Arming Poor Countries Enriches Rich Countries Anis Chowdhury and Jomo Kwame Sundaram

Although the Cold War came to an end over a quarter century ago, international arms sales only declined temporarily at the end of the last century. Instead, the United States under President Trump is extending its arms superiority over the rest of the world. The five biggest importers were India, Saudi Arabia, the United Arab Emirates (UAE), China and Algeria. Indian arms imports increased by 43 per cent. Its imports during 2012–2016 were far greater than those of its regional rivals, China and Pakistan, as Pakistan’s arms imports declined by 28 per cent compared to 2007–2011. UAE imports increased by…

Strengthening Governments to Cope with PPPs Jomo Kwame Sundaram

Public-private partnerships (PPPs) have emerged in recent years as the development ‘flavour of the decade' in place of aspects of the old Washington Consensus. Instead of replacing the role of government or consigning it to the garbage bin of history, corporations are increasingly using governments to advance their own interests through PPPs. On the one hand, in a contemporary variant of previously condemned ‘tied aid', developed country governments have been persuaded to use their aid or overseas development assistance (ODA) budgets to promote their own national – read corporate – interests, e.g., by providing ‘blended finance' on concessional terms to…

Do Purchasing Power Parity exchange rates mislead on incomes? The case of China C.P. Chandrasekhar and Jayati Ghosh

Ever since Larry Summers and Alan Heston produced what become known as the “Penn World Tables” comparing prices and thereby the purchasing power of currencies across countries, the urge to use some deflator of market exchange rates to compare incomes across countries has been strong. The economic theory behind this is that exchange rate comparisons of less-developed economies consistently undervalue the non-traded goods sector, especially labour-intensive and relatively cheap services, and therefore underestimate real incomes in these developing economies. In some cases, this can be quite significant. In larger emerging markets like China and India, the conversion factors have been…

Beware Public Private Partnerships Jomo Kwame Sundaram

Public-private partnerships (PPPs) are essentially long-term contracts, underwritten by government guarantees, with which the private sector builds (and sometimes runs) major infrastructure projects or services traditionally provided by the state, such as hospitals, schools, roads, railways, water, sanitation and energy. Embracing PPPs PPPs are promoted by many OECD governments, and some multilateral development banks – especially the World Bank – as the solution to the shortfall in financing needed to achieve development including the Sustainable Development Goals (SDGs). Since the late 1990s, many countries have embraced PPPs for areas ranging from healthcare and education to transport and infrastructure with problematic…

Banks and Non-performing Assets Prabhat Patnaik

What exactly constitutes a non-performing asset (NPA) of a bank is not easy to determine. Since banks tend to roll over credit to borrowers, whether the request for such a roll over arises in the normal course of business or owing to a fundamental inability to pay back the loan, is difficult to decide. The tendency of late therefore has been to see NPAs as an extreme case of a wider category called “stressed assets” which are defined according to certain criteria. The problem of NPAs has arisen in a serious form in recent times because of the change in…

The Gujarat Model’s Failure explains why the Economy has become such a significant Factor in the coming State Elections Jayati Ghosh

By now, almost everyone in the country knows that – whatever else they may or may not be able to do – one thing Narendra Modi and the team around him excel in is the art of public relations and media management. This is the reason that “the Gujarat model” of handling a state’s economy became such a major talking point in the run-up to the 2014 general elections. This model was widely projected across major media as a huge success in delivering both growth and development, even though Gujarat’s performance was at best middling among all states and in…

Shopping Frenzy in the New China C. P. Chandrasekhar

In an otherwise gloomy world economic environment, a new kind of record given the media bizarre cause to cheer: the value of online sales notched up by Chinese e-commerce giant Alibaba on a single discount sales day. Global business headlines screamed that in its annual sale on Singles’ Day, 11 November 2017, Alibaba had registered a record sales value of 168.2 billion yuan or $25.3 billion.  Singles’ Day, or 11 November, was, because of its 11/11 aspect, reportedly chosen around 25 years ago by students of Nanjing University to celebrate the fact of being single. Using what has evolved to…

How China is Managing Capital Flows – and why Jayati Ghosh

The global financial media are always on the lookout for signs of an impending financial crisis in China – and the dark prognostications about the future made by several external observers relate to both internal and external financial flows. But there are reasons to believe that both concerns may be overplayed, and that what is occurring especially with respect to cross-border flows is a much more complex process reflecting a medium-term plan of the Chinese state, in accordance with its much more assertive role in the global scene. There has been much discussion on rising internal debt levels, with analysts…

Coping with Foreign Direct Investment Jomo Kwame Sundaram and Anis Chowdhury

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it "is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented". FDI flows UNCTAD's 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally…

The Impact of the Saudi Coup on the World Oil Market and China Ali Kadri

While the orchestrated coup is afoot in Saudi Arabia, little attention is being paid to the potential disruption that such a fiasco may entail for the global oil markets. At the present juncture, the US’s stock of power has grown as a result of the rise to power of yet another more US-loyal and obedient Saudi prince, Mohammad bin Salman (MBS). If the tragic prince manages to survive, the US will have in place a more trigger happy and obedient anti-Iran monarch than the deposed Epicurean (what is in it for me) bunch. If he does not ascend to the…