Zambia are far from encouraging. According to a 2009 FinScope survey, 63 percent of the Zambian adult population (6.4 million people) is excluded from formal financial services. Slightly over half of the adult population is engaged in farming.

Putting these statistics into context, the “unbanked” majority are poor people, with many of them smallholder farmers. Now, in an attempt to help them become more resilient to climate variability and shocks, the World Food Programme (WFP) has launched the R4 Rural Resilience Initiative, aimed at tackling risk in a holistic manner.

The initiative is “an integrated approach to managing risk, focusing on index‐based agricultural insurance (risk transfer), improved natural resource management (disaster risk reduction), credit (prudent risk taking), savings (risk reserves) and productive safety nets,” Allan Mulando, WFP Zambia’s Head of Vulnerability Assessment and Mapping Unit (VAM), told IPS.

The initiative is based on a strategic global partnership between WFP and Oxfam America which, Mulando said, is aimed at “improving the capacity of food-insecure households to manage the risks of severe weather shocks.”

Working with partners such as the national Disaster Management and Mitigation Unit (DMMU), government ministries, the Meteorological Department, national insurance companies, as well as credit and savings institutions, the project strives to integrate activities with already running government programmes on resilience, such as the Conservation Agriculture Scaling Up (CASU), programme.

CASU, which is being run by the U.N. Food and Agriculture Organisation (FAO) in partnership with the Ministry of Agriculture and Livestock and with financial support from the European Union (EU), aims to contribute to reduced hunger, and improved food security, nutrition and income, while promoting the sustainable use of natural resources.

“R4’s overall objective is to create an environment for private sector participation through market development to ensure sustainability … through insurance cover, credit provision, asset creation programmes and safety nets, as well as household saving … all of which have been identified as alternative ways of reducing vulnerability,” explained Mulando.

Stressing the importance of the project, Southern Province Principal Agriculture Officer Paul Nyambe told IPS that “the Ministry [of Agriculture and Livestock] has been encouraging climate-resilient technologies under CASU and crop diversification amid climate-induced hazards, of which financial inclusion is a key ingredient.”

Meanwhile, for the Ministry of Lands, Natural Resources and Environmental Protection, such initiatives are always welcome because they fall within the government’s major objective of building the capacity of local communities to adapt to climate change.

“Stakeholders with initiatives that help people to adapt are welcome,” Richard Lungu, Chief Environment Management Officer at the ministry, said. “Right now, government is in the process of mobilising resources to support communities affected by a severe drought which led to crop failure.”

According to Lungu, who is Zambia’s focal point for the United Nations Framework Convention on Climate Change (UNFCCC) , “climate change is now a cross-cutting developmental issue especially for Zambia whose economy is natural resource dependent”, with over 80 percent of the population dependent on agriculture for their livelihoods.

Whereas climate shocks can trap farmers in poverty, the risk of shocks also limits their willingness to invest in measures that might increase their productivity and improve their economic situation – and this is where financial education becomes critical.

“Taking into consideration that agricultural weather-based index insurance is relatively new among our small farmers, there is a need for strong financial education,” Mulando told IPS. “When small-scale farmers are financially literate, they are able to guide fellow farmers to uptake a particular financial product such as insurance or credit … and avoid making poor decisions.”

Financial expert George Siameja agreed but noted that the problem lies at two levels – lack of financial education and an inhibiting credit finance environment.

“However, financial literacy should be the starting point because banks consider it too risky to lend money to individuals with inadequate financial capacity,” Siameja told IPS. “While farming is a function of climate, financial education is key.”

Sussane Giese, a German development and change consultant, also pointed to the so-called “dependency syndrome” which inhibits farmers from being more active. “In my interactions with some field officers,” she said, “there is something called dependency syndrome affecting farmers where they see themselves as beneficiaries and not individuals running agriculture as an enterprise.”

Meanwhile, one farmer who is singing the praises of financial literacy is 34-year-old Rodney Mudenda of Nabuzoka village in Pemba district, who has seen a dramatic change of fortunes.

“Since I was trained in financial management last year, I have changed my approach to farming. I am ready to take calculated risks like I did this season to reduce on maize and plant more sunflowers, a drought-tolerant crop. And the gamble has paid off. I expect to earn 12,000 kwacha (1,500 dollars) from an investment of 5,000 kwacha (650 dollars)”, Mudenda told IPS.

Edited by Phil Harris

ACP Secretary-General Patrick I. Gomes, who sees the group’s role as “a global player defending, protecting and promoting an inclusive struggle against poverty and for sustainable development in a world enmeshed in inequality”. Photo credit: ACP Press

By Patrick I. Gomes
BRUSSELS, Jun 28 2015 (IPS)

In his memoirs, Glimpses of a Global Life, Sir Shridath Ramphal, then-Foreign Minister of the Republic of Guyana, who played a leading role in the evolution of the Lomé negotiations that lead to the birth of the African, Caribbean and Pacific (ACP) Group of States, pointed to the significant lessons of that engagement of developed and developing countries some 40 years ago and had this to say:

“As regards the Lomé negotiations, the process of unification – for such it was – added a new dimension to the Third World’s quest for economic justice through international action. Its significance, however, derives not merely from the terms of the negotiated relationship between the 46 ACP states and the EEC, but from the methodology of unified bargaining which the negotiations pioneered.

“Never before had so large a segment of the developing world negotiated with so powerful a grouping of developed countries so comprehensive and so innovative a regime of economic relations. It was a new, and salutary, experience for Europe; it was a new, and reassuring, experience for the ACP States.

“Forty years later, that lesson remains retains its validity. Unity of purpose and action remains the touchstone of ACP’s meaning and success.”

With a conscious appreciation of that founding unity of purpose and action, the ACP Group convened a high-level symposium at its headquarters in Brussels on Jun. 6. The event marked the milestone of four decades of trade and economic cooperation, vigorous and contentious political engagements and a range of development finance programmes – all aimed at the eradication of poverty from the lives of the millions of people in its 79 member states.“The ACP will craft its future path to continue the struggle against power, inequality and injustice, the core purpose for which it was established in 1975”

In 1975, it was 46 developing countries that met in the capital city of Guyana, to sign the Georgetown Agreement and give birth to the ACP Group. They had recently embarked on their post-colonial path of independence following successful negotiations of non-reciprocal trade arrangements with the then nine-member European Economic Community (EEC) in February.

Known as the Lomé Agreement, after the capital of Togo where it was signed, this legally-binding, international agreement had a life-span of 25 years to 2000. Essentially, it comprised three pillars of trade and economic cooperation, development assistance – mainly through grants from the European Development Fund (EDF) – and political dialogue on issues such as human rights and democratic governance.

During that period, the preferential trade and aid pact undoubtedly gave an impetus to various aspects of economic and social development in the ACP Group. Substantial revenue was received from preferential access to the European market for exports of clothing, banana, sugar, cocoa, beef, fruit and vegetables, for example, and with the accompanying aid programmes.

The benefits were seen in the economies of Mauritius, Kenya, Cote d’Ivoire, Namibia, Guyana and Fiji, to name a few. Member states of the ACP Group, less-developed countries (LDCs), landlocked states and small island developing states (SIDS), had access to returns from trade for improved social services and in this sense, the first decades of Lomé were certainly gains for development in sub-Saharan Africa, the Caribbean and Pacific.

But these gains entrenched an aid-dependency of commodity export economies with minimal structural transformation through value-added manufacturing and related service sectors in ACP countries.

The fierce trade-liberalising world of the late 1990s, rising indebtedness due to enormous increase in the cost of energy and pressure from the challenge of the World Trade Organisation (WTO) to the European Union’s discriminatory practice of preferential trade and aid to this exclusive set of developing countries meant that post-Lomé ACP-EU trade relations had to be WTO-compatible.

Finding compatibility for “substantially all trade” between the economies of the ACP’s 79 members – grouped in six regions of Africa, the Caribbean and Pacific – and Europe, and ensuring that development criteria take precedence over tariff reductions and WTO rules have proven contentious in this long-standing partnership.

With this overhang of tensions in its troubled access to its principal market, the ACP faces the conclusion of the 20-year Agreement signed in Cotonou, the Republic of Benin, in 2020.

A soul-searching and vigorous process to be repositioned as a global player defending, protecting and promoting an inclusive struggle against poverty and for sustainable development in a world enmeshed in inequality is the singular task on which the ACP now concentrates.

Such a task has entailed a series of actions that are informed by the report of the Ambassadorial Working Group on Future Perspectives for the ACP Group of States that was approved by the Council of Ministers in December 2014.

The main thrust of the transformation and repositioning of the ACP is captured in the strategic policy domains identified in the report.

These are in five thematic areas that address:

a) Rule of Law & Good Governance;

b) Global Justice & Human Security;

c) Building Sustainable, Resilient & Creative Economies; and

d) Intra-ACP Trade, Industrialisation and Regional Integration;

e) Financing for Development.

In each of these, and in ways that are mutually reinforcing, very specific programmed activities of an annual action plan are being prepared and will be executed.

For example, the annual plan will address the thematic area of “sustainable, resilient and creative economies” through the mechanism of an ACP Forum on SIDS with financial resources, mainly from the intra-ACP allocation of the EDF and the UN’s Food & Agriculture Organisation (FAO), one of the partner agencies of the UN system with which the ACP Group works very closely.

Conceptualised so as to address systemic and structural factors affecting sustainable development, the ACP emphasises South-South and triangular cooperation as a major modality for implementation of its role as catalyst and advocate.

The current stage of rethinking and refocusing provides an opportunity for 40 years of development through trade by which the ACP Group and the European Union could recast the world’s most unique and enduring North-South treaty of developed and developing countries to effectively participate in a global partnership where no one is left behind.

The ACP has social and organisational capital accumulated from a rich experience on trade negotiations with the world’s largest bloc of Europe and its 500 million inhabitants.

Undoubtedly marked by contentious issues on trade provisions to satisfy the WTO’s non-discriminatory behaviour among its member States, ACP-EU relations reveal the persistent battle of poor versus rich with a view to finding common ground on issues of mutual interest.

The 40^th anniversary celebration by the ACP Group at a High-Level Inter-regional Symposium on Jun. 4 and 5 witnessed reflections on achievements and failures, as well as limitations in the performance of the ACP Group, in itself as a group and among its member states, as well as in its partnership with the European Union and the wider global arena.

The theme of the symposium covered the initial Georgetown Agreement and the ambitious objectives that were set in 1975. The high point was the keynote address by H.E. Sam Kutesa, President of the UN General Assembly.

Interestingly, discussions revealed how relevant and timely they remain and of special note was the “promotion of a fairer and more equitable new world order”.

This retrospective conversation has been recognised as fundamental for how, and in what direction, the ACP will craft its future path to continue the struggle against power, inequality and injustice, the core purpose for which it was established in 1975.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

G7-based companies and investors cheated Africa out of an estimated six billion dollars in a year through just one form of tax dodging, according to a new Oxfam report ‘Money talks: Africa at the G7’, released Jun. 2.

This is equivalent to three times the amount needed to plug the healthcare funding gap in the Ebola-affected countries of Sierra Leone, Liberia, Guinea and at-risk Guinea Bissau.

According to an Oxfam briefing paper release in April this year, an estimated 1.7 billion dollars is required to close the healthcare funding gap to improve dangerously inadequate health systems in these countries. This figure is based on raising spending to the recommendation of the World Health Organisation (WHO) that 86 dollars per capita is required to achieve the minimum package of essential services.“Multinational companies, many with headquarters in the United Kingdom and other G7 countries, are cheating African countries out of billions of dollars in vital tax revenues that could help vulnerable people get decent healthcare and send their children to school” – Nick Brye, Oxfam’s Head of U.K. Campaigns

The new Oxfam report comes as G7 leaders prepare to meet their African counterparts at the annual summit in Bavaria, Germany from Jun. 8 to 9. African leaders from Ethiopia (Prime Minister Hailemariam Desalegn), Liberia (President Ellen Johnson Sirleaf), Nigeria (President Muhammadu Buhari) and Senegal (President Macky Sall) are scheduled to join an outreach session on Jun. 8.

