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…

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…

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…

Emerging Markets at Risk Again Jomo Kwame Sundaram

Emerging market governments often draw lessons from previous financial crises – or at least claim to do so – to prevent their recurrence. However, such preventive measures are typically designed to address the causes of the last crisis, not the next one. Hence, some measures adopted may inadvertently become new sources of instability and crisis. Very rarely are the root causes of crises and vulnerability addressed. In their efforts to prove themselves as worthy emerging markets, they tend to be pro-active in joining the financial globalization bandwagon. But premature financial liberalization – with hasty integration into the international financial system,…

Mounting Illicit Financial Outflows from South Jomo Kwame Sundaram and Zera Zuryana Idris

Although quite selective, targeted, edited and carefully managed, last year's Panama Papers highlighted some problems associated with illicit financial flows, such as tax evasion and avoidance. The latest Global Financial Integrity (GFI) report shows that illicit financial outflows (IFFs) from developing countries, already at alarming levels, continue to grow rapidly. Illicit financial flows growing rapidly  With international financial liberalization enabling investments abroad, ‘legitimate outflows' have also been growing rapidly, heightening macro-financial risks to countries. Many of today's financial centres compete intensely to attract customers by offering lower tax rates and banking secrecy. It is generally presumed that IFFs are related…

Why 1997 Asian Crisis Lessons Lost Jomo Kwame Sundaram

Various different, and sometimes contradictory lessons have been drawn from the 1997-1998 East Asian crises. Rapid or V-shaped recoveries and renewed growth in most developing countries in the new century also served to postpone the urgency of far-reaching reforms. The crises' complex ideological, political and policy implications have also made it difficult to draw lessons from the crises. Conventional wisdom  The conventional wisdom was to blame the crisis on bad economic policies pursued by the governments concerned. Of course, the vested interests favouring the international financial status quo or further liberalization also impede implementing needed reforms. Such interests continue to…

To Eliminate Poverty, Better Understanding Needed Jomo Kwame Sundaram and Anis Chowdhury

As the United Nations' Second Decade for the Eradication of Poverty (2008-2017) comes to an end, more self-congratulation is likely. Claims of victory in the war against poverty will be backed by recently released poverty estimates from the World Bank, entrusted by the UN system to monitor poverty. Mismeasuring Poverty The latest Bank data on global poverty suggests that 767 million people, or 10.7% of the world's population, live in extreme poverty, compared to some 42% of the world's population in 1981. Earlier figures suggested that most progress was due to East Asia, especially China. The Bank's international poverty line…

Hunger in Africa, Land of Plenty Jomo Kwame Sundaram and Anis Chowdhury

Globally, 108 million people faced food crises in 2016, compared to about 80 million in 2015 – an increase of 35%, according to the 2017 Global Report on Food Crises. Another 123 million people were ‘stressed', contributing to around 230 million such food insecure people in 2016, of whom 72% were in Africa. The highest hunger levels are in Sub-Saharan Africa (SSA) according to the Global Hunger Index 2016. The number of ‘undernourished' or hungry people in Africa increased from about 182 million in the early 1990s to around 233 million in 2016 according to the FAO, while the global…