World Bank Financializing Development

By Jomo Kwame Sundaram and Anis Chowdhury

Cross-posted at Inter Press Service.

The World Bank has successfully legitimized the notion that private finance is the solution to pressing development and welfare concerns, including achieving the Sustainable Development Goals (SDGs) through Agenda 2030.

A recent McKinsey report estimates that the world needs to invest about US$3.3 trillion, or 3.8 per cent of world output yearly, in economic infrastructure, with about three-fifths in emerging market and other developing economies, to maintain current growth.

The world financing gap is about US$350 billion yearly. If new commitments, such as the SDGs, are considered, the gap would be about thrice the currently estimated gap as available public resources alone are not enough. Thus, for the Bank, the success of Agenda 2030 depends on massive private sector participation.

China’s Belt and Road Initiative vs. the Washington Consensus

Cross-posted at Inter Press Service.

With the Washington Consensus from the 1980s being challenged, President Donald Trump withdrawing the United States from the Trans-Pacific Partnership (TPP), and China pursuing its Belt and Road Initiative (BRI), most notably with its own initiatives such as the multilateral Asian Infrastructure Investment Bank (AIIB), the political and economic landscape in East Asia continues to evolve. Jomo Kwame Sundaram was interviewed about likely implications for developing countries in the region and beyond.

IPS: What do you think of world growth prospects and China’s Belt and Road Initiative?

Jomo: Although there are some hopeful signs here and there, there are few grounds for much optimism around the North Atlantic (US and Europe) for various reasons. Unconventional monetary policies, especially quantitative easing (QE), have helped achieve a modest recovery in the US, but appears less likely to succeed elsewhere. Such measures have also accelerated massive wealth concentration, which is why a few of the world’s richest men own more than the bottom half of the world’s population.

Greening the New Deal

By Shaun Ferguson (guest post)

The Green New Deal is desperately needed, and arguing about a price tag is like Henry Ford wondering if the country will be able to afford his brand new automobile.  With the introduction of a House Resolution by Rep. Alexandria Ocasio-Cortez (D-New York) and Sen. Edward Markey (D-Massachusetts), a debate has surged across the country on the affordability of the Green New Deal. The sheer distraction of the affordability discussion is enough to ensure that very few people will pay attention to what is really at stake. For when the bigger fish eat up this little fish we will need to remember how we got here and what matters most.  As the bright young critics have quickly observed, the Green New Deal could hardly be too green. Time is wearing thin and we need to make haste.

Promoting Privatization

Cross-posted at Inter Press Service.

By Jomo Kwame Sundaram

Privatization has been central to the ‘neo-liberal’ counter-revolution from the 1970s against government economic interventions associated with Roosevelt and Keynes as well as post-colonial state-led economic development.

Many developing countries were forced to accept privatization policies as a condition for credit or loan support from the World Bank and other international financial institutions, especially after the fiscal and debt crises of the early 1980s. Other countries voluntarily embraced privatization, often on the pretext of fiscal and debt constraints, in their efforts to mimic new Anglo-American criteria of economic progress.

Ignorance-Inspired Brexit Imperial Nostalgia

By Jomo Kwame Sundaram and Anis Chowdhury
Cross-posted at Inter Press Service.
As the possible implications of Britain’s self-imposed ‘no-deal’ exit from the European Union loom larger, a new round of imperial nostalgia has come alive.
After turning its back on the Commonwealth since the Thatcherite 1980s, some British Conservative Party leaders are seeking to revive colonial connections in increasingly desperate efforts to avoid self-inflicted marginalization following divorce from its European Union neighbours across the Channel.

Inequality, Sunk Costs, and Climate Policy

By Frank Ackerman

Fifth in a series on climate policy; find Part 1 here, Part 2 here, Part 3 here, and Part 4 here.

Climate change is at once a common problem that threatens us all, and a source of differential harms based on location and resources. We are all on the same boat, in perilous waters – but some of us have much nicer cabins than others. What is the relationship of inequality to climate policy?