Oxfam is calling for the leaders of the G7 countries – Canada, France, Germany, Italy, Japan, United Kingdom and United States – to include action for ambitious tax reform in discussions about how the group can support economic growth and sustainable development on the continent.

In the United Kingdom, Oxfam is part of a coalition that has been calling on the recently elected new British government to show leadership by introducing a Tax Dodging Bill, which would make it harder for U.K. companies to avoid paying tax in the countries in which they operate – practices which currently cost some of the world’s poorest countries billions each year.

The coalition, which includes ActionAid and Christian Aid in addition to Oxfam, is currently running a Tax Dodging Bill campaign.

According to Oxfam, a well-crafted Tax Dodging Bill would also make it harder for big companies to avoid paying tax in the United Kingdom, and could bring in at least 3.6 billion pounds (5.4 billion dollars) a year to the U.K. Treasury, the equivalent of 600 pounds (910 dollars) for every household living below the poverty line.

“Multinational companies, many with headquarters in the United Kingdom and other G7 countries, are cheating African countries out of billions of dollars in vital tax revenues that could help vulnerable people get decent healthcare and send their children to school,” said Nick Brye, Oxfam’s Head of U.K. Campaigns.

“To fund the fight against poverty and to tackle worsening extreme inequality, we need action to ensure big companies pay their fair share, here and in the world’s poorest nations.”

Oxfam also notes that existing international efforts to tackle corporate tax dodging, such as the BEPS (Base Erosion and Profit Shifting) process, led by the Organisation for Economic Cooperation (OECD) for the G20 group of the world’s major economies, will leave gaping tax loopholes.

It warns that these loopholes can continue to be exploited by multinational companies across the developing world and that many African nations have been shut out of discussions on BEPS reform and will not benefit from them as a result.

Oxfam is also calling for British Chancellor of the Exchequer George Osbourne to attend July’s Financing for Development Conference in Ethiopia which will play host to heads of states and finance ministers from around the world.

The talks, which will focus on how the international community will fund development over the next two decades, are an opportunity for governments to work together to start shaping a more democratic and fairer global tax system.

In 2010, the last year for which data are available, Oxfam says that companies and investors based in G7 countries avoided paying tax on 20 billion dollars of income through a practice called trade mispricing – where a company artificially sets the prices for goods or services sold among its subsidiaries to avoid taxation.

With corporate tax rates in Africa averaging 28 percent, this equates to nearly six billion dollars in lost revenues. In addition, developing countries as a whole lose around 100 billion dollars a year through tax avoidance schemes involving tax havens, according to the U.N. Conference on Trade and Development (UNCTAD).

“Reforming global corporate tax rules so that African governments can claim the money owed to them is vital to tackle extreme poverty and inequality and boost economic growth, said Brye. “That’s why Oxfam has been calling for a U.K. Tax Dodging Bill that would ensure U.K. companies do their bit to help poor families at home and in developing countries.”

Edited by Phil Harris   

It is astonishing that every week we see action being taken in various part of the world against the financial sector, without any noticeable reaction of public opinion.

It is astonishing because at the same time we are experiencing a very serious crisis, with high unemployment, precarious jobs and an unprecedented growth of inequality, which can all be attributed, largely, to speculative finance.

Roberto Savio

This all began in 2008 with the mortgage crisis and the bursting of the derivatives bubble in the United States, followed by the bursting of the sovereign bonds bubble in Europe.

It is calculated that we will need to wait until at least 2020 to be able to go back to the levels of 2008 – so we are talking of a lost decade.

To bail out the banks, the world has collectively spent around 4 trillion dollars of taxpayers’ money. Just to make the point, Spain has dedicated more than its annual budget on education and health to bail out the banking sector … and the saga continues.

Last week, five major banks agreed to pay 5.6 billion to the U.S. authorities because of their manipulations in the currency market. The banks are household names: the American JPMorgan Chase and Citigroup, the British Barclays and the Royal Bank of Scotland, and the Swiss UBS.“To bail out the banks, the world has collectively spent around 4 trillion dollars of taxpayers’ money”

In the case of UBS, the U.S. Department of Justice took the unusual step of tearing up a non-prosecution agreement it had reached earlier, saying that it had taken that step because of the bank’s repeated offences. “UBS has a ‘rap sheet’ that cannot be ignored,” said Assistant U.S. Attorney General Leslie Caldwell.

This is a significant departure from the Justice Department’s guidelines issued in 2008, according to which collateral consequences have to be taken into account when indicting financial institutions.

“The collateral consequences consideration is designed to address the risk that a particular criminal charge might inflict disproportionate harm to shareholders, pension holders and employees who are not even alleged to be culpable or to have profited potentially from wrongdoing,” said Mark Filip, the Justice Department official who wrote the 2008 memo.

Referring to the case of accounting giant Arthur Andersen, which certified as valid the accounts of the Enron energy company that went into bankruptcy for faking its budget, Filip said that “Arthur Andersen was ultimately never convicted of anything, but the mere act of indicting it destroyed one of the cornerstones of the Midwest’s economy.”

This was in fact a declaration of impunity, which did not escape the managers of the financial system, under the telling title of “Too Big to Fail”.

Two weeks ago, a judge from the Federal District Court of Manhattan, Denise L. Cote, condemned two major banks – the Japanese Nomura Holdings and the British Royal Bank of Scotland – for misleading two mortgage public institutions, Fannie Mae [Federal National Mortgage Association] and Freddie Mac [Federal Home Loan Mortgage Corporation], by selling them mortgage bonds which contained countless errors and misrepresentations.

“The magnitude of falsity, conservatively measured, is enormous,” she wrote in her scathing decision.

Nomura Holdings and the Royal Bank of Scotland were just two of 18 banks that had been accused of manipulating the housing market. The other 16 settled out of court to pay nearly 18 billion dollars in penalties and avoid having their misdeeds aired in public.

Nomura Holdings and Royal Bank of Scotland refused any settlement and instead went to court against the U.S. government, arguing that it was the housing crash which caused their mortgage bonds to collapse. Judge Cote, however, wrote that it was precisely the banks’ criminal behaviour which had exacerbated the collapse in the mortgage market.

It is worth noting that, until now, the cumulative fines inflicted by the U.S. government on just five major banks since 2008 amount to a quarter of a trillion dollars. No one has yet gone to jail – fines have been paid and the question closed.

Now the question: is all this due to the misconduct of a few greedy managers or is it due to the new “ethics” of the financial sector?

By the way, let us not forget that it was revealed recently that 25 hedge fund managers took close to 14 billion dollars only last year and that the highest paid manager took for himself the unthinkable amount of 1.3 billion dollars, equal to the combined average salaries of 200,000 U.S. professionals.

Well, just a week ago, the respected University of Notre Dame was reported as having published a startling report, based on a survey of more than 1,200 hedge fund professionals, investment bankers, traders, portfolio managers from the United States and the United Kingdom, in which about one-third of those earning more than 500,000 dollars a year said that they “have witnessed or have first-hand knowledge of wrongdoing in their workplace.”

The report went on to say that “nearly one in five respondents feel financial services professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment” and in any case,  nearly half of the high income professionals consider authorities to be ”ineffective in detecting, investigating and prosecuting securities violations.”

A quarter of respondents stated that if they saw that there was no chance of being arrested for insider trading to earn a guaranteed 10 million dollars, they would do so.

And nearly one-third “believe compensation structures or bonus plans in place at their companies could incentivise employees to compromise ethics or violate the law.”  It should also be noted that the majority were worried their employer “would likely to retaliate if they reported wrongdoing in the workplace.” So, the bonus that goes to those in the financial sector every year practically amounts to a bribe for silence on misconduct.

At the same time, we have learned that in Guatemala the Governor of the Central Bank has been arrested for embezzling 10 million dollars. Of course, everything is a question of scale…but in sociology there is a mechanism called “demonstration effect”.

The example of Wall Street and the City will increasingly seep down once a new “ethic” is in place. It will propagate if it is not stopped … and this is not happening.

A final note. In the same week (how many things have happened in such a short space of time), the Federal Trade Commission of Columbia accused four respected cancer charities of misusing donations worth millions of dollars.

One of them, the Cancer Fund of America, declared that it spent 100 percent of proceeds on hospice care, transporting patients to chemotherapy sessions and buying medication for children. The Federal Trade Commission found in fact that less than three percent of donations was spent on cancer patients.

The “new ethic” is in reality a cancer, and it is metastasising rapidly. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

By Roberto Savio
ROME, May 19 2015 (IPS)

The victory of the Conservative Party and the debacle of the Labour Party in the recent British general elections is yet another sign of the crisis facing left-wing forces today, leaving aside the question of how, under the British electoral system, the Labour Party actually increased the number of votes it won but saw a reduction in the number of seats it now holds in Parliament (24 seats less than the previous 256).

Roberto Savio

If the proportional rather than uninominal system had been used, the Conservative Party with its 11 million votes would have won 256 and not 331 seats in Parliament (far short of the absolute majority of 326 needed to govern), while at the other extreme the United Kingdom Independence Party with nearly four million votes would have landed 83 and not just the one seat it ended up with – results that would be hard to imagine anywhere else and a good example of insularity.

To an extent, the recent British general elections mirrored the U.S. presidential elections in 2000 when Democratic candidate Al Gore won around half a million more popular votes than Republican candidate George W. Bush but failed to win the majority of electoral college votes on which the U.S. system is based. The outcome was eight years of George W.  Bush administration, the war in Iraq, the crisis of multilateralism, and all the paraphernalia of “America’s exceptional destiny”.

Let us venture now into an analysis that will have the politologues among us cringing.“The left has tried to mimic the winners, instead of trying to be an alternative to the process of neoliberal globalisation and, since the beginning of the world financial crisis in 2008 … it has had no real answer to the crisis”

It is now generally recognised that the end of the Soviet Union has given free way to a kind of capitalism without control, marked by an unprecedented supremacy of finance which, in terms of volume of investments, overwhelmingly exceeds the real or productive economy.

In its wake, neoliberal thinking has found the left totally unprepared, because part of its function had been to provide a democratic alternative to Communism, which was suddenly no longer a threat.

The left therefore has tried to mimic the winners, instead of trying to be an alternative to the process of neoliberal globalisation and, since the beginning of the world financial crisis in 2008 (with its bail-out cost so far of over four trillion dollars), it has had no real answer to the crisis.

Ever since the industrial revolution, the identity of the left had been to press for social justice, equality of opportunities and redistribution, while the right placed the emphasis on individual efforts, less role for the state and success as motivation.

Continuing with this brutal simplification, we have to add that the left, from Marx to Keynes, always studied how to create economic growth and redistribution – Marx by abolishing private property, social democrats through just taxation.

But it never studied the creation of a progressive agenda in the event case of an economic crisis such as the one we are now facing, with structural unemployment, young people obliged  to accept any kind of contract, new technologies which are making the concept of classes disappear, and rendering trade unions – erstwhile powerful actors for social justice – irrelevant.

It is unprecedented that the top 25 hedge fund managers received a reward in 2014 of 11.62 billion dollars, yet neither U.S. President Barack Obama nor Ed Miliband, then still leader of the Labour Party at the recent British general elections (until he resigned after election defeat), saw it fit to denounce this obscene level of greed.

Meanwhile, Europe as a political project is clearly in disarray, and now faces a “Grexit” on its southern flank and a “Brexit” on its northern flank.

In the case of a “Grexit” (the possible abandonment of the European Union by Greece), Greece faces the prospects of having to make substantial concessions to Europe, thus reneging on the promises of Alexis Tsipras who was voted in as prime minister in rebellion against years of dismantlement of public and social structures imposed in the name of austerity.

What is at stake here is the very neoliberal model itself and not only is ordoliberal Germany supported by allies like Austria, Finland and the Netherlands erecting a wall against any form of leniency, but countries which accepted painful cuts and where conservatives are now in power, like Spain, Portugal and Ireland, see leniency as giving in to the left.

A “Brexit” (the possible abandonment of the European Union by Britain) is a different affair. It is a game being played by British Prime Minister David Cameron to negotiate a more favourable agreement for Britain with the European Union.

