By Gino Brunswijck, Maria Jose Romero and Bodo Ellmers, The European Network on Debt and Development (Eurodad)
Argentinians are experiencing deja-vu this month as the government announces massive layoffs and a hiring freeze as part of an adjustment package attached to a loan from the International Monetary Fund (IMF). Thousands of public servants are being forced yet again to swallow the bitter pill of austerity, which the IMF programme – published last Friday – aims to patch up through increased targeted social assistance.
For many Argentinians the financial crisis gripping the country, and the return to the Fund, brings back bad memories of 2001. Then, IMF-induced policies triggered the worst economic meltdown in Argentinian history. A cocktail of austerity measures contributed to the contraction of economic activity with a loss of 20 % of GDP between 1998 and 2002. They also compromised the government’s ability to provide essential services; unemployment soared above 20 % while real wages dropped by 18%; and poverty affected more than half of all Argentinians. Children were most affected, with seven out of 10 falling below the poverty line.
To appease popular discontent, the government and IMF officials have emphasised that this time the Fund has changed its ways. However, a comparison between previous and current agreements points to business as usual, focusing on traditional austerity with a few cosmetic tweaks.
By John Weeks
There seems some disagreement as to whether Nero played the violin or the harp as Rome burned in AD 64. Whatever happened 1,954 years ago, there was considerable complacent fiddling in Brussels after the 4 March Italian election. To replace the centrist government of neoliberal Matteo Renzi Italian voters cast 60% of their ballots for two anti-EU parties, the aggressively xenophobic coalition of Lega neo-fascists and the anti-immigrant 5 Star Movement (Movimento 5 Stelle, M5S).
Confounding the hope and expectation of the EU elite, this pair formed their misbegotten government in Rome in April. The anti-EU rhetoric of these two parties, plus their promise to breech EU budget rules – end fiscal austerity – ended the fiddling and set off alarm bells.
The EU elite quickly moved to prevent this anti-establishment government from rocking the Brussels neoliberal consensus. The nominally neutral Italian president refused to accept the first proposed coalition government of the Lega-M5S. The refusal did refer to thee proposed racist immigration policies, nor to its aggressively anti-Roma policies. Unacceptable to the president that the person nominated for finance minister, who had long standing opposition to the euro (see commentary by Yanis Varoufakis).
Should anyone miss the implied priories of the Italian establishment, the president sought to form an interim government that would continue Brussels-designed austerity policies. To lead that government the president chose a former functionary of the International Monetary Fund. This affront to the electoral process proved short-lived. Soon the far right Lega and eclectic right M5S were back in government with a different, but no less anti-austerity, finance minister.
By Timothy A. Wise
The victory of Andrés Manuel López Obrador and his Morena party in Sunday’s Mexican elections has stunned international observers. The center-left insurgency received an estimated double the votes of its nearest rival in a multi-party presidential race, winning more than 50 percent of the vote, several important governorships including the first woman to run Mexico City, and an absolute majority in the House of Representatives and the Senate. However the final tally ends up, López Obrador has a resounding mandate for change.
Many observers have interpreted the results as a vote against rampant corruption; given the pervasive graft and influence-peddling in Mexico, López Obrador’s clean, austere reputation was certainly a factor for voters. But economic factors also motivated many voters, especially farmers. The majority of Mexicans have been left behind in a failing strategy to hitch the country’s fortunes to open trade with the United States under the North American Free Trade Agreement (NAFTA).
As one recent report summarized, “Poverty is worse than a quarter century ago, real wages are lower than in 1980, inequality is worsening, and Mexico ranks 18th of 20 Latin American countries in terms of income growth per person in 21st century.” It is hard to imagine worse outcomes in a country with privileged and historic access to the largest capital and consumer markets in the world—the U.S.
Among those rejoicing now over López Obrador’s victory are Mexico’s farmers, who have been largely abandoned by the government while unregulated imports of below-cost maize, wheat, pork, and other agricultural goods flooded Mexican markets under NAFTA. (See my report.) After the agreement took effect in 1994, maize farmers endured a 400-percent increase in imports of U.S. maize priced 19-percent below its costs of production, resulting in a punishing 66-percent drop in producer prices. Producers of other farm goods faced similar pressures, forcing many to become migrant workers in the strawberry fields of multinational growers or migrate to the U.S. without documentation.
The financial crisis of 2008, which resulted in the near meltdown of the world’s financial and banking system, has left a lot of questions unanswered regarding reform and whether enough has been done to avoid another similar crisis. A leading authority on financial governance, Ilene Grabel, Professor of International Finance at the University of Denver, spoke to C. J. Polychroniou about where things stand today ten years after the biggest capitalist crisis since the Great Depression. (Cross-posted at Global Policy.)
C. J. Polychroniou: It’s been ten years since the outbreak of the financial crisis, and the verdict on the effect of that crisis on global financial governance remains largely ambiguous. Nonetheless, all this may soon change as a result of the publication of your recent book titled When Things Don’t Fall Apart: Global Financial Governance and Developmental Finance in an Age of Productive Incoherence. In this book, you argue that much has in fact changed since the East Asian financial crisis of 1997-98 and especially since the global financial crisis of 2008. In what ways has global financial governance changed over the last couple of decades?
Ilene Grabel: I argue that the contradictory effects of the East Asian financial crisis (EAFC) of 1997-8 laid groundwork for consequential (albeit paradoxical) shifts in several dimensions of global financial governance and developmental finance that deepened during and since the global crisis. The EAFC solidified neoliberalism through the leverage granted to external and domestic actors who had been previously unable to secure liberal reform prior to the crisis. The EAFC also inaugurated a gradual, uneven rethinking of capital flow liberalization. In addition, the crisis gave the IMF a vast new client base. But the crisis was ultimately costly to the institution because its crisis response led EMDEs to implement strategies (such as reserve accumulation) to escape its orbit. Reserve accumulation was enabled by the fortuitous global economic conditions that followed the EAFC. The Asian Monetary Fund (AMF) proposal catalyzed by the EAFC was quickly scuttled by tensions between Japan and China, tensions that were adroitly exploited by the IMF and the U.S. government, both of which strongly opposed the AMF. Though the AMF proposal failed, the crisis ultimately bore fruit in the region and beyond. Not least, it yielded the creation of a currency reserve pooling arrangement among the members of the Association of Southeast Asian Nations plus Japan, China, and South Korea (ASEAN+3). More broadly, the EAFC stimulated in other regions of the developing world an interest in regional mechanisms that could deliver countercyclical liquidity support and long-term project finance through institutions that are, to some degree or other, independent of the Bretton Wood Institutions (BWIs, namely, the IMF and World Bank). In sum, the EAFC marked the beginning of the end of a unified neoliberal regime.
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.
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.
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.
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.
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.