Warnings of a New Global Financial Crisis

By Martin Khor

Cross-posted at Inter Press Service.

There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank of International Settlements, the bank of central banks.

The warnings come at a moment when there are signs of international capital flowing out of some emerging economies, including Turkey, Argentina and Indonesia.

Some economists have been warning that the boom-bust cycle in capital flows to developing countries will cause disruption, when there is a turn from boom to bust.

All it needs is a trigger, which may then snowball as investors in herd-like manner head for the exit door. Their behaviour is akin to a self-fulfilling prophecy: if enough speculative investors think this is the time to move back to the global financial capitals, then the exodus will happen, as it did in previous “bust” phases of the cycle.

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Growing Resistance: The Rise and Fall of Another Mozambique Land Grab

By Timothy A. Wise

The rice fields of Xai-Xai, three hours up the coast from Maputo, are vast, coming into view as we descended onto the alluvial plain from the villages that dot the hills above. They stretch across the plains toward the Indian Ocean as far as the naked eye can see, in the flat green monochrome of a rice plantation. Mozambique was one of the leading targets of large-scale agricultural investment projects, widely denounced as “land-grabs” by critics. Community resistance had prevented most such projects in Mozambique, including ProSAVANA, the controversial Brazil-Japan initiative, which was slated to be the largest land grab in Africa. As I’d seen in the field, it seemed to grow not crops but only rumors, threats, government proclamations, and community resistance.

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No Blank Check for Development Banks

By Kevin P. Gallagher and Jörg Haas
Originally published at Project Syndicate. 
Global financial leaders convened in Washington, DC, last month for the annual spring meetings of the World Bank Group and the International Monetary Fund. This year, they asked the world’s taxpayers to grant the World Bank and other multilateral development banks (MDBs) more capital to fill global infrastructure gaps.

Increasing the capital – and optimizing the existing capital – of the world’s MDBs is of the utmost importance. But doing so makes sense only if that financing is used to move the world economy in a direction consistent with the United Nations Sustainable Development Goals (SDGs) and the 2015 Paris climate agreement.

According to researchers at the Brookings Institution, the world needs to invest an additional $3 trillion per year in sustainable infrastructure in order to keep global warming below 2°C relative to pre-industrial levels – the target enshrined in both the SDGs and the Paris agreement. Today, however, infrastructure contributes heavily to global warming, with about 70% of all greenhouse-gas emissions coming from its construction and operation.

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Do All Communities Have Equal Access to Energy Efficiency in Massachusetts?

By Liz Stanton

Massachusetts’s electric and gas providers’ draft plans to make energy efficiency measures available to consumers were released for public review on April 30, 2018. Massachusetts’ Green Communities Act, signed into law in 2008, requires electric and gas distributors to provide “all cost-effective” energy efficiency measures. That means any program, product, or policy—from insulation to LED lightbulbs to letters sent to consumers comparing their energy use to their neighbors’—must be provided to households and businesses, so long as it will cost the state less than the cost of the energy it saves. If it’s cost effective, distributors must make it available to their customers.

This far-reaching efficiency policy has led Massachusetts to rank first in the United States in energy efficiency for seven years running: a commendable achievement. However, Massachusetts state law places no obligation on the electric and gas distributors regarding how cost-effective energy savings are distributed across communities.

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Rethinking International Environmental Agreements

By Edward B. Barbier

In recent article in Science, “How to pay for saving biodiversity”, my co-authors and I argue that it is time to rethink the global approach to saving the world’s remaining biodiversity and habitats.

Twenty-five years after establishing the Convention on Biological Diversity, the world is facing “biological annihilation”, according to a scientific study published in the Proceedings of the National Academy of Sciences last year.  The problem is mainly due to lack of funding.  Governments and international organizations alone cannot fund the investments needed to reverse the decline in biological populations and habitats on land and in oceans.  For example, it will take around $100 billion a year to protect the earth’s broad range of animal and plant species, and current funding fluctuates around $4-10 billion annually.

In our article, we follow others’ lead and propose creating a new Global Agreement on Biodiversity (GAB) modeled after the 2015 Paris Climate Change Accord.  But instead of focusing on just governments as parties to the agreement, we argue that the corporations in industries that benefit from biodiversity should also formally join the GAB and contribute financially to it.

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China’s Embrace Of An Intellectual Property System Imposed On It By The United States

According to Peter Drahos, Professor of Law and Governance in the Law Department at the European University Institute in Florence, the two biggest scientific powers, the U.S. & China, need to rethink the world’s intellectual property-based innovation system to safeguard citizen interests or else this privatization of technology, an arms race mentality in science, will produce a dark, dystopian future none of us really want.  Drahos was interviewed by Lynn Fries of the Real News Network. Find the original TRNN post, which contains links to related stories, here.