A referendum will be held before the end of 2017 and the four million people who voted for the UKIP in the recent elections, plus the country’s “Euro-sceptics”, threaten to push Britain out of the European Union, especially if Cameron does not manage to obtain some substantial concessions from Brussels.

Meanwhile, if Europe is in disarray, the United States has a serious problem of governance. Analyst Moisés Naím, who served as editor-in-chief of Foreign Policy magazine from 1996 to 2010, has pinpointed a few examples of how this has translated into self-inflicted damage.

One concerns China which, after waiting five years trying to get the Republican-dominated Congress to authorise and increase in its stake in the International Monetary Fund (IMF) from a ridiculous 3.8 percent to 6 percent (compared with the 16.5 percent of the United States), got fed up and established an alternative fund, the Asian Infrastructure Investment Bank (AIIB).

Washington tried unsuccessfully to kill the initiative by putting pressure on its allies but first the United Kingdom, then Italy, Germany and France announced their participation in the new bank, which now has 50 member countries and the United States is not one of them.

Another example was the attempt by the Republican-dominated Congress to kill the Export-Import Bank of the United States (Ex-Im Bank) which has provided support for U.S exporters to the tune of 570 billion dollars since it was set up by President Franklin D. Roosevelt in 1934.  In just the last two years, China has provided 670 billion dollars in support for its exporters. Moral of the story: U.S. companies will be at a clear disadvantage.

As Larry Summers, a great proponent of U.S. hegemony, put it, “the US will not be in a position to shape the global economic system”.

The latest snub to the U.S. role of world leader came from four Arab heads of state who snubbed a U.S.-Gulf States summit at Camp David on May 14. The summit had been called by Obama to reassure the Gulf states that the ongoing negotiations with Iran over a nuclear agreement would not diminish their relevance, but the rulers of Saudi Arabia, United Arab Emirates, Oman and Bahrain deserted the summit.

However, there is no more striking example of mistake-making than the joint effort by the United States and Europe to push Russian President Vladimir against the wall over his engagement in Ukraine by imposing heavy sanctions.

There was no apparent reflection on the wisdom of encircling a paranoid and autocratic leader, albeit one with strong popular support, by progressively also bringing in all Eastern and Central European countries. The result of this encirclement of Russia is that China has now come to the rescue of Russia, by injecting money into the country’s asphyxiated economy.

China will invest around six billion dollars in the construction of a high speed railway between Moscow and Kazan, is financing a 2,700 kilometre pipeline for the supply of 30 billion cubic metres of Russian gas over a period of 30 years, plus several other projects, including the establishment of a two billion dollar common fund for investments and a loan of 860 million dollars to the Russian Sberbank bank.

So, the net result is that Russia has been pushed out of Europe and into the arms of China, and the two are now starting joint naval and military manoeuvres.  Is this in the interest of Europe?

At the end of the day, the decline of Europe and the United States perhaps comes down to a decline of political vision, with democracy being substituted by partocracy, and the statesman of yesteryear being substituted by very much more modest and self-referential political leaders.

This is all taking place amid a growing disaffection with politics, which is now aimed basically at administrative choices, making corruption easy. At least this is what around one-third of electors now appear to believe when they are asked if they think that they can make a difference at elections … and this is why a rapidly growing number of people are deserting the ballot box. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

The European Commission is calling for SDGs to address poverty eradication and sustainable development together in three dimensions – economic, social and environmental. Photo credit: UNFPA Sudan

By Ramesh Jaura
BRUSSELS, May 5 2015 (IPS)

In the run-up to the international Conference on Financing for Development from Jul. 13 to 16 in Addis Ababa, Ethiopia, the European Union has called for a “true paradigm shift” in global development cooperation.

The Addis Ababa conference will be followed by the U.N. post-2015 Summit in New York and the Climate Change conference in Paris in December. “These meetings will define our future and will set the level of ambition of the international community for the years and decades to come,” according to European Union Commissioner for International Cooperation and Development Neven Mimica.

The Addis Ababa conference on development financing in July and the Paris climate conference in December offer a “once in a lifetime” opportunity “to end poverty, achieve shared prosperity, transform economies, protect the environment, promote peace and ensure the respect of human rights” – Neven Mimica, European Union Commissioner for International Cooperation and Development
This, Mimica believes, offers a “once in a lifetime” opportunity “to end poverty, achieve shared prosperity, transform economies, protect the environment, promote peace and ensure the respect of human rights.”

The European Commission, which represents the interests of the 28-nation European Union, believes that the sustainable development goals (SDGs) to be agreed in New York in September should not only cover “traditional” development challenges such as poverty, health and education, but go much further and address poverty eradication and sustainable development together in three dimensions – economic, social and environmental.

The Commission is pleading for “moving towards a universal agenda”. This means that the goals and targets to be agreed in New York will apply to all countries, challenging them to achieve progress domestically, while contributing to the global effort. “Such a far-reaching agenda can only be delivered through a true global partnership,” said Mimica.

The E.U. Development Commissioner is backed by an eminent group of experts from Finland. France, Germany and Luxembourg, who have authored the fifth edition of the European Report on Development (ERD), which focuses on ‘Combining Finance and Policies to Implement a Transformative post-2015 Development Agenda’.

Mimica wants the agenda to serve to mobilise action by all countries and stakeholders at all levels: governments, private sector and civil society, all of which would need to play their part.

The key message of the ERD report, launched on May 4, is that policy and finance go together and that they are both crucial to implement a transformative post-2015 development agenda.

Based on existing evidence and specific country experiences, the report shows that finance alone is not enough – it seldom reaches the intended objectives, unless it is accompanied by complementary policies, the right combination of financing and enabling policies, says the report.

According to Mimica, “the findings and analysis contained in the report provide a most valuable research-based contribution to the debate, particularly in view of the Addis Conference on Financing for Development – but also beyond”.

“In this crucial year for international development cooperation, the 2015 European Report on Development can serve as a key point of reference, not just for the European Union, but for the international community at large,” Mimica said at the launching of the report.

The findings of the report are in line with three major guidelines which would drive the E.U. Commission’s action to implement the new development agenda:

• if it is not sustainable, it is not development
• if it is not resilient, it is not development
• if it is without women, it is not development

In many ways, the report complements and supports the work of the Commission in advocating a comprehensive approach to the means of implementation for the post-2015 development agenda. At the same time, it challenges the Commission to keep pushing our thinking forward, said Mimica.

The significance of the report is underlined by the fact that the European Union as a whole has consistently remained the biggest global aid donor, even in times of significant budgetary constraints.

According to latest figures, the European Union’s collective official development assistance (ODA) (by E.U. institutions and member states) has increased to Euro 58.2 billion (up by 2.4 percent from 2013) – growing for the second year in a row, and reaching its highest nominal level to date. Collective European Union ODA represented 0.42 percent of E.U. gross national income (GNI) in 2014.

A 0.7 percent ODA/GNI target was formally recognised in October 1970  when the U.N. General  Assembly adopted a resolution including the goal that “each economically advanced country will progressively increase its official  development  assistance  to  the  developing  countries  and  will  exert  its  best  efforts  to  reach  a minimum net amount of 0.7 percent of its gross national product at market prices by the middle of the decade.”

To date, the target has not been achieved but it has been repeatedly re-endorsed at the highest level at international aid and development conferences.

“We are committed to playing our full part in all aspects of the post-2015 agenda, including means of implementation,” Mimica stressed.

He added: “In our February Communication [on a Global Partnership for Poverty Eradication and Sustainable Development after 2015], the Commission was very clear. We proposed to the Member States a collective E.U. re-commitment to the 0.7 ODA/GNI target – and we hope indeed that there will be agreement amongst Member States on this ahead of Addis.”

Official development assistance will certainly remain important in a post-2015 context – in particular for the least developed countries (LDCs), according to Mimica.

“At the same time, we expect other partners – including other developed economies and emerging actors – to also contribute their fair share. The efforts of the European Union alone will not be enough.”

Aware that this is a rather controversial issue, he added: “To be able to speak of an ambitious outcome in Addis and New York, we will all need to raise our level of ambition. The EU is ready to engage with all partners to achieve this. We have been active and constructive in the negotiations so far, and we will continue to do so, taking a responsible, bridge-building approach.”

Edited by Phil Harris    

By Roberto Azevêdo
GENEVA, May 2 2015 (IPS)

Up to 80 percent of global trade is supported by some form of financing or credit insurance. Yet in many countries there is a lack of capacity in the financial sector to support trade, and also a lack of access to the international financial system. Therefore the ability of these countries to use simple instruments such as letters of credit is limited.

The impact of these limitations on a country’s trading potential can be very, very significant.

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

After the financial crisis, the supply of trade finance has largely returned to normal levels in the major markets, but not everywhere and not for everyone.

The structural difficulties of poor countries in accessing trade finance have not disappeared – indeed the situation may well have declined due to the effects of the crisis.

There are indications that markets are even more selective now. Under increased regulatory scrutiny, many institutions have lowered their risk-appetites and are focusing more on their established customers. Some are deliberately decreasing their number of clients in a so-called “flight to quality”.

In this environment, the lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most.

I was particularly struck by the fact that the financing gaps are the highest in the poorest countries, notably in Africa and Asia. And I was struck by the size of those gaps.

A survey by the African Development Bank of 300 banks operating in 45 African countries found that the market for trade finance was somewhere between 330 and 350 billion dollars.

It also found that this could be markedly higher if a significant share of the financing requested by traders had not been rejected.“The lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most”

Based on such rejections, the estimate for the value of unmet demand for trade finance in Africa is between 110 and 120 billion dollars.

This gap represents one-third of the existing market.

The main reasons for the rejection of requests for financing were:

• the lack of creditworthiness or poor credit history
• the insufficient limits granted by endorsing banks to local African issuing banks
• the small size of the balance sheets of African banks, and
• insufficient U.S. dollar liquidity

Some of these constraints are structural, and can only be addressed in the medium to long term. The retreat of global banks from Africa, and from other poor countries, is one such issue.

The Asian Development Bank conducted a similar survey in Asia, looking at countries like Viet Nam, Cambodia, Bangladesh, Pakistan and India.

According to preliminary estimates, the unmet demand there is around 800 billion dollars.

Small and medium-sized enterprises are the most credit-constrained as 50 percent of their requests for trade finance are estimated to be rejected. This is compared with just seven percent for multinational corporations.

Moreover, two-thirds of the companies surveyed reported that they did not seek alternatives for rejected transactions.

Therefore, these gaps may be exacerbated by a lack of awareness and familiarity among companies – particularly smaller ones – about the many options which exist.

A large majority of firms stated that they would benefit from greater financial education.

These findings are particularly striking as Africa and developing Asia are two areas of the world in which trade has grown fastest in the past decade.

But the potential evolution of new production networks is faster than the ability of the local financial sectors to support them.

In this way the lack of development of the financial sector can be a significant barrier to trade.

It can prevent developing countries from integrating into the trading system and accessing further trade opportunities.

And it can therefore prevent them from leveraging trade as a powerful source of development.

So we need to respond to this problem.

The exchanges that we have here can form part of this response. We need to join together in order to advocate action in this area and to devise practical solutions.

Of course, there is no magic bullet. This is a complex issue. However, that should not discourage our efforts.

The trade finance facilitation programmes that I outlined earlier are one example of practical action that we can take.

Of course this only fills part of the gap, so our response needs to be more fundamental.

In July this year, the United Nations’ major ‘Financing for Development’ conference will take place in Addis Ababa. And I think it is essential that we put trade finance on the agenda there.

In this way we can ensure that this issue is given its proper prominence in the development debate, especially at a time when the all-important U.N. Sustainable Development Goals are being finalised.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, Mar 12 2015 (IPS)

The world is clearly splitting into two parallel worlds, with each going their own way, in what we could call the ‘Acapulco paradox’.

Take the official version of the image of Acapulco – a splendid Mexican resort, with horse riding on the beaches, a place blessed by nature and enriched by beautiful villas, gourmet restaurants, a place of bliss and relaxation.

