The increasing global economic uncertainty and the prospects of a flight-to-quality, with money flowing out of developing towards developed countries, raise the question of how prepared developing countries are to protect their economies from external shocks in the coming year. But volatility of financial flows also means that, most probably, following capital flight driven by the eurozone crisis emerging markets will again experience a surge in speculative financial inflows. The threat of continued ‘boom and bust’ cycles and lack of responses from international forums like the G20 and the IMF to address global monetary chaos makes the need for central banks to take action even more urgent.
There is a welcome shift in Latin America as countries continue their slow process of acceptance and de-stigmatisation of capital account regulations. In September this year Costa Rica joined the group of countries using these regulations, when it established that short-term foreign loans received by banks and other financial entities will be subject to a holding deposit of 15% of the value of the investment.
Following the conclusion of the UN Climate Change Conference of COP 17 & CMP 7 in Durban, South Africa, and as part of our Spotlight Durban series, Triple Crisis recommends the following analyses on the package of decisions adopted at Durban and what they mean for the Kyoto Protocol and the 2020 successor agreement.
The storm brewing in Europe makes it all the more important that all countries prepare themselves for dangerous economic shocks. For developing countries, as we learned in 2008, shocks are transmitted through multiple channels, a key one of which is capital flows.
The exit of some countries from the euro, or even its break-up, is now a high probability. There are two big implications: capital flight within the EU and the risk aversion by global investors. Imagine the accelerated flight from Greek banks towards German ones if Greece no longer participates in the euro project. The most recent example would be the Icelandic banking collapse of 2008, at which the Icelandic authorities resorted to strong foreign exchange and capital outflow controls, controls that were even endorsed by the IMF. However, as the report explains, within the EU there are deeply entrenched policy hurdles, not least of which is the Lisbon Treaty, which would prevent the Greek authorities from trying to stem a run on their banks in the same way the Icelandic authorities did.
Triple Crisis blogger Ilene Grabel was recently interviewed by the Real News Network on why the major institutions governing international economic affairs in Europe, the G20, IMF, ECB and European governments, have failed to develop comprehensive responses to the eurozone crisis.
Prior to the Arab spring, the official rate of unemployment in the Arab World was the highest globally. The labour share was as low as a quarter of national income. Productivity was negative. If a more sensible method of assessing unemployment is carried out, more than half of the labour force could be considered unemployed. The real economy was de-industrialising and shrinking relative to oil rent, and its capacity to reemploy people perished.
A propos, a 2004 technical report on economic performance in the Arab World stated that ‘the predisposition of major macroeconomic and demographic variables towards an inevitable collision implies that there is little space for argument over the unavoidability of change. The built-up of imbalances in a regional economy that does not expand at a rate commensurate with the demands of the demographic transition means that, unless the system experiences a chance occurrence of heavy oil rent fallout, change cannot be gauged as a matter of degree.’ This report took about a year to prepare, so these remarks were written sometime earlier when oil prices were at historically low levels. The chance occurrence of high oil prices did indeed take place soon after, a matter which became pellucidly clear in 2005. But the massive oil rents could not avert an inevitably violent political (only political and not social so far) restructuring, or what has come to be known as the Arab spring.
Triple Crisis blogger Matías Vernengo was recently interviewed by the Real News Network on Europe’s new fiscal compact, which he argues is based on the interests of bankers, large companies and the European elite.
In spite of the grave economic and financial crisis worldwide, France has refused to allow the extraction of shale gas through fracking (a process involving injection of water and other materials), due to the environmental risks and landscape destruction entailed. At the same time, in the United States, President Barack Obama has decided to postpone, at least until after the 2012 election, the construction of the oil pipeline that was to be brought all the way to Texas from Alberta, Canada (where oil is extracted from bituminous sands, at great energetic cost and with high environmental impact).
On the other hand, in Colombia, there is consideration of a law to prevent coal extraction in marsh lands since this would endanger the ecology and the role of these marshes as a water reservoir, in Ecuador. Instead, they have decided to keep the oil from the Ishpingo, Tambococha and Tiputini (ITT) oil block in the soil beneath the vast Yasuní National Park (Spanish acronym: PNY), which is nearly a million hectares (over two million acres).
Durban, December 9: The halls outside are full of people who are now waiting for some action. But strangely enough, there is no sense of anticipation or excitement. Strange in a world, which is increasingly seeing the pain of climate change impacts, and which knows that time is running out.
So what was the agenda for this conference, and what is the expected outcome?
To the climate uninitiated, Durban has been portrayed as a fight between the ‘good’ – namely, the European Union (EU) – and the ‘bad’ – in this case, India in specific and China in general. The EU wants to move the world, and urgently; it has set a target for the completion of a new agreement by 2015 at the latest. It expects that this agreement will be legally binding and will include all countries to take commitments to reduce emissions in the future. This is necessary because the existing agreement, Kyoto Protocol, only sets emission reduction targets for the industrialised countries. Now with the world changing – China’s annual emissions have overtaken the US and India’s are growing as well – the new agreement must have all these countries on board. This is all good and necessary. The world indeed needs urgent action and the emerging world’s emissions have increased: therefore, new kinds of agreements are necessary.
United Nations Climate Change Conference in Durban ended on Sunday morning with the launch of negotiations for a new global climate deal to be completed in 2015.
The new deal aims to ensure “the highest possible mitigation efforts by all Parties”, meaning that the countries should undertake deep Greenhouse Gas emissions cuts, or lower the growth rates of their emissions.
It will take the form of either “a protocol, another legal instrument or an agreed outcome with legal force”.
In a night of high drama, the European Union tried to pressurize India and China to agree to commit to a legally binding treaty such as a protocol, and to agree to cancel the term “legal outcome” from the list of three possible results, as they said this was too weak an option.