Martin Khor

Political leaders of developing countries gathered in the Bolivian city of Santa Cruz last week to commemorate the 50th anniversary of the Group of 77, the main umbrella organisation of the South.

Presidents, Prime Ministers, Foreign Ministers and Ambassadors from a hundred countries celebrated the event with speeches and a declaration that pledged their continued fight for a fairer world order, but also to improve the condition of life of their people.

President Evo Morales of Bolivia, who hosted this G77 summit gave a stirring speech enumerating nine key tasks that lie ahead for the developing world, and chaired the meeting of interesting reflections from leaders on what the South has achieved so far, the present crises and big challenges ahead.

On June 15, 1964, when most developing countries had just emerged from colonial rule, the officials of 77 developing countries met and issued a joint statement announcing the birth of the G77, at the first ever meeting of the UN Conference on Trade and Development in Geneva.

In that historic statement, the developing countries pledged to promote equality in the international economic and social order and promote the interests of the developing world, declared their unity under a common interest and defined the Group as “an instrument for enlarging the area of cooperative endeavour in the international field and for securing mutually beneficent relationships with the rest of the world”.

Fifty years later at Santa Cruz, on June 14 and 15, the leaders affirmed that the developing countries need to unite under the G77 even more than before, as the global economy is in turmoil and the world order remains still imbalanced against their interests.

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Sunita Narain

In India, traffic accidents are not on the health agenda. It is time the agenda is changed. Last week when the Union Minister for Rural Development met with an unfortunate and tragic accident on the road in Delhi, the issue was highlighted. But as yet, there is little understanding of the seriousness of the problem, and why India, which has just begun to motorise, needs to take action, and fast.

For me, the news of the minister’s death was particularly distressing. It hit me that seven months ago I was on the same road—South Delhi’s Aurobindo Marg—when my cycle was hit by a reversing car. I was lucky that Good Samaritans picked me up, took me to the same Jai Prakash Narain Apex Trauma Centre at AIIMS where minister Gopinath Munde was taken. The same wonderful group of doctors, who tried their best to resuscitate Munde, worked to repair my hands and nose, and stop internal bleeding. I was fortunate. I survived. But Munde, who had much to do in his life, did not. This waste of human lives because of sheer apathy and negligence should make us angry. It should make us change the way we design our roads, enforce traffic rules and, most importantly, take responsibility for our driving.

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Matías Vernengo

The new edition of the International Labour Organization’s Global Wage Report (2012/13) has been published. The figure below shows the rates of growth in real wages by region.

Note that real wages have basically stagnated in the developed world, and have fallen in the Middle East, while they have grown in the rest of the world. One should take with a grain of salt the incredible increase in Eastern Europe. For example, the graph below, showing Russia’s real wages, gives a more accurate picture.


Real wages are now slightly above the levels associated with the pre-liberalization, and market reform period. In other words, the commodity boom and the Natural Resource Nationalism have allowed a significant recovery in real wages. Not dissimilar to the Latin American story, by the way.

In Asia a lot of the growth in real wages is explained by the vast migration of rural workers to urban areas in China.


Note that without China the rate of growth in real wages has been considerably less impressive. At any rate, as always, the ILO report provides a wealth of data, which is worth to take into consideration.

Originally posted at Naked Keynesianism.

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John Weeks, Guest Blogger

The gathering pressure for Congress to “fast track” the Trans-Pacific Partnership (TPP) demonstrates yet again that trade liberalization is one of the few aspects of economic policy about which there is agreement across the mainstream of the political spectrum, in both the United States and Europe. Almost all conservative commentators endorse it with gusto, for centrists it is an article of faith, and even many progressives accept it implicitly by their criticism of industrial country protection.

The neoliberal ideologues sell it by bestowing the label “free trade,” which is allegedly reached by repeated measures of “trade liberalization.” No matter that the TPP has little to do with trade and everything to do with setting loose capital on a global scale. Well tested and demonstrably disastrous in the North American Free Trade Association, this liberating of capital includes 1) global extension of corporate patents under the moniker “intellectual property rights,” 2) shifting enforcement of those patents from national governments and courts to ad hoc international tribunals, and 3) prohibiting as “protectionist” measures protecting labor rights and the environment.

This is not “freer” trade, but re-regulation of trade to entrench corporate profit making. However, if you call it freer trade, you can sell it to the public. In order to discredit this corporate sales pitch, I have to drive a stake through the heart of the Free Trade dogma that is the ideological justification for neoliberal globalization.

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Sunita Narain

The 2014 general election, it would seem, is becoming a referendum on the so-called Gujarat model and the something-UPA model. In the heat, dust and filth of elections, rhetoric is high, imagery is weak and facts are missing. Very broadly, the Gujarat model is seen to be corporate-friendly, with emphasis on economic growth at any cost and little focus on social indicators of development. The UPA [United Progressive Alliance] model, on the other hand, is seen to promote distributive justice and inclusive growth. And our conclusion could well be that this model does not work because we see little difference—high inflation pinches our purse; poverty and malnutrition persist; and crony capitalism thrives.

In this way, the referendum on May 16, when the counting is done, could well be seen as a go-ahead to rampant growth without a human face. But this, I believe, will be missing the key point.

If there is a referendum, it must be on the lack of delivery of programmes for social justice and inclusive growth. It cannot be a decision against the idea of rights-based development. That would be disastrous for India. So, what we need to do is to think about what went wrong. And the next government’s agenda must be to fix it. Not to throw out the baby with the bathwater.

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This is the second part of a four-part interview with Costas Lapavitsas, author of Financialised Capitalism: Expansion and Crisis (Maia Ediciones, 2009) and Profiting Without Producing: How Finance Exploits Us All (Verso, 2014). This part turns toward international aspects, including the contrasts between financialization in high-income and developing countries and the relationships between financialization and both neoliberalism and globalization. (See the first part here.)

Costas Lapavitsas, Guest Blogger

Part 2

Dollars & Sense: You’ve anticipated our question about whether financialization is exclusive to high-income capitalist countries or is also happening in developing countries. How is it different in developing countries?

CL: Financialization in developing countries is a recent phenomenon, which has begun to emerge in the last 15 years in full earnest. We see a number of middle-income countries that are financializing, and we have to look at it carefully to understand it. One thing that is immediately obvious is that, in mature countries, financialization has been accompanied by weak or indifferent performance of the real economy. Rates of growth have been weak, crises have been frequent, unemployment has been above historical trends. We see a problematic state of real accumulation in mature countries. But when we look at developing countries, it is possible to see countries with phenomenal financialization, where growth has been reasonably strong. Brazil has been financializing during the last ten years, and yet its growth rate has been significant. Turkey has been financializing and yet its growth rate has been significant, and so on. So financialization in developing countries is not the same as in mature countries, because typically in the last ten years, it’s been accompanied by significant rates of growth.

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Jesse Griffiths, Guest Blogger

Jesse Griffiths is Director of the European Network on Debt and Development (Eurodad). He was