Roberto Savio

Now take the version of the people living there – a place torn by criminal gangs with several deaths every day, where locals live in fear and total insecurity.

In the same way, there are now two ways to look at global reality.

One is the macroeconomic approach based on global data and, according to which, Greece has been doing better along with Italy, Portugal and Spain. In those countries, macroeconomic data are improving. Spain is even being touted as the example of how a country, which went through the bitter pill of austerity, now has growth at the same level as Germany.

Then, speak with young people, among whom unemployment is close to 40 percent, or with pensioners, or with those working in the hospital and education sectors, and you get a totally different picture. According to Caritas, the number of people living in misery has doubled in the last seven years.

The alternative model is the United States, which invested in growth and not in austerity like Europe. Its growth is running at 2.4 percent against an anaemic 0.1 percent for Europe. Again, the positive macro data do not coincide with the people’s data.

“Take the official version of the image of Acapulco, a place of bliss and relaxation. Now take the version of the people living there, a place torn by criminal gangs, where locals live in fear and total insecurity. In the same way, there are now two ways to look at global reality”
Let us take the latest example of economic recovery: the decision of the Walmart retail chain, one of the largest employers in the United States to increase the hourly wage from 8.9 to 10 dollars. This looks like very positive news, but the fact is that 60 percent of Walmart staff do not work sufficient hours to make a living – some work just two days a week, and with 640 dollars a month you are still into poverty.

Maybe it is just a coincidence, but the suicide rate rose from 11 per 100,000 people in 2005 to 13 seven years later. In the time it takes to read this article, six Americans will have tried to kill themselves and in another ten minutes one will have succeeded. More than 40,000 Americans took their own lives in 2012, more than died in car crashes, says the American Association of Suicidology.

If you start looking into the macro data, things become clearer. Profits from the financial sector are now over 20 percent of the total, double the level from the Second World War to the 1970s, and since 1970 productivity has grown by less than half. What this means is that the real economy has grown by half that of finance.

It is now clear that it is growth of the finance industry which is really holding back the rest of the economy, and far fewer people are employed in the financial sectors than in production and services.

These data come from nothing less than the Bank of International Settlements, the Gotha of the banking world, which also reports that brilliant people are trying to move into the financial sector, to the detriment of other sectors of the economy.

Looking into the figures opens up fascinating analyses. One of them from Hong Kong, published in the New York Times in the first week of March, deals with the personal wealth of lawmakers from China and the United States.

The NYT reported that according to the Shanghai-based Hurun Report, of the 1,271 richest people in China – a record 203 – nearly 16 percent are in the Parliament or its advisory body. Their combined net worth is 463.8 billion dollars, which is more than the annual economic output of Austria.

By comparison, American lawmakers are poorer. Eighteen of the Chinese lawmakers have a net worth greater than the 535 members of the U.S. Congress, the nine members of the U.S. Supreme Court and U.S. President Barack Obama’s cabinet.

We should pity the U.S. lawmakers, the 22 richest members of whom have only an average of 124 million dollars (70 percent of the senators are millionaires anyhow) and make up only four percent of the Senate, while four percent of the richest Chinese lawmakers are the country’s 203 billionaires.

Statistics in Europe also open the way to illuminating reflections. Take Spain, for example, where billionaires are in decline. In the Forbes list of the richest men in the world, Spain now has 21, five less than last year. Their combined wealth is 116,300 million dollars, and they increased their wealth in a year by only 500 million dollars, against the 3,200 million dollars of the richest man in the world, Bill Gates.

Yet, 500 million dollars is the equivalent of 35,714 average yearly  salaries, close to the population of the sunny town of Teruel in eastern Spain (around 36,000), and 116,300 million dollars is the equivalent of 8.3 million yearly salaries, equal to the combined population of Andalusia, the largest Spanish region, and the Balearic Islands.

The problem is that those two worlds are supposed to meet and relate through political institutions: Parliament, which represents everybody, and Government, which is supposed to regulate society for the good of every citizen.

Well, a good case study comes again from Spain, where it is possible to become a Spanish resident without going to Spain. It is sufficient to buy two millions euros’ worth of the country’s public debt, or buy one million euros’ worth of shares, or buy a house that costs at least 500,000 euros plus taxes, to become a Spanish resident. Since September 2013, 530 foreigners have obtained that right.

It is probable that the experience of obtaining a Spanish residence permit of the tens of thousands who crossed the Mediterranean at risk of their lives (it is estimated that over 20,000 have died up to now) looks very different. And many European countries have taken a similar path, including the United Kingdom, Cyprus and Portugal

In the United Kingdom, there is now a debate on a law from 1914 which excludes “non-domiciled” residents (‘non-doms’) from paying taxes on their foreign income or assets. It is enough to have a domicile abroad, usually by declaring permanent home in a tax haven. The number of ‘non-doms’ surged by 22 percent between 2000 and 2008 (year of the last available date), to reach 130,000 people.

This is part of an effort to reduce taxation on rich people, by creating loopholes and new regulations, to attract as many rich people as possible. President François Hollande in France has learnt at his expense what it means to speak of taxing the rich and had to make a quick turnaround. Obama is doing the same, and the only ‘leader’ who is speaking about taxing the rich is now Pope Francis.

However, one of the best examples of the ‘Acapulco paradox’ comes from the City in London.

After all the popular uprising about the disproportionate salaries of bankers, with public declarations from the U.K. government, the Church of England and the Bank of England, the announcement of an improvement in the U.K. economy by the European authorities has been taken at face value.

Barclays, for example, is increasing salaries by 40 percent, and an increase in salaries of 25 percent is expected all over the City this year. A young financial analyst, just out of university, at entrance salary could expect to take home the equivalent of 100,000 dollars per year.

While this will be good for statistics on average incomes, the yearly incomes of the 10 percent poorest British citizens will keep them at survival level. It is likely that their view of economic recovery will be different from those in the City. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Guillermo Medina
MADRID, Mar 4 2015 (IPS)

At last, on Tuesday Feb. 24, the Eurogroup (of eurozone finance ministers) approved the Greek government’s commitment to a programme of reforms in return for extending the country’s bailout deal.

The agreement marks the end of tense and protracted negotiations. It consists of a four-month extension for the second bailout programme worth 130 billion euros (over 145 billion dollars), in force since 2012 and which was due to expire on Feb. 28. The first bailout was for 110 billion euros, equivalent to 123 billion dollars.

Guillermo Medina

During this period, the European Central Bank (ECB) will provide Greece with liquidity and the terms of a new bailout will be hammered out.

The eleventh-hour agreement was no doubt motivated partly by fears that a “Grexit” – Greek withdrawal from the eurozone monetary union – would have triggered a financial earthquake with unforeseeable consequences. The result is a very European-style compromise that averts catastrophe and gains time while avoiding facing the underlying problems.

In exchange for an extension of financial support from Greece’s partners and creditors, Prime Minister Alexis Tsipras will have to submit all his government’s measures during this period to Eurogroup inspection.

But the deal promises Greece more than just restrictions. The country will have to pay its debts to the last euro, but if, as seems probable, deadlines for primary surplus targets are extended, the country will have greater ability to pay (France has just secured this for itself).

In the final document, Greece promised to adopt a tax reform that would make the system fairer and more progressive, as well as reinforce the fight against corruption and tax evasion and reduce administrative spending.“Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future”

If the government pursues these goals, together with the fight against contraband, efficiently and with determination (as indeed it should, because they are part of its programme and target its domestic enemies), the income will be helpful for the application of its social and economic programmes.

In view of the successive positions that Greece has had to relinquish in the course of the negotiations, it appears that the country has achieved the little that could be achieved.

The negotiations between Greece and its European partners mark a milestone in the political tussle in the European Union since the reunification of Germany in 1990, between moving towards a Europeanised Germany or a Germanised Europe.

Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future.

Germany has openly tried to impose its convictions and its hegemony on Europe. Greece was only the immediate battlefield. Brussels and Berlin have been divided from the outset about how to solve the Greek crisis, but Germany prevailed.

However, the masters of Europe do not have any interest in “destroying” Greece, and so cutting off their nose to spite their face. They are satisfied with a demonstration of the asymmetry of power between the two sides, and the public contemplation of assured failure for whoever defies the status quo and supports any policy that deviates from the one true official line.

The problem with a Germanised Europe is not the preponderant role that Germany would play, but that it would impose a “Made in Germany” model of Europe that conforms to its own interests. That is how it would differ from a Europeanised Germany.

The Greek crisis has highlighted the ever-widening contrast between the values and ideals that we consider to be central to the European project, such as solidarity, mutual aid and social justice, and the new values that set aside basic aims like full employment, social welfare and equal opportunities.

It is paradoxical that Europe, which is apparently absent from or baffled by threats from the opposite shore of the Mediterranean, should take a harsh, tough attitude with a small partner overwhelmed by debt. It is also paradoxical that structural reforms are demanded of Greece, without admitting Europe’s own urgent need to redesign the eurozone and reframe the policies that have led to the poor performance of its monetary union.

The Greek crisis and the difficulties in overcoming it have a great deal to do with a design of the euro that benefits financial interests, particularly Germany’s.

The project neglected the harmonisation of tax policies and created a European Central Bank that lacked the powers that permit the U.S. Federal Reserve and the Bank of England to issue money and buy state debt.

As is well known, the ECB has made loans to European banks at very low interest rates, and they in turn have made loans to states, including Greece, at much higher interest. Government debts thus mounted up, and in order to pay they were forced to cut public spending.

Why does Europe persist in following failed policies while refusing to follow those that have lifted the United States out of recession? The only explanation is stubborn attachment to an ideological vision of economic policy that is devoid of pragmatism.

How can insistence on the path of error be explained at such a time? There may well be a quota of incompetence, but the basic reason is, as Nobel prize-winners Joseph Stiglitz and Paul Krugman affirm, that the goal of the policies imposed by the “Troika” (European Commission, ECB and International Monetary Fund) is to protect the interests of financial capital. And this is because the powers of political institutions, the media and academia, are dominated by financial capital, with German financial capital at the core.

Financial interests are essentially capable of shaping the decisions of European governance institutions. In the United States this subservience is less clear-cut, allowing hefty penalties to be imposed on certain banks, as well as the development of other economic strategies.

This is because independent mechanisms of control and oversight exist, the Federal Reserve has well-defined goals (whereas the ECB has spent years fighting the insistent threat of inflation), and there is democratic administration with the political will to resist.

In conclusion: the issue is to clarify what sort of Europe the citizens of Europe want, and what institutional changes are needed to achieve it.

And even more importantly, having seen the consecration of German hegemony over the Old World, what sort of German leadership would be compatible with a united Europe based on solidarity? Is this even possible? (END/IPS COLUMNIST SERVICE)

Translated by Valerie Dee/Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

By Roberto Savio
ROME, Jan 22 2015 (IPS)

Every day we receive striking data on major issues which should create tumult and action, but life goes on as if those data had nothing to do with people’s lives.

A good example concerns climate change. We know well that we are running out of time. It is nothing less than our planet that is at stake … but a few large energy companies are able to get away with their practices surrounded by the deafening silence of humankind.

Roberto Savio

Another example comes from the world of finance. Since the beginning of the financial crisis in 2009, banks have paid the staggering amount of 178 billion dollars in fines – U.S. banks have paid 115 billion, while European banks 63 billion. But, as analyst Sital Patel of Market Watch writes, these fines are now seen as a cost of doing business. In fact, no banker has yet been incriminated in a personal capacity.

Now we have other astonishing data from Oxfam – if nothing is done, in two years’ time the richest one percent of the world´s population will have a greater share of its wealth than the remaining 99 percent.

The richest are becoming richer at an unprecedented rate, and the poorest poorer. In just one year, the one percent went from possessing 44 percent of the world´s wealth to 48 percent last year. In 2016, therefore, it is estimated that this one percent will possess more than all the other 99 percent combined.

The top 89 billionaires have seen their wealth increase by 600 billion dollars in the last four years – a rise of five percent and equal to the combined budgets of 11 countries of the world with a population of 2.3 billion people.

