Francis A. Kornegay, Institute for Global Dialogue, associated with the University of South Africa, and Nancy Alexander, Heinrich Böll Foundation (North America)

At the recent BRICS Summit, leaders announced new initiatives, including a New Development Bank (NDB) for infrastructure and sustainable development. In the same timeframe, China will join with its allies to launch a new Asian Infrastructure Investment Bank (AIIB). These initiatives provide a counter-point to the U.S.-led World Bank and the Japan-led Asian Development Bank.

Not to be outdone, the World Bank aims to double its lending operations within the decade, including an expansion of infrastructure operations and the launch of a Global Infrastructure Facility (GIF) this year. While an initial GIF pilot program will be modestly funded, it has outsized ambitions for mobilizing global pension and sovereign wealth funds to invest in infrastructure as an “asset class.”

To some degree, the Group of 20 has instigated the expansion of infrastructure financing—ostensibly as a means to accelerate global growth and job creation.  Bringing up the “caboose” of this infrastructure juggernaut, the UN declares that public-private partnerships (PPPs) will be a key “means of implementation” of its post-2015 agenda, including infrastructure.

The new-generation development finance institutions (NG-DFIs) are a testament to the failure of the Bretton Woods Institutions (BWIs) to reform their governance and share power with emerging economies.  They also represent pushback against the BWIs’ legacy: imposition of neoliberal policies, including austerity regimes that strangled public spending on infrastructure; de-industrialization (e.g., demolished infant industries through premature trade liberalization); and dismantling of national development banks.

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Gerald Epstein

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Ali Kadri

This is the third of a five-part series by regular Triple Crisis contributor Ali Kadri, Senior Research Fellow at the Middle East Institute, National University of Singapore, and author of Arab Development Denied: Dynamics of Accumulation by Wars of Encroachment (Anthem Press).

The series is based on an interview he granted to the Center for the Study of Human Rights at the London School of Economics (LSE). The full interview is available here.

In your work you have argued that the Arab state is at the “behest” of foreign powers as regards resources. Please explain.

Development in a developing and class-divided society depends on the ruling class’s vested interest in capacity building. I also propose that, necessarily but not exclusively, the ruling class tendency to expand its wealth by its mode of integration with the global economy outweighs its nationalist or pan-Arab zeal. After the fact, the cant of Arab or pan-Arab nationalism has been the sentimental veneer behind which anti-integrationist policies have been implemented. Neither the country’s own working class nor the peoples of Arab nations have been integrated into a unifying wealth making process. In a word, the Arab ruling classes, as is the case of other ruling classes, place the concerns with which they accumulate first on their agenda. What has occurred in the Arab world under relentless imperialist assault is the gradual disengagement of national industrial capital (de-industrialisation), after which only commerce bereft of industrial production remained and the merchant mode of accumulation became the dominant mode around which society has come to be organised. So the class in charge no longer reproduces itself (creates the economic and social conditions for its expansion) from production in the national economy, but principally from grabbing national assets, divesting and expanding in the greater sphere of the international financial market.

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C. P. Chandrasekhar

This is the first in a two-part series on the New Development Bank (NDB) founded by the BRICS counties (Brazil, Russia, India, China and South Africa). This post discusses the NDB’s potential to “shift power relations in the multilateral development-banking infrastructure.” The second part considers some of the likely limitations on the changes the NDB will spur. The full article was first published as the H T Parekh Finance column in the Economic and Political Weekly.

The world has one more multilateral development bank, the New Development Bank (NDB), established on July 15, 2014. With authorised capital of $100 billion, and initial subscribed capital of $50 billion, the bank’s founding partners are the countries in the BRICS grouping (Brazil, Russia, India, China and South Africa). These five countries, which share equally the paid-up capital in the form of actual equity ($10 billion) and guarantees ($40 billion), will remain dominant in perpetuity with their aggregate shareholding never falling below 55 per cent. Organisationally too the BRICS bank seeks to be even-handed: India gets the first chance for a rotating Presidentship, China gets to host the bank’s headquarters in Shanghai, South Africa gets to host the first regional office, the first chair of the board of governors is from Russia and the first chair of the board of directors from Brazil.

In itself, the creation of a new multilateral development bank should not be considered out of the ordinary. A 2009 study from the Association of Development Financing Institutions in Asia and the Pacific estimated that there were over 550 development banks worldwide, of which 32 were in the nature of international, regional or sub-regional (as opposed to national) development banks. The news that one more has been added to the list should not elicit much excitement.

Yet the news that the NDB had been created was received in some circles with much enthusiasm, in others with disappointment and in yet others with a degree of discomfort.

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Léonce Ndikumana

This is the first of a two-part series on capital flight from Africa by regular Triple Crisis contributor Léonce Ndikumana. The series is drawn from a Political Economy Research Institute (PERI) working paper, available here, forthcoming in Celestin Monga and Justin Y. Lin (eds.), Handbook of Africa and Economics, Oxford University Press.

Part 1: Causes and Consequences of Capital Flight

At the turn of the century the story of Africa has changed, from that of hopelessness to exuberance in the face of yet another African renaissance. Growth surged in the continent, even weathering the storm of the Great Recession of 2008-09, with Africa emerging as the second fastest growing region in the world after Asia. Despite this growth resurgence, however concerns remain. The most fundamental concern is that growth has not been accompanied by commensurate reduction in poverty. Moreover, it has been characterized by high inequality, and generally it has not been broad-based. From a long-term perspective the question is whether this recent growth resurgence is sustainable. In particular, the issue is whether the current saving rates are sufficient to support high and sustained growth and development.

