Another Global Financial Crisis for Developing Countries? Anis Chowdhury and Jomo Kwame Sundaram

George Soros, Bill Gates and other pundits have been predicting another financial crisis. In their recent book, Revolution Required: The Ticking Bombs of the G7 Model, Peter Dittus and Herve Hamoun, former senior officials of the Bank of International Settlements, warned of ‘ticking time bombs' in the global financial system waiting to explode, mainly due to the policies of major developed countries. Recent events vindicate such fears. Many emerging market currencies have come under considerable pressure, with the Indonesian rupiah, Indian rupee and South African rand all struggling since early this year. Brazil's real fell sharply in June, and Argentina…

Great Recession, Greater Illusions Anis Chowdhury and Jomo Kwame Sundaram

In 2009, the world economy contracted by -2.2%. Growth in all developing countries declined from around 8% in 2007 to 2.6% in 2009 as the developed world contracted by -3.8% in 2009. The collapse of the Lehmann Brothers investment bank in September 2008 symbolized the US financial crisis that triggered the Great Recession of 2008-2009. Demise of Keynesian consensus In its immediate aftermath, a new consensus reversed the neoliberal Washington Consensus of the last two decades of the 20th century. Proclaimed by the G20's London Summit of 2 April 2009, it envisaged return to Keynesian macroeconomic policies, including large-scale fiscal…

Revisiting Privatization’s claims Jomo Kwame Sundaram

Several arguments have been advanced to justify privatization since the 1980s. Privatization has been advocated as an easy means to: Reduce the government's financial and administrative burden, particularly by undertaking and maintaining services and infrastructure; Promote competition, improve efficiency and increase productivity in providing public services; Stimulate private entrepreneurship and investment to accelerate economic growth; Help reduce the public sector's presence and size, with its monopolistic tendencies and bureaucratic support. Moot case for privatization First, privatization is supposed to reduce the government's financial and administrative burdens, particularly in providing services and infrastructure. Earlier public sector expansion was increasingly seen as…

Demonizing State-Owned Enterprises Jomo Kwame Sundaram

Historically, the private sector has been unable or unwilling to affordably provide needed services. Hence, meeting such needs could not be left to the market or private interests. Thus, state-owned enterprises (SOEs) emerged, often under colonial rule, due to such ‘market failure' as the private sector could not meet the needs of colonial capitalist expansion. Thus, the establishment of government departments, statutory bodies or even government-owned private companies were deemed essential for maintaining the status quo and to advance state and private, particularly powerful and influential commercial interests. SOEs have also been established to advance national public policy priorities. Again,…

Global Economy Vulnerable a Decade After Jomo Kwame Sundaram and Anis Chowdhury

Ten years ago, deteriorating confidence in the value of US sub-prime mortgages threatened a liquidity crisis. The US Federal Reserve injected considerable capital into the market, but could not prevent the 2008-2009 global financial crisis (GFC). The 2008 meltdown exposed the extent of finance-led international economic integration, with countries more vulnerable to financial contagion and related policy ‘spillovers' exacerbating real economic volatility. It also revealed some vulnerabilities of the post-Second World War (WW2) US-centred international financial ‘architecture' – the Bretton Woods system – modified after its breakdown in the early 1970s. Robert Triffin, the leading international monetary economist of his…

Will Trump’s Trade War Make America Great Again? Jomo Kwame Sundaram and Anis Chowdhury

The United States has had the world's largest trade deficit for almost half a century. In 2017, the US trade deficit in goods and services was $566 billion; without services, the merchandise account deficit was $810 billion. The largest US trade deficit is with China, amounting to $375 billion, rising dramatically from an average of $34 billion in the 1990s. In 2017, its trade deficit with Japan was $69 billion, and with Germany, $65 billion. The US also has trade deficits with both its NAFTA partners, including $71 billion with Mexico. President Trump wants to reduce these deficits with protectionist…

Agricultural Trade Liberalization Undermined Food Security Jomo Kwame Sundaram and Anis Chowdhury

Agriculture is critical for achieving the Sustainable Development Goals (SDGs). As the Food and Agriculture Organization (FAO) notes, ‘From ending poverty and hunger to responding to climate change and sustaining our natural resources, food and agriculture lies at the heart of the 2030 Agenda.' For many, the answer to poverty and hunger is to accelerate economic growth, presuming that a rising tide will lift all boats, no matter how fragile or leaky. Most believe that market liberalization, property rights, and perhaps some minimal government infrastructure provision is all that is needed. The government's role should be restricted to strengthening the…

Blending Finance Not SDG Financing Silver Bullet Jomo Kwame Sundaram and Anis Chowdhury

After largely failing to provide 0.7 per cent of their Gross National Income (GNI) in aid to developing countries for almost half a century since making the commitment, donor countries have recently promoted blended finance (BF) as a solution to the financing for development challenge. Blending refers to combining public development funds (in the form of grants, technical assistance or interest indemnification) with loans from private lenders. Following adoption of Agenda 2030 for the Sustainable Development Goals (SDGs), the OECD and the World Economic Forum (WEF) claimed that "blended finance represents an opportunity to drive significant new capital flows into…

What’s different about Trump’s tariffs? Jomo Kwame Sundaram

At Davos in January, US President Donald Trump warned that the US "will no longer turn a blind eye to unfair economic practices" of others, interpreted by many as declaring world trade war. Before the US mid-term elections in November, Washington is expected to focus on others' alleged "massive intellectual property theft, industrial subsidies and pervasive state-led economic planning" pointing to China without always naming names. With the Republican Party already united behind his tax bill, Trump senses an opportunity to finally unite the party behind him and to continue his campaign for re-election in 2020. Since January, Trump has…

Japan-led Pacific Rim Countries Desperate to Embrace Trump Jomo Kwame Sundaram

The grandiose sounding Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be signed in Santiago de Chile today, 8 March. Instead of doing something to advance the condition of women on International Women’s Day, trade representatives from 11 Pacific rim countries will sign the CPTPP, which some critics argue will further set back the progress of humanity, including women who hold up ‘half the sky’.  The Trans-Pacific Partnership (TPP) originally involved twelve countries, including the USA, namely Japan, Brunei, Australia, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, now often referred to as the TPP11. Although originally…