In 2010, that figure was owned by 388 billionaires, and this striking and rapid concentration of wealth has, of course, a global impact. The so-called middle class is shrinking fast and in a number of countries youth unemployment stands at 40 percent, meaning that the destiny of today’s young people is clearly much worse than that of their parents.“In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production”

It will probably take some time before those figures become part of general awareness but it is a safe bet that they will not lead to any action, as with climate change. U.S. President Barack Obama is the only leader who has announced a tax increase on the rich, although he stands little chance of succeeding with his Republican-dominated Congress.

In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production. But up to a point: 34 percent of today’s billionaires inherited all or part of their wealth, and – interestingly – “inheritance tax is the most avoidable of levies”, as James Moore noted Jan. 20 in The Independent.

The “father of modern times”, late U.S. President Ronald Reagan, saw it clearly when he said that the rich produce richness, the poor produce poverty. So let the rich pay less taxes.

Well, in a just-released report, the U.S. Institute on Taxation and Economic Policy notes that in 2015 the poorest one-fifth of Americans will pay on average 10.9 percent of their income in taxes, the middle one-fifth 9.4 percent, and the top one percent just 5.4 percent.

Now, 20 percent of the richest billionaires are linked to the financial sector and it is worth recalling that this sector has grown more than the real economy, and has regulations only at national level. At global level, finance is the only activity which has international body of some kind of governance, as do labour, trade and communications, to name just a few.

Finance is no longer at the service of the economy and citizens. It has its own life. Financial transactions are now worth 40 trillion dollars a day, compared with the world’s economic output of one trillion.

At national level, there are now attempts half-hearted attempts to regulate finance. But let us look what is happening in United States. The new bland regulation is the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank, and it does not go as far as restoring the division between deposit banks, which was where citizens put their money and which could not be used for speculation, and investments banks, which speculate … and how!

This separation was abolished during the U.S. presidency of Bill Clinton, and is considered the end of banks at the service of the real economy. In any case, the lobbyists on Wall Street are intent on having the Dodd-Frank chipped away at, little by little.

There is some schizophrenia when we look at the relations between capital and politics. The U.S. Supreme Court has eliminated any limit to contributions from companies to political elections, declaring that the companies have the same rights as individuals. Of course, there are not many individuals who can shell out the same figures as a company, unless you’re one of the 89 billionaires!

Meanwhile, banks are not only responsible for the corruption of the political system, and for the illegal activities which have earned them billions of dollars, they are also responsible for funding only big investors, and leaving everybody else out from easy credit. The efforts of the Chairman of the European Central Bank,  Mario Draghi, to have banks give credit to small companies and individuals has gone largely nowhere.

But a new and imaginative initiative comes from the very stern Dutch bankers. All 90,000 bankers in the Netherlands are now required to take an oath: “I swear that I will endeavour to maintain and promote confidence in the financial sector. So help me God”.

This is not so much oriented towards the customer, and it is very self-serving; and it brings God in as the regulator of the Dutch banking system. Perhaps the Dutch bankers have been paying heed to the words of Goldman Sach’s CEO Lloyd Blankfein who said at the time of the financial crisis in 2009 that bankers were “doing God’s work”.

Well God will have to be actively involved. All the three biggest Dutch banks – Rabobank, ABN Amro and ING Groep – have been involved in scandals that have hurt consumers, or were nationalised during the financial crisis, costing taxpayers more than 140 billion dollars. In one case, Rabobank was fined one billion dollars.

New York’s Wall Street and London’s City are said to be open to the idea of introducing a similar oath.

It is probably only that kind of Higher Power which could turn the tide in this world of growing inequality and lack of ethics. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

The author can be contacted at utopie@ips.org

Excerpt:

By Manuel F. Montes
GENEVA, Nov 12 2014 (IPS)

As the international community wades into the political discussions regarding the alternatives to the Millennium Development Goals (MDGs) after 2015 and the design of the Sustainable Development Goals (SDGs) as mandated by the Rio+20 conference, it is timely to consider the question of whether development is a matter mostly of individual effort on the part of nation-states or whether there are elements in the international economic system that could serve as significant obstacles to national development efforts.

If there are obstacles in the international economic system, it is important that the post-2015 development agenda and the SDGs address the question of the elimination or the reduction of these obstacles.

Manuel F. Montes

The limited number of successfully developing countries since the 1950s has provoked a debate over whether the success of these countries required their success in eluding international obstacles to development.

The question is to evaluate features of the international system on the basis of how these features are conducive to enabling long-term investment toward economic diversification.

Terminologies of previous development orthodoxies litter the development literature – import substitution, industrialisation, basic needs, structural adjustment, Washington Consensus and Millennium Development Goals (MDGs).

Each of these orthodoxies tended to be a reaction to perceived weaknesses or missing elements from the immediately previous one. The most recent orthodoxy, as exemplified by the MDGs, is that development is about poverty eradication.

But poverty eradication is an overly narrow, possibly misleading, perspective on development.“Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment”

Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment.

The association of development with poverty reduction created for the donor community the pride of place in economic policy in developing countries.

But this place can be at the cost of reducing the responsibility of donor countries in helping to maintain an enabling international environment for development in trade, finance, human resource development and technology.

In the MDGs, these issues are crammed into “MDG-8”, the so-called global partnership for development, with a very selective and poorly defined set of targets.

Development requires not just higher levels of income, nutrition, education, and health outcomes but in the first place involves higher levels of productivity and capabilities.

Higher levels of productivity and capabilities are possible only with structural transformation of the economy.

In turn, in most societies, according to a report by the Secretary-General of the U.N. Conference on Trade and Development (UNCTAD), such a structural transformation has been “associated with a shift of the population from rural to urban areas and a constant reallocation of labour within the urban economy to higher-productivity activities.”

Structural transformation is only possible with substantial and sustained investment over decades in new activities and products, not just in anti-poverty programmes.

Where the international economic system is hostile to investment in new, productivity enhancing economic activities is where its elements create obstacles to development.

One example of an externally based obstacle is aid volatility which has been shown to have highly negative impacts on macroeconomic performance and domestic investment.

Capital and technological investments are required to overcome the enormous productivity gap between developing and developed countries which characterises the world economy.

In 2008, a ratio of the average Gross National Income (GNI) per worker in the countries of the Organisation for Economic Cooperation and Development (OECD) versus those in the least developed countries (LDCs) was 22:1 in favour of the OECD countries.

This imbalance has worsened by a factor of five in comparison to the earliest days of capitalist development. In the nineteenth century, taking the Netherlands and the United Kingdom as the richest countries and Finland and Japan as the poorest, the productivity gap was only between 2 to 1 and 4 to 1.

The international economic system is lacking crucial mechanisms for delivering long-term, stable resources required by developing countries to upgrade their capabilities.

Dependence on commodity exports sustains the productivity gap between developed and developing countries.

Abundant global liquidity and growing trade imbalances fuelled a commodity boom in the 2000s which benefited many developing countries, including many LDCs.

All previous global liquidity booms had ended with serious economic crises in developing countries. The more recent commodity price boom did not introduce an enduring improvement in macroeconomic balances, especially for low-income countries (LICs).

While in the 2000s LDCs experienced the strongest growth rates since 1970s, according to UNCTAD, more than one-quarter of LDCs actually saw GDP per capita decline or grow slowly in the 2002-2007 global boom.

Even the middle income region of Latin America presents evidence of insignificant structural improvement in fiscal and current account balances.

Previous commodity boom periods had similarly not been an occasion for structural change in LDCs. UNCTAD suggests that between the 1970s and 1997, manufacturing as a proportion of GDP increased by less than two percentage points in LDCs as a group, a period which saw various episodes of commodity and global liquidity booms.

When considering LDCs from Africa alone and including Haiti, manufacturing fell from 11 to 8 percent during the same period.

Developing countries had extensively liberalised their trade regimes in the 1980s. In the aftermath, UNCTAD finds that some LDCs have more open trade regimes than other developing countries, and others are more open than even developed countries.

These policies had been intended to facilitate economic diversification. Instead of the expected outcome, greater trade liberalisation has been accompanied by greater concentration in the structure of exports.

The international economic system labours under the constraint that the highest decision-making bodies in key institutions, such as the International Monetary Fund (IMF), do not provide sufficient voting weight and policy influence to countries most affected by their operations.

One effort under way but under enormous political obstruction is to update voting weights in line with the changed economic structure. Even the G20, where important developing countries sit, has been unable to advance progress. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

*  Click here for the Research Paper on which this column is based.

Excerpt:

More than six years after the global financial crisis broke out, European Union (EU) countries continue to protect banks and investments funds from tougher rules, despite abundant evidence of recurrent criminal or reckless activities in the sector, and new accumulation of enormous financial risks.

The latest in a string of scandals involving banks was the revelation in May that at least seven European banks or banks operating in Europe had colluded to falsely fix the Euro Interbank Offered Rate (Euribor).

The Euribor is a daily reference rate, published by the European Banking Federation, based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market.

“The (European) commission has concerns that … three banks may have taken part in a collusive scheme which aimed at distorting the normal course of pricing components for euro interest rate derivatives,” the body said in a statement issued May 22.

The three banks in question are JPMorgan Chase, HSBC and Crédit Agricole. Another four banks (Barclays, Deutsche Bank, Royal Bank of Scotland and Société Générale), also accused of misconduct concerning the Euribor, reached a settlement with European regulators.“Another typical example of the lack of will among European governments to improve regulations and reduce risks in financial markets is the long and so far fruitless debate on the introduction of a very low tax on financial transactions, also known as the Tobin tax”

Because of such behaviour, bank managers have since 2009 again earned the nickname of ‘banksters’, a combination of banker and gangster coined in 1937 at the height of the global economic crisis of the time.

Experts and analysts complaint that despite such criminal activities, and the new accumulation of financial risks, European governments have during the past six years repeatedly intervened to stop far-reaching rules to regulate operations in the financial sector.

The list of actions taken by European governments to spare banks and investment funds from new rules is long. In December last year, the French government managed to arrange for French banks to pay a lower-than European average contribution to the E.U.-created national deposit insurance.

“To obtain that, France used the friendly support of Michel Barnier, the French European Commissioner for Internal Market and Services,” says Burkhard Balz, German member of the European Parliament (EP).  Balz is a member of the conservative Christian Democratic Union.

“Over the last six years we have seen a pattern of behaviour concerning efforts to introduce a Europe-wide financial regulation,” Udo Bullmann, a German Social Democratic member of the European Parliament, told IPS.

This pattern goes as follows, Bullmann added: “First, the European Commission makes a timid regulating proposal. The European Parliament takes the proposal over and toughens its content. But then it is the turn of governments, and they water the proposal down, even under the original commission level.”

Independent experts agree. “The European Union is indeed a community of states, but at the end of the day, the member states compete against each other instead of cooperating to put forward a comprehensive set of rules for financial markets,” says Joost Mulder of Finance Watch, an independent association set up in 2011 to act as a public interest counterweight to the powerful financial lobby.

“What the individual states want is to protect their countries’ banks and investment funds,” Mulder added.

Opposition to far-reaching financial regulation comes from practically every state, but in changing roles. Britain usually opposes rules that would affect operations at the London financial market. It also has consistently opposed establishing limits for bonuses for financial managers, one of the main reasons for risky investments and moral hazard. Germany and France prefer to pass modest laws on financial aspects, to avoid approving a tougher European binding regulation.

In September last year, Finance Watch published a report on the planned European banking union and the bank reform in the European Union, and concluded that “despite its intention, (it) will fail to prevent European citizens from bearing the losses of failed banks in the event of a systemic banking crisis unless there are meaningful structural and capital reforms to Europe’s largest banks.”

The banking union, which should start operations in November, is supposed to create a safety net to minimise the risk of further European Union taxpayer-funded bailouts.

The banking unions foresees a new European authority, the so-called Single Resolution Mechanism (SRM), with the power to wind up or restructure failing banks.

According to Finance Watch, “The SRM has the right objectives: namely to enable the orderly resolution of banks in participating member states, and to weaken the interdependencies between financial institutions and their sovereigns.”