Domestic saving in African countries has remained low, leading to high investment-saving gaps and increased dependence on external capital. A key reason is the inadequate performance in domestic saving mobilization in the public sector and in the private sector. But a factor that has been often overlooked is the leakage of resources through capital flight. The financial hemorrhage of the continent is a both a chronic problem and a looming crisis. The levels of capital flight have exploded over the past decade. Thus, efforts to build a solid base for long-term growth and development in Africa must involve strategies to improve efficiency in public and private domestic resource mobilization as well as policies to curb and prevent further capital flight from the continent.

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Martin Khor

The full-scale military onslaught by Israel on Gaza has been barbaric and outrageous.

The pictures on TV and the internet of the thousands killed and injured, whole neighbourhoods reduced to rubble, the population deprived of food, water and electricity, have been pitiful.

It is also almost unbelievable, except that it has happened before. It begs the question why powerful countries allow it to happen and continue.

Last week, when bombs killed 20 people and injured hundreds while they were sleeping in a United Nations school sheltering 3,000 people, a UN agency official at the site gave voice to the outrage felt around the world.

Interviewed on Al Jazeera TV, he said the world stands disgraced as children were allowed to be killed while they slept with their parents when they sought refuge in a UN school.

“We condemn in the strongest terms this violation of international law. The international community must end this continuing carnage.”

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Gerald Friedman, Guest Blogger

This is the second part of a two-part series on the reasons for the sluggish U.S. economic “recovery” since the Great Recession, by Gerald Friedman, professor of economics at the University of Massachusetts and author of Microeconomics: Individual Choice in Communities. This post, from Friedman’s “Economy in Numbers” column in Dollars & Sense magazine, focuses on the failings of various government policy responses to the crisis.

Government Policy and Why the Recovery Has Been So Slow

The recovery from the Great Recession has been so slow because government policy has not addressed the underlying problem: the weakness of demand that restrained growth before the recession and that ultimately brought on a crisis. Focused on the dramatic events of fall 2008, including the collapse of Lehman Brothers, policymakers approached the Great Recession as a financial crisis and sought to minimize the effects of the meltdown on the real economy, mainly by providing liquidity to the banking sector. While monetary policy has focused on protecting the financial system, including protecting financial firms from the consequences of their own actions, government has done less to address the real causes of economic malaise: declining domestic investment and the lack of effective demand. Monetary policy has been unable to spark recovery because low interest rates have not been enough to encourage businesses and consumers to invest. Instead, we need a much more robust fiscal policy to stimulate a stronger recovery.

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Ali Kadri

This is the second part of a five-part series by regular Triple Crisis contributor Ali Kadri, Senior Research Fellow at the Middle East Institute, National University of Singapore, and author of Arab Development Denied: Dynamics of Accumulation by Wars of Encroachment (Anthem Press).

The series is based on an interview he granted to the Center for the Study of Human Rights at the London School of Economics (LSE). The full interview is available here.

Part 2: How would you define neoliberalism? What effect has it had on the Arab world?

The neoliberal policy package depends primarily on the creation of an enabling environment for the private sector, freeing the goods and capital markets and implementing “good governance.” The story goes: If price distortions are removed, capital-gains taxes that inhibit the wealthy from investing are removed, labour laws that make the market “rigid” (enabling labour stability on the job instead of being precarious) are removed, and financial regulations that impede the flows of capital are removed—at some immense pain to the working class in the short term—then after a period of welfare retrenchment, the market spurs into action delivering much needed capital stock, rising productivity, and rising wages in the long term. One ought to note in passing that despite the dismal record of this “trickle-down” story, it remains central to mainstream policies. When these conditions prevail, the neoliberal “theory” says, development prevails. However, this is not much of a theory.

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John Weeks

Background

Unless you just returned from holiday in some ultra-remote region lacking newspapers, television or internet access (is there such a place?), you are aware that the government of Argentina defaulted on its external debt on Wednesday. A New York federal court provided the immediate cause of the default with a ruling that rendered illegal an agreement reached between the Argentine government and creditors holding over 90% of the country’s external debt.

The principal litigant bringing the case against the government holds less than US$2 billion of the Argentine debt, which by comparison makes a tail wagging a dog seem a credible anatomical interaction. MNL Capital, never lent a cent to the Argentine government (nor to any other). It acquired its one-billion-plus Argentine bonds on the re-sale market, purchasing them at far below face value.

Depending on your source of (mis)information, you will think that this default is 1) the result of an feckless, spend-thrift government failing to accept responsibility for its actions (argued for example, in Forbes),  2) the harbinger of deep economic trouble for the Argentines; and/or 3) the consequence of the predatory evil of vulture hedge funds.

Taking these three in order, they are 1) false, 2) probably false, and 3) true but not terribly important.

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Sunita Narain

Smart is as smart does. The NDA government’s proposal to build 100 “smart” cities will work only if it can reinvent the very idea of urban growth in a country like India. Smart thinking will require the government to not only copy the model cities of the already developed Western world, but also find a new measure of liveability that will work for Indian situation, where the cost of growth is unaffordable for most.

The advantage is that there is no agreed definition of smart city. Very loosely it is seen as a settlement where technology is used to bring about efficiency in resource use and improvement in the level of services. All this is needed. But before we can bring in smart technology, we need to know what to do with it. How do we build new cities and repair groaning urban settlements to provide clean water to all, to manage the growing mountains of garbage, to treat sewage before we destroy our rivers and to do something as basic as breathing without inhaling toxins?

It can be done. But only if we have our own dream of a modern Indian city. We cannot turn Ghaziabad, Rajkot, Sholapur, Tumkur or even Gurgaon into Shanghai or Singapore. But we can turn these cities into liveable models for others to emulate.

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