The ultimate economic obstacle to climate policy is the long life of so many investments. Housing can last for a century or more, locking residents into locations that made sense long ago. Business investments often survive for decades. These investments, in the not-so-distant past, assumed continuation of cheap oil and minimally regulated coal – thereby building in a commitment to high carbon emissions. Now, in a climate-aware world, we need to treat all fossil fuels as expensive and maintain stringent regulation of coal. And it is impossible to repurpose many past investments for the new era: they are sunk costs, valuable only in their original location or industry.

If we could wave a magic wand and have a complete do-over on urban planning, we could create a new, more comfortable and more sustainable way of life. Transit-centered housing complexes, surrounded by green spaces and by local amenities and services, could offer convenient car-free links to major employment sites. Absent a magic wand, the challenge is how to get there from here, in a short enough time frame to matter for climate policy.

Space is the final frontier in energy use. Instead of shared public spaces for all, an ever-more-unequal society allows the rich to enjoy immense private spaces, such as McMansions situated on huge exurban lots. This leads to higher heating and cooling costs for oversized housing, and to higher infrastructure costs in general: longer pipes, wires and travel distances between houses. And it locks in a commitment to low population density and long individual commutes. Outside of the biggest cities, much of the United States is too sparsely settled for mass transit.

Read the rest of this entry »

Prices Are Not Enough

By Frank Ackerman

Fourth in a series on climate policy; find Part 1 here, Part 2 here, and Part 3 here.

We need a price on carbon emissions. This opinion, virtually unanimous among economists, is also shared by a growing number of advocates and policymakers. But unanimity disappears in the debate over how to price carbon: there is continuing controversy about the merits of taxes vs. cap-and-trade systems for pricing emissions, and about the role for complementary, non-price policies.

At the risk of spoiling the suspense, this blog post reaches two main conclusions: First, under either a carbon tax or a cap-and-trade system, the price level matters more than the mechanism used to reach that price. Second, under either approach, a reasonably high price is necessary but not sufficient for climate policy; other measures are needed to complement price incentives.

Agribusiness Is the Problem, Not the Solution

By Jomo Kwame Sundaram

Cross-posted at Inter Press Service.

For two centuries, all too many discussions about hunger and resource scarcity has been haunted by the ghost of Parson Thomas Malthus. Malthus warned that rising populations would exhaust resources, especially those needed for food production. Exponential population growth would outstrip food output.

Humanity now faces a major challenge as global warming is expected to frustrate the production of enough food as the world population rises to 9.7 billion by 2050. Timothy Wise’s new book Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food (New Press, New York, 2019) argues that most solutions currently put forward by government, philanthropic and private sector luminaries are misleading.

Methane Measurements and Short Attention Spans

By Frank Ackerman

Third in a series of posts on climate policy.  Find Part 1 here and Part 2 here.

Carbon dioxide (CO2) represents most, but not all, greenhouse gas emissions. In EPA’s Greenhouse Gas Inventory for 2016, CO2 represented 82 percent of gross U.S. GHG emissions, while methane represented 10 percent (measured as CO2-equivalents). The top three sources of methane are agriculture, the energy industry, and waste management.

As fascinating as some of us may find such details, the general public has a short attention span for new information about climate change. Within that constraint, what do we want to communicate? For methane, there are two choices, an introductory and an advanced message.

The introductory message emphasizes that methane, the principal component of natural gas, is an important cause of global warming under any version of the data. It is therefore crucial to reduce and eliminate all fossil fuels, gas included, as soon as possible, replacing them with efficiency, renewables and energy storage.

Climate Damages: Uncertain but Ominous, or $51 per Ton?

By Frank Ackerman

Second in a series of posts on climate policy.  Find Part 1 here.

According to scientists, climate damages are deeply uncertain, but could be ominously large (see the previous post). Alternatively, according to the best-known economic calculation, lifetime damages caused by emissions in 2020 will be worth $51 per metric ton of carbon dioxide, in 2018 prices.

These two views can’t both be right. This post explains where the $51 estimate comes from, why it’s not reliable, and the meaning for climate policy of the deep uncertainty about the value of damages.