But the watchdog group does not see “how these objectives can be met without reducing the regulatory incentives that favour sovereign debt, and without a structural reform of bank activities to make bail-in and bank resolution credible.”

According to International Monetary Fund (IMF) figures, in the aftermath of the global financial meltdown of 2008, industrialised countries bailed out private banks for 1.75 trillion dollars, some 1.3 trillion euros. This amounts to the one-year salary of more than 42 million people earning net average German wages of around 25,000 euro per year.

The global bank rescue weakened the European states involved, in particular Greece, Spain, Portugal and Ireland, and triggered, among others, the present sovereign debt crisis, with its social and human costs.

Another typical example of the lack of will among European governments to improve regulations and reduce risks in financial markets is the long and so far fruitless debate on the introduction of a very low tax on financial transactions, also known as the Tobin tax, after it was suggested by Nobel Laureate economist James Tobin in 1972.

In September 2011, the European Commission proposed the introduction of the tax within the 27 member states of the European Union by 2014. According to the original proposal, the tax would only impact financial transactions between financial institutions charging 0.1 percent against the exchange of shares and bonds and 0.01 percent across derivative contracts.

According to the initial Commission estimates, the tax could raise up to 57 billion euros per year. But, as of June 2014, that is, almost three years after the proposal, only 11 E.U. member countries appear ready to introduce the tax. Furthermore, there is wide disagreement among these 11 countries about which transactions should be taxed, and how high the levy should be.

Sven Giegold, German Green Party member of the Euro-Parliament and expert on international finance, even goes as far as saying that “France, nominally a strong supporter of the Tobin tax, actually did kill it.”

In May, during negotiations at the European Council, the French government opposed raising the Tobin tax on most financial derivatives and on government bonds. Giegold said that “France obviously fears that if taxed, banks wouldn’t buy government bonds.”

After such objections, Giegold complained, “the original tax on financial transactions has been devaluated to a useless levy to be paid only by small savers.”

A new scheme to avoid new rules for financial markets in Europe is to make them part of supra-regional binding projects, such as the Transatlantic Trade and Investment Partnership (TTIP), currently under negotiation between the European Union and the U.S. government.

According to Finance Watch, “there is no proven case for including financial services in the TTIP.” “We are concerned that the EU’s approach to regulatory cooperation (within the TTIP negotiations related to financial markets) will encourage convergence around the lowest common standards, not the highest,” Thierry Philipponnat, Finance Watch’s secretary, said during a recent hearing at the European Parliament.

For Philipponnat, “it is difficult to see how the inclusion of financial services in the European Union-U.S. free trade agreement negotiations, and especially the parts on regulatory cooperation, will not lead to a ‘race to the bottom’ in financial services regulation.”

'The Seven Deadly Sins and the Four Last Things'. Painting by Hieronymus Bosch, kept in the Museo del Prado, Madrid

By Roberto Savio
ROME, Jun 9 2014 (IPS)

It is a great pity that, beside opening the doors to ethics, social justice and peace, Pope Francis does not also give indications of updating  traditional theology. The most urgent task is to update the Seven Deadly Sins.

The update should be done on their social impact and viciousness. How it is possible to equate, for example, sloth and gluttony with greed? In the 1987 film Wall Street, Gordon Gekko, a wealthy, unscrupulous corporate raider played by Michael Douglas, says that greed, not gluttony, moves man. And it is very doubtful that all the people who are now moved by greed are also victims of gluttony, when they usually are on a diet!

Roberto Savio. Credit: IPS

According to the United Nations, throughout the world there are over 1.5 billion people who are obese or overweight compared with 842 million who suffer from undernourishment. The problem is that the obese or overweight are not usually the result of overfeeding but of junk food marketing by large corporations (McDonald’s and the like) – and the poor are the most overweight because junk food is cheap.

And sloth is certainly not a social threat, even if urban legend has it that people are poor because they do not want to work.

So, let us concentrate on greed, and see why it is time for an update.“We are rushing forward to the past, and the times of Queen Victoria, when an obscure German philosopher and economist by the name of Karl Marx was working … on his denunciation of exploitation, and preparing his Communist Manifesto”

We have reached a point where the preachers of ethics are central bankers. Speaking last week in London at the Conference on Inclusive Capitalism, Christine Lagarde, Managing Director of the International Monetary Fund (IMF), said that ”some prominent firms have even been mired in scandals that violate the most basic ethical norms.” And Bank of England Governor Mark Carney warned that “unbridled faith in financial markets” before the crisis, rising inequality and recent “demonstrations of corruption” has damaged “social capital”.

This must have gone down well in the country of understatement. According to Lagarde, the big banks are still being subsidised to the tune of 70 billion dollars in the United States and 300 billion dollars in the Eurozone. And in spite of this, regulators around the world have imposed 5.8 billion dollars in penalties for attempting to manipulate market benchmark rates.

Mark Carney solemnly told the London conference: “Ultimately … integrity can neither be bought nor regulated. Even with the best possible framework of codes, principles, compensation schemes and market discipline, financiers must constantly challenge themselves to the standards they uphold.”

And this is exactly the problem. James Dimon, the head of JP Morgan, the world’s largest bank, and with a 74 percent raise in salary for 2013, considers regulations “un-American”. In 2013, the bank paid 18.6 billion dollars in fines. The U.S. Attorney General, Eric Holder, has just slapped a 2.6 billion dollar fine on Credit Suisse for helping U.S. citizens to evade taxes. In December 2013, the European Commission levied fines totalling 1.04 billion euros (1.42 billion dollars) on Barclays, Deutsche Bank, RBS and Société Générale for having manipulated the Euribor benchmark interest rate. Are we therefore to think that this is “un-European”?

It is worth noting that, in this orgy of fines, none of those bankers responsible ever went to jail. They just received salary increase, as the case of James Dimon shows. Banks are inanimate objects, they cannot go to jail. The U.S. Justice Department has gone to great lengths to guarantee that banks will not be treated like criminals because banks cannot be put out of business. These are “the standards they uphold”.

A new contribution to theology has been revealed in Stress Test: Reflections on Financial Crises, a recently published book by Timothy Geithner, President of the Federal Reserve Bank of New York, and U.S. Treasury Secretary during the 2007-2009 crisis. Writing in the Financial Times of May 28, Martin Wolf says: “Mr. Geithner argues not only that crises are sure to recur but that governments must react with overwhelming force … the government must borrow more, spend more and expose taxpayers to more short-term risk – ‘even if it seems to reward incompetence and venality, even if it fuels perceptions of an out-of-control, money-spewing, bailout-crazed big government’.”

But Geithner “also offers a law of unintended consequences. The safer the visible financial system is made, he argues, the greater the danger that the fragility will emerge somewhere less visible, but possibly even more dangerous.” So the new theology of the financial system is that because it is impossible to make it safe, let us not introduce regulations which, Geithner says, “often be self-defeating.”

Yet, until 1999, when then U.S. President Bill Clinton (culminating a process started by Ronald Reagan) repealed the Glass-Steagall Act which had separated commercial and investment banking for seven decades, we had nothing of what we see today.

Deposit banks were obliged to use citizens’ funds under tight regulations, and the money they raised through deposits was used to finance commercial and capital growth. Now, all the money goes into speculation, and as everybody knows, banks have little patience with small investors and citizens because returns are much smaller than from the various instruments of financial speculation. If anything goes wrong, states are obliged to bail the banks out.

Where does this logic lead? Obviously into taking many risks (the higher, the better return), taking home the highest possible salaries, and knowing that the collectivity is there to bail you out when needed. Clearly, this logic could not exist, if it was not as a shining daughter of greed.

It is a sign of the times that in her speech in London, Lagarde used the same language that Oxfam used at this year’s World Economic Forum in Davos. She reminded the audience that “the 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people.”

Now, we know from French economist Thomas Piketty, author of the best-selling book Capital_in_the_Twenty-First_Century, that the growth of this concentration of capital is faster than that of general growth, which is a way to say that these 85 people will continue to suck money from the general market, and therefore the rich will become richer and the poor will become poorer.

In other words, what we are witnessing is a progressive reduction of the middle class, while we are rushing forward to the past, and the times of Queen Victoria, when an obscure German philosopher and economist by the name of Karl Marx was working in the British Library in London on his denunciation of exploitation, and preparing his Communist Manifesto.

This trend is happening everywhere, and at every level. The increase in sales of giant U.S. retailer Walmart fell from 5 percent in 2012 to just 1.6 percent last year. Under Walmart’s pay plan, pay increases would only take effect after growth of 2 percent. So what did its brilliant accountants come up with? They took into in consideration only certain items, making sure to come up with a figure of 2.02 percent growth, permitting William S. Simon, president and chief executive officer of Walmart U.S. to receive a salary increase of 1 million dollars, taking his total salary to 13 million dollars. Meanwhile, the average full-time Walmart employee makes 27,000 dollars a year.

Worse still is the case of restaurants chains, which are setting up a strong line of attack to U.S. President Barack Obama’s idea of raising minimum wages (just like they did in Germany). Ever heard of a chain called Chipotle Mexican Grill? Even if you have, the odds are that you did not know that last year, Steve Ellis, its co-chief executive officer, made 25.1 million dollars while the other co-chief executive officer, Montgomery Moran, made another 24.4 million dollars. As you can see, they make even more than James Dimon.

The average salary at one of Chipotle Mexican Grill’s 1,600 restaurants is 21,000 dollars. Therefore, one employee with this salary would have to work for more than a thousand years to equal one year of the co-chief executive officer’s salaries.

By the way, Mr. Ellis has received more than 145 million dollars in Chipotle stocks since 2011, and Mr. Moran at least 104.5 million.

Now, is it possible that it is the gluttony of Mr. Ellis and Mr. Moran that creates such a world of absurd inequalities? No, but greed certainly does.

Time to update the Seven Deadly Sins, Pope Francis … (END/COLUMNIST SERVICE)

Excerpt:

By Hazel Henderson
ST. AUGUSTINE, Florida, Sep 9 2013 (IPS)

As our climate destabilises, floods inundate cities, wildfires burn forests, droughts kill our crops and manmade radioactive isotopes leach into our soil and water, many accountants and policy analysts are waking up. They are joined by NGOs, civic leaders, whistle-blowers and a few public-minded politicians.

The big message is that the deep but false philosophy of “economism” and its narrow, outdated dogmas are the hidden virus spreading financialisation and its social and ecological destruction.

Hazel Henderson

This malfunctioning source code spread worldwide, commandeered public and private decision-making, overriding scientific research in other disciplines which clearly demonstrate the real conditions of our 7.5 billion member human family on this planet.

Change is difficult, especially in many human minds, as my late friend Thomas Kuhn wrote in his Structure of Scientific Revolutions in 1993. New paradigms are introduced in social systems “one funeral at a time.”

Mahatma Gandhi reminded us that “First they ignore you, then they ridicule you, then they fight you and then you win.” Polls in the U.S. find some 40 percent of the public do not believe in evolution while many politicians still deny science and climate change.

Brain and behavioural scientists demonstrate how our brains lock in habits of thought, often amplifying our fear of change and “the other,” those primitive emotions seated in the amygdala in our brains.

This constrains both personal development and public policy as we hear politicians intoning ”there is no alternative” to old ideas or the financial bubble-created status quo: austerity and cuts in public services, jobs, education, health and environmental protection. Others blame God for human-made environmental pollution and climate disruption.

Many observers, including myself, predicted the 2008 financial crisis and the continuing misery imposed on so many around the world. Wall Street morphed from small firms, partnerships and petty manipulators into ever-larger corporations and trusts, capturing hungry politicians and regulators.

These financial firms capitalised on public infrastructure, unprotected common resources and newer communications technologies, computers, the internet and satellites funded by taxpayers. Compliant politicians helped finance go global after the “big bang” deregulation and privatisation of Ronald Reagan and Margaret Thatcher in the 1980s. Money was moved offshore into tax havens as detailed by Nicholas Shaxson.

This culminated in today’s global financial bubble, with over four trillion dollars of currencies traded daily, quadrillions of derivatives generated by mega banks and flighty traders. High-frequency trading firms place and cancel billions of orders every second, phishing for trends ahead of other investors – all on shaky computer platforms and programmed by algorithms that regularly malfunction.

This misuse of publicly funded IT infrastructure led to the mini-crashes which occurred frequently since the ominous “flash crash” of May 2010 and continue in the latest three-hour crash of NASDAQ on Aug. 22, 2013.

All efforts to regulate and downsize this destructive financial bubble and restore finance to its boring, modest role supporting real and local economies are fiercely opposed by lobbyists from Wall Street, in London, Washington, Davos and among their privately funded think tanks and revolving-door intellectual mercenaries in governments.

Well-endowed academic economists and their university departments buttress economic orthodoxies: equating “free” markets with human freedom and individual rights, expanding trade and privatisation. All these policies still are based on “externalising” social and environmental costs onto others, taxpayers and future generations.

This pernicious philosophy of “economism” is unchallenged even in still referring to winners of the Bank of Sweden prize in economic “science” (sic) as a real Nobel Prize. Even correcting accounts to include “externalities” has been resisted for decades.

In 1992, 170 governments in Article 40 of Agenda 21 at the second United Nations Earth Summit in Rio de Janeiro agreed to include in their gross domestic product (GDP) the unpaid work of millions in traditional agriculture, households and community volunteering.

I experienced this resistance from the economics profession, and from finance, economic and trade ministries, while I served as a science policy advisor in Washington, DC, in the 1970s.

Statistics from other disciplines and ministries measuring poverty gaps and real performance in health, education, housing, public infrastructure and environmental monitoring were relegated to “satellite” accounts, rather than integrated into broader measures of national progress beyond GDP.

Only in 1995 did the pioneering group at the United Nations Development Programme (UNDP) publish in their Human Development Report an estimation of the global value of unpaid productive work: 11 trillion dollars of work by women and five trillion dollars by men – simply missing from the official 24 trillion dollars of global GDP reported that year.

So most societies are much richer than economists acknowledge, both in un-priced human skills and environmental assets – as social and ecological researchers have shown for decades.

Recent U.N.-commissioned reports by TEEB, Trucost and others now show that billions counted by corporations as “profits” are offset by even larger environmental and social costs and losses.

Pricking the global financial bubble and preventing its further exploitation of citizens and ecosystems requires facing down both the underlying false philosophies of economism and their adherents in government, business, academia as well as their operators in financial markets.

Once economism is defrocked as obsolete and a failed ideology, with its derived financial “innovations” exposed as mathematical abstractions, we will not be flying blind.

Accounting is a more realistic profession than macroeconomics. The growth of new more realistic accounting protocols is providing new wheels for social change toward healthier, more inclusive, equitable, greener and more knowledge-rich societies.

Accountants are now beginning to measure six forms of capital: physical (buildings, bridges, etc.); financial (money as the accepted unit of account); human (talent, energy, sweat); social (associations, community, institutions); intellectual (knowledge); and, natural (biodiversity, ecosystem services).

These new metrics for assessing corporate and financial firms’ performance as well as of cooperatives, social enterprises and community associations have been quietly growing for decades. They developed practically in socially responsible, ethical funds, pensions, foundations and endowments and among concerned asset managers, entrepreneurs, innovative scientists and monetary reformers.

Today they emerge in many forms, both at the company level and in correcting GDP. New accounting protocols are multi-disciplinary, integrating many factors key to analysing performance of firms in creating or destroying value.

They include the GRI, the IIRC, the ACCA, the ICAEW, the AICPA, the SASB, together with the NSFM and pioneer asset managers Domini, Calvert, Innovest and now reflected by Bloomberg, Dow Jones and others.

NGOs have largely driven these changes through their work, and collaborations with many U.N. agencies include those of the GEC, the WSF since 2000 and those active since the U.N. Conference on Innovative Finance for Development, Monterrey, Mexico, 2001 and joined in 2013 by many experts on Long Term Finance.

As needed, incremental changes are made and private investments have poured into green sectors worldwide since 2007, the fatal flaws of economism underlying the 2008 crash are now exposed and reforms are underway. Yet, NGOs must remain vigilant if too-big-to-fail or jail finance is to be downsized from a global casino to a public service sector.

(END/COPYRIGHT IPS)

Excerpt:

The International Monetary Fund (IMF)’s internal auditor has criticised the Fund’s recent policy on foreign currency reserves, and has offered an implicit warning that the United States’ outsized influence within the institution has resulted in policy that was insufficiently evidence-based.

The findings, which were publicised in an unusually narrow report on Wednesday but follow months of discussion, are seen as a victory for a bloc of “middle income” developing countries, particularly China, that have advocated hoarding larger stockpiles of foreign currency as insurance against the effects of the international financial crisis.

Starting in 2009, the IMF began advising governments around the world not to depend too greatly on such reserves, anxious over the potential impact on the global economy. The Washington-based Fund offers yearly inspections on – and in certain cases nearly oversees – economies around the world, and remains one of the most powerful forces in defining the functioning of the international financial system.

That system has been upended in the aftermath of the 2008-09 financial meltdown, however, and some key IMF tenets have increasingly been called into question, particularly by fast-rising economies such as Brazil, China, India and others. The IMF itself has realised that the Fund now needs to offer advice on finance rather than just macroeconomic policy, a new focus for which it is still strengthening its capacity.

Now, auditors with the Independent Evaluation Office (IEO) of the IMF have suggested that the Fund’s spotlight on reserves was “not helpful”, criticising its economists for focusing on symptoms rather than on underlying causes of financial instability.

Around the world, the analysts point out, foreign reserves amount to only around 10 trillion dollars – a large amount, thought not when compared to, for instance, the 105 trillion dollars in the banking system or the 117 trillion dollars in the fund management industry.

Plus, the governments and central banks that hold these reserves are relatively more interested in maintaining the stability of the international monetary system than are private-sector interests, seemingly further decreasing the potential for reserves to upset the global financial equilibrium.

Many officials, the report states, feel that IMF advice would have been better served by focusing instead on “other developments … that they considered to be of more pressing concern than reserves”.

U.S.-China factor

The IEO investigators hint that the IMF may have chosen to follow such a policy approach for less than apolitical reasons.

“The evaluation found a broadly held view that (the IMF management’s) emphasis on excessive reserve accumulation was a response to frustration among some member countries with the IMF’s inability to achieve exchange rate adjustments in Asian countries with persistently large current account surpluses,” the audit states.

This has struck many as a direct reference to longstanding frustrations voiced by the IMF’s single largest shareholder, the United States, about a chief economic rival, China.

“When the IMF talks about imbalances, that’s generally code for China and the United States,” Jo Marie Griesgraber, executive director of New Rules for Global Finance, a Washington-based international network, told IPS.

“While the United States is desperately trying to jumpstart its economy, policymakers are holding interest rates low, but this is trashing other countries’ attempts to hold down the appreciation of their own currencies. Brazil is perhaps the most prominent example in this regard.”

Brazil has been at the forefront in pushing up its foreign reserves, continuing to increase this cushion as the world economy has continued to roil.

While Griesgraber suggests that powerful countries such as China and Brazil will increasingly get away with flouting IMF diktat, she warns that smaller countries continue to get squeezed by overlapping responsibilities imposed by the World Trade Organisation and various bilateral treaties – responsibilities often, and still, demanded by Washington.

Meanwhile, with the largest trove of international reserves in the world, estimated at some three trillion dollars, China is given special attention in the IEO report. Washington has long accused Beijing of holding down the yuan’s exchange rate in order to keep exports cheaper. (Significant reserves can be one result of an artificially low exchange rate.)

The exchange-rate issue even became a central point during the recent presidential election here, with President Barack Obama’s Republican opponent, Mitt Romney, pledging that he would formally declare China a “currency manipulator” on his first day in office.

And while many analysts have suggested that Beijing’s currency manipulation isn’t really much of a factor anymore, the 2012 presidential election saw both candidates trying to take a harder line on the issue.

Costly self-insurance

IMF managers, meanwhile, have rejected several of the audit’s findings, warning that the IEO investigators have understated the potential disturbances caused by excessive reserves and have misconstrued the breadth of the Fund’s response in dealing with the global economic downturn.

While IMF staff did not respond specifically to any broader accusation of politicisation, others have urged caution in this regard.

“Reserves have multiple purposes,” Dev Kar, lead economist with Global Financial Integrity, a Washington-based watchdog, and a former senior economist at the IMF, told IPS in an e-mail. “While a large accumulation serves the insurance purpose … such an accumulation can impose a cost on other countries (for example, inhibiting corrective action on the exchange rate).”

He continued: “So research cannot be seen as kowtowing before any country’s economic or political agenda. The facts are what they are. The interpretation lies in the eyes of the beholder.”

On the other hand, Griesgraber emphasises that the fact that countries are feeling the urge to build up the cushion of significant reserves in the first place underscores a broader problem facing the IMF, which was originally created to offer just this type of insurance for economies facing uncertainty.

“If the IMF is not fulfilling the purpose for which it’s designed, it makes sense to have some form of self-insurance,” she says. “At the same time, we can’t forget that this has a high opportunity cost for many countries, which are forced to use their own money for interest payments rather than using it to build roads, strengthen health systems, and other social expenditures.”

By Jinty Jackson
Sep 20 2012 (IPS)

Carolina Poalo strikes the dry earth over and over with her hoe, her frail body bent almost double. She is determined to begin planting. During the long, dry season in Mozambique, she and her two young grandchildren have eaten little but cassava leaves.

In a country where the average life expectancy is 50, the 65-year-old is considered very old, but her golden years are far from restful.

Instead, life is a constant battle for the many elderly living in the semi-rural outskirts of the capital, Maputo.

Violence and abuse against the elderly – ranging from rape to psychological abuse and neglect – are on the rise, say authorities. Often this is linked to witchcraft accusations, although no official statistics exist about the phenomenon. Perpetrators are often family members.

Carolina Paolo’s sister, Amelia Paolo, fled her home when her sons accused her of witchcraft. “They threw me out, calling me a witch,” she tells IPS. “I only survived thanks to my plot of land.”

It was a bit unclear how she got access to land where she lives now, but she has a plot of land next door to her sister’s in Bilalwane, on the outskirts of Maputo.

“I don’t get any help from my children. Sometimes they dump their kids here when they get pregnant,” Carolina Paolo tells IPS of her two daughters.

The women survive by earning extra cash when they can, working in nearby fields. The five dollars a month state elderly grant, the lowest in Southern Africa, is enough to buy them a one-kilogramme bag of salt. With no access to running water, the money also comes in handy when filling up at a nearby tap – one barrel of water costs them three cents.

Mozambique’s social welfare office is notoriously corrupt and inefficient. Only one in three people interviewed by IPS said they received the grant despite all three having applied for it.

Her body shrunken and her eyes grown over with cataracts, Maria Chambale (70) admits she is frightened of what might happen when she can no longer work, “I must go on fighting,” she says and shrugs. “What else can I do?”

She, like the other elderly in Mozambique, works on her own small plot of land to grow vegetables to feed herself. She also accepts “piece jobs” or day jobs in nearby fields owned by richer neighbours who have land but do not have the time to farm it.

Despite the heady pace of Mozambique’s economic growth – the World Bank expects the economy to expand by 7.5 percent in 2012 – little benefit is trickling down to the poor, many of whom are elderly people.

“Sixty-eight percent of the elderly live below the poverty line in Mozambique,” says Janet Duffield, the director of the aid agency HelpAge International in this country.

For the elderly in the city who cannot grow food to feed themselves, conditions are even worse.

Sixty-year-old Armando Mattheus is amongst the many elderly people who now find themselves begging on the streets of the capital, unable to cope with the high cost of living. “Before I could buy something with the little I have but today I can’t buy anything,” says Mattheus, who spends his days outside a popular Maputo restaurant, begging tourists for handouts.

It is a situation experts say Mozambique’s government needs to address urgently. Eighty percent of people work well into old age in Mozambique – one of the highest rates in the world.

“The population in Mozambique works until they die because there aren’t alternatives,” says the director of Mozambique’s Institute of Social and Economic Studies, António Francisco.

With half its population of 23 million under 18 years old, Mozambique is often referred to as a country of young people. Those who can remember the devastating civil war that ended two decades ago are now in the minority.

Newly discovered natural gas and coal deposits promise untold riches for a lucky few and will soon fuel what is already one of the world’s fastest growing economies.

The aged make up a tiny fraction of the population – just five percent.  However, by the time a child born today reaches 60, that number will be nearly three times as high, according to Francisco’s research. This represents, he says, “an unprecedented demographic transformation in the history of Mozambique.”

Nearby countries – South Africa, Swaziland, Botswana, Namibia and Lesotho – all spend between 0.3 and two percent of GDP on grants for the elderly. Like Mozambique, they have a young population structure but such an approach can pay dividends.

Japan, which in 2010 registered 38 percent of its population over the age of 65 – the world’s largest proportion – spends over 10 percent of GDP on pensions, according to the International Monetary Fund. And the United Kingdom spends five percent of GDP on pensions, according to the Organisation for Economic Cooperation and Development.

Studies show that providing state pensions can reduce hunger and poverty because elderly people share resources with the family.

A 2003 study by HelpAge International found that “social pensions increase the income of the poorest five percent of the population by 100 percent in Brazil and 50 percent in South Africa.” And a 2005 study by the University of Manchester in the U.K. found that people living in households receiving a pension were 18 percent less likely to be poor in Brazil and 12.5 percent less likely in South Africa.

One fifth of all families in Mozambique include an elderly person. This is one reason why aid agencies are pushing the government to fall into step with other countries in the region. Another is that 43 percent of orphans are cared for by grandparents in Mozambique. The country has an HIV prevalence rate of 16.2 percent, one of the highest rates in the world.

“Of the 10 African countries with the highest HIV prevalence, eight have introduced some form of social pension or cash transfer directed at older people,” says Duffield.

The government would need to provide citizens over 60 with a minimum of 26 dollars a month to have an impact, estimates Francisco. The figure represents three percent of the country’s 12.8-billion-dollar GDP.

But universal social pensions would be too costly, argues Felix Matusse, who heads the government’s Department for the Elderly. “We still depend on external aid,” he explains, pointing out that foreign donors contribute over 30 percent of the entire state budget.

But the government cannot go on pleading poverty for long. By some estimates, Mozambique stands to collect over five billion dollars a year in the long term from its natural gas alone.

Bolivia, South America’s poorest country, financed its universal pension scheme or “Dignity Pension” in 2007 through a direct hydrocarbon tax. Could Mozambique do the same?

“Improved revenue collection from new-found mineral resources could free up fiscal space more than adequate to provide a cash transfer for all older people,” suggests Duffield.

Others argue that caring for the elderly should not have to depend on hydrocarbon windfalls. “What kind of state do we have that cannot look after five percent of its population?” asks Francisco, adding that nearby Lesotho finances a pension scheme but has no natural resources to speak of.

Few expect a major shift in government policy on pensions before the next national elections in 2014. But in the run-up, the government is showing greater willingness to tackle its elderly problem.

A draft bill, due to go to parliament before the end of the year, aims to protect the aged from abuse, meting out specific tough penalties for violence related to witchcraft accusations. However, there is no mention of universal old age pensions.

Matusse points out that Mozambique will not begin to reap the benefits of hydrocarbons for at least another five years. “Then we will see what is going to happen in terms of social security,” he says.

When her name is called, Rékia Djibo leaves the group of women gathered in front of the school in Toula, and takes a confident step towards the door. Djibo is one of the recipients of a cash transfer from the World Food Programme here on the outskirts of the southwestern Niger city of Tillabéri.

Each of the women here receives the equivalent of 60 dollars from WFP every month, intended to enable some of this drought-stricken country’s most vulnerable households to buy food.

“With this money, we’ll first of all buy staples and spices so that we can go to work in our fields,” Djibo told IPS.

The 42-year-old is the senior wife in a polygamous household. Though she was the one chosen to receive the transfer, she said she consults her husband and her co-wife to set priorities for spending the money to care for all of their six children.

Zalika Hado is another of the women waiting to receive the monthly grant in Toula.

“Since we started receiving the money,” the 39-year-old mother of two told IPS, “our priority has been to buy food as intended. If there’s anything left over, we spend it on basic necessities like soap, sugar and clothes for the children.”

The cash transfer programme is run by the WFP office in Niamey, the capital, supporting a wider emergency plan established by the Nigerien government in response to the severe food crisis that has hit the country after a poor harvest.

The 2010-2011 growing season left the country with a cereal deficit of some 600,000 tonnes, according to the National Food Crisis Prevention and Management System.

“The operation began in May and will continue until September,” Giorgi Dolidze, WFP programme officer in Niamey, told IPS.

“We pay a grant of 32,500 CFA francs – with no conditions attached – to extremely poor Nigerien families at the end of each month so they can afford to buy food in local markets,” he said.

“Traditionally, the WFP provides food, but we decided to diversify our interventions by providing money directly, in areas where markets are functioning well, to allow beneficiaries themselves to buy what they want to eat,” Dolidze added.

WFP is working in partnership with local and international non-governmental organisations, micro finance institutions and a mobile phone company to implement the initiative.

“We are one of the implementing agencies,” said Illo Mamoudou from the international charity Oxfam, “and in this capacity we create lists of beneficiaries nominated by a local committee in the areas covered by the operation. We also educate the beneficiaries regarding use of the money and supervise distribution at the end of each month.”

WFP staff member Midou Bawa Youssifi told IPS that money is being distributed in 21 of the country’s 36 counties. “In three urban areas –Agadez, Tahoua and Tillabéri – we transfer the money using mobile phones, but in rural communities, we work with micro finance institutions to send the money to beneficiaries,” he said.

“The operation reaches 158,000 households with a total of 1,166,000 people, to whom we distribute at the end of each month a total of 5,136,432,500 CFA (around 9.7 million dollars),” he added.

Dolidze said 99 percent of those chosen to receive money on behalf of their households are women. “A post-distribution study that we carried out revealed that up to 95 percent of the money is effectively spent on buying food,” he said.

“It’s manna from heaven,” said beneficiary Djoumassi Ali. “With the money that I’ve just received, I will go straight to the market to buy maize, millet and seasoning because our household ran out several days ago.”

Laboni (left) checks product quality at her lingerie unit. Credit: Naimul Haq/IPS

By Naimul Haq
DHAKA, Aug 15 2012 (IPS)

Laboni Vhoumik’s lingerie manufacturing unit in the Gopai village of Noakhali district, about 180 km outside the capital, is a forceful argument in favour of the Grameen Bank microcredit model that fosters female entrepreneurship and also relies on it.

But the Grameen Bank is itself under threat of creeping government control sparking  a storm of protests by entities ranging from women’s rights groups to the state department of the United States.

Vhoumik, 36, started out in 2003 with nothing to commend her except tailoring skills. Today, she runs a production unit which employs 12 women and supplies quality undergarments to several major retailers in Noakhali and the adjacent districts.

Joining a local non-government organisation (NGO), Noakhali Rural Development Services (NRDS), helped Vhoumik to borrow Taka 4000 (then about 45 dollars) to buy her first sewing machine.

“We counsel and offer free training to promote such small entrepreneurships. The idea is to ensure that the borrowed money is properly utilized,” Mohammad Kaiser Alam, NRDS microcredit programme coordinator, told IPS.

Vhoumik now earns about 238 dollars a month, which is considered handsome in her village. She also has large savings and recently paid for some major repairing of her home.

Her group of 65 members discusses social and family problems as well as members’ progress with their business or problems or outstanding loans.

Members rarely default as the group is responsible as guarantor for the loans.

But this simple business model that has worked to lift thousands of Bangladeshi women out of poverty is now under threat because one of its pioneers, the Grameen Bank, is undergoing changes at the helm that will allow greater government control.

The government owns three percent of Grameen Bank, but by suitably changing the ‘Grameen Bank Ordinance’ the new state-appointed chairman will be able to appoint its chief executive officer.

“This represents a de facto imposition of government control of the bank; in other words, the poor women, who are also its owners, are being deprived of their right to manage their own bank and are being made powerless,”  says a statement issued by 60 of Bangladesh’s leading civil society representatives.

“Grameen Bank is unique in the world for being owned by impoverished women. Representatives of the 8.4 million women borrowers sit on the board of the bank and have participated over the years in its decision making, unlike any other bank in the world,” the statement said.

Shireen Huq, one of the signatories to the statement, told IPS “there is no reason to believe that the changes (to Grameen Bank) are being made with good intent.”

Huq, a leading women’s rights activist and founder of the NGO ‘Naripokkho’, said the proposed amendment to the Grameen Bank’s constitution gives the chairman of the board the authority to form a three-member selection committee. “In other words, the majority board members will be in effect disenfranchised.

“The government’s appointment of a person known for his animosity towards Prof. Muhammad Yunus (Grameen Bank’s founder) as the chairman did not bode well for the institution,” Huq told IPS.

A press statement on Aug. 5 by Patrick Ventrell, acting deputy U.S. state department spokesman, said Washington was “deeply concerned about recent actions the government of Bangladesh has taken to give the government-appointed chairman of the Grameen Bank Board control over the selection of the bank’s new managing director.”

“This move would diminish the role the largely female borrower-shareholders play in shaping the direction of an institution that has made a difference to millions of impoverished women in Bangladesh, and indeed around the world,” the statement said.

“We are concerned that the latest actions by the government could threaten the future of the bank which was founded by Nobel peace prize laureate Prof.  Muhammad Yunus,” Ventrell said.

The plan by the government to increase its role in Grameen Bank has sparked a furious debate in Bangladesh that has pitted economists who favour microcredit as a development tool against those who believe that it is not effective enough.

Prof. Abul Barkat, who head the economics department at Dhaka University’s  told IPS that microcredit reaches only small portion of the poor people. “Hardcore poor who need most attention remain out of the reach of such services and who are considered having no potential of repaying loans.”

“Out of Bangaldesh’s 150 million population, 98.9 million are poor, 47 million are middle class and 4.1 million are rich people. Out of the 98.9 million, 50 percent form the hardcore poor and remain in the lower bottom. Microcredit only reaches the upper half of the poor who are the potential target group of the NGOs,” the economist explained.

According to Barkat economically the upper half of the poor (49.4 million) who get microcredit facilities “bounce in their own orbit” and they “neither come out of poverty nor slide down to the hardcore poor group.”

Qazi Kholiquzzaman Ahmad, another noted economist, told IPS that he has rarely seen poor people getting significant benefit from microcredit programmes. “One of my own studies shows only seven percent of the borrowers actually coming out of poverty from microcredit.”

Ahmad, who currently chairs Palli Karma-Sahayak Foundation or PKSF, said his 2008 study showed that fewer than ten percent of the total 23 million borrowers in the country actually came out of poverty. “This means that microcredit programmes are not always sustainable in poverty alleviation.”

But, the PKSF itself was launched by the government in 1990 to build on the success of private players and now has over 250 partner organisations (small NGOs) and has 8.6 million borrowers.

Mohammad Hasan Ali, founder and executive director of Pally Bikash Kendra, an NGO that operates microcredit programmes in the northwestern districts, told IPS that the steady growth in borrowings and repayments showed the robustness of the model.

“Surely the poor are borrowing because they are getting some benefit in one way or another,” Ali said.

What is important, most economists agree, is that the small borrowings made through NGOs have  eliminated traditional village moneylenders who charged usuriously high rates of interest and increased the debt burden of the poor.

The real success of microcredit, economists say, lies in the fact that it integrates other programmes like health and hygiene, education, water and sanitation, social safety, legal aid, human rights and other basic issues with the lending process.

S. M. Ali Aslam, executive director of ADAMS, an NGO operating in the southwestern districts, told IPS, “There is no doubt that the NGOs took the leadership in providing financial security to the poor when the  state failed to offer any secure economic programme.”

Aslam added that that foreign donors continue to support microcredit programmes in Bangladesh “because they work.”