China’s Bid To Assist Assad In Syrian Reconstruction Is About Security and Profit

By Sara Hsu

Even as the West favors airstrikes against Syrian president Bashar al-Assad and steers clear of supporting the president in rebuilding Syria, China has stated that it is interested in reconstructing the war-torn nation, and Chinese firms are lining up to become part of the process. The reconstruction cost is expected to amount to $250 billion, according to the United Nations. China’s motivations are apolitical, and are not aimed at opposing the policies of Western nations. Rather, China is propelled by economic and security reasons to take part in rebuilding Syria.

Chinese firms interested in reconstruction include infrastructure construction companies such as China Energy Engineering Corporation and China Construction Fifth Engineering Division. In addition, a Syria Day Expo held in Beijing was attended last year by hundreds of Chinese infrastructure investment firms. At the First Trade Fair on Syrian Reconstruction Projects held last summer, officials pledged $2 billion for the reconstruction process. Chinese energy firms might have benefited as well, since before the Syrian war began, Syria’s main energy contracts were held with Western energy companies such as Shell and Total. However, Russia has been given exclusive rights to produce oil and gas in Syria.

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What’s Different About Trump’s Tariffs?

By Jomo Kwame Sundaram

Cross-posted at Inter Press Service. 

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 taken steps threatened in his mid-2016 election economic policy document, drafted by US’s National Trade Council head Peter Navarro and Commerce Secretary Wilbur Ross. In particular, he has imposed tariffs and other restrictions on imports to revive US manufacturing. Import tariffs of 25% and 10% on steel and aluminium respectively have been imposed by invoking Section 232 of the US 1962 Trade Expansion Act, allowing unilateral measures to protect domestic industries for “national defence” and “national security”.
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The Left and the Return of Protectionism

Originally posted at Naked Keynesianism.

So if you believe a simplified version of conservative views on the economy, Trumponomics is pretty contradictory (and yes they are contradictory, even if one may doubts about why). Tax cuts should lead to growth, via supply side economics, and the recently proposed tariffs on steel and aluminum do exactly the opposite. Protectionism (not a very good name, I prefer managed trade, as I discussed here before) has made a come back, but while many heterodox economists have suggested that ‘free trade’ is not always beneficial to all, and those concerned with the fate of manufacturing and the working class in the United States have decried Free Trade Agreements (FTAs) over the years, it seems that the association of these ideas with Trumponomics has made them less keen on the recent tariff proposal.

A typical example is the recent op-ed by Jared Bernstein and Dean Baker in WAPO, and I cite them exactly for my respect for their economic views in general, and their commitment to progressive causes. In their view: “The bigger dangers to our economy are twofold. One, that our trading partners will retaliate by taxing our exports to them, thus hurting a broad swath of our exporting industries, and two, by leading an emboldened, reckless Trump administration to enact more bad trade policy.” Essentially, they agree that tariffs would have a negative effect on employment, but perhaps not as big as some Cassandras have suggested, and that this ‘bad protectionist’ policies would continue. A similar argument can be found in Brad DeLong’s op-ed, another progressive economist, in which he argues that the tariff is a tax hike for consumers. Brad, I should note, has recently published a very good book in which he praises the Hamiltonian system, that is,  the use of managed trade to promote industrial development (I discussed it here).*

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Exposing the Risks of Global Finance: Yilmaz Akyuz on ‘Playing with Fire’ (2/2)

Part 2 of “Exposing the Risks of Global Finance: Playing with Fire”, a documentary program on the meeting “Another Crisis in the Making”. A South Centre debate on the state of the global economy and finance, the meeting was held on the occasion of the launch of the book Financial Integration and Changing Vulnerabilities of the Global South authored by South Centre Chief Economist, Yilmaz Akyüz. In this final segment, TRNN feature clips of Dr. Akyüz, as an author’s commentary. The South Centre Chief Economist explains the deepened financial integration of the Global South as a mechanism of Northern countries to continue compressing wage income. But the growing and massive accumulation of debt worldwide is making the global economy more vulnerable than ever before. Link to the Real News Network page here for this video by TRNN’s Lynn Fries. Video appears after the introduction from South Centre below.

The meeting “Another Crisis in the Making” was moderated by Mrs. Yuefen Li, Special Advisor on Economics and Development Finance of the South Centre, with presentations by Dr. Richard Kozul-Wright, Director of the Division on Globalization and Development Strategies (GDS), UNCTAD, Dr. Y.V. Reddy, South Centre Board Member and Former Governor of the Reserve Bank of India, and Dr. Peter Dittus, Former Secretary General of the Bank for International Settlements (BIS). Dr. Yılmaz Akyüz, the author, responded to various comments and observations made by the panellists.

“Playing with Fire is a comprehensive account of financial integration of emerging and developing countries supported by a wealth of data and information. It also includes discussion of new vulnerabilities to external financial shocks. The book aids understanding of destabilizing interactions between key international markets for emerging and developing countries through a new concept of commodity-finance nexus. It takes a critical look at foreign direct investment.” (Oxford University Press)

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