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…

Wealth Concentration Continues to Increase Jomo Kwame Sundaram and Anis Chowdhury

As the ‘masters of the universe' gather for their annual retreat at Davos, the World Economic Forum (WEF) has just published its Inclusive Development Index (IDI) for the second time. After moderating from the 1920s until the 1970s, inequality has grown with a vengeance from the 1980s as neoliberal ascendance unleashing regressive reforms on various fronts. Sensing the growing outrage at earlier neo-liberal reforms and their consequences, as well as the financial sector bail-outs and fiscal austerity after the 2008-2009 global financial crisis, politicians and business leaders have expressed concerns about inequality's resurgence. The record is more nuanced. While national…

PPPs Likely to Undermine Public Health Commitments Jomo Kwame Sundaram and Anis Chowdhury

The United Nations Agenda 2030 for the Sustainable Development Goals (SDGs) is being touted in financial circles as offering huge investment opportunities requiring trillions of dollars. In 67 low- and middle-income countries, achieving SDG 3 — healthy lives and well-being for all, at all ages — is estimated to require new investments increasing over time, from an initial $134 billion annually to $371 billion yearly by 2030, according to recent estimates by the World Health Organization (WHO) reported in The Lancet. Selling PPPs Deprived of fiscal and aid resources, none of these governments can finance such investments alone. The United…

Trade Multilateralism Set Back Yet Again Jomo Kwame Sundaram and Anis Chowdhury

As feared, the Eleventh Ministerial Conference (MC11) of the World Trade Organization (WTO) in Buenos Aires, Argentina, on 10-13 December 2017, ended in failure. It failed to even produce the customary ministerial declaration reiterating the centrality of the global trading system and the importance of trade as a driver of development. Driven by President Donald Trump's ‘America First' strategy and his preference for bilateral trade deals, instead of multilateral or even plurilateral agreements, United States Trade Representative (USTR) Robert Lighthizer was key to the outcome. The USTR also refused to engage in previously promised negotiations on a permanent solution to…

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…

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…

Finance Following Growth Jomo Kwame Sundaram and Anis Chowdhury

Economists of all persuasions recognize the critical role of finance in economic growth. The financial sector's stability and depth are widely considered important in this connection. Thus, many believe that the lack of a well-developed financial sector constrains growth in developing countries. Neoliberals generally attribute this to excessive regulation, especially the role of state-owned financial institutions, interest rate limits and restrictions on short-term cross-border capital flows. It is often assumed that banks and financial markets allocate capital to the most productive endeavours, and that the financial infrastructure for credit reduces ‘information inefficiencies', such as ‘moral hazard' and ‘adverse selection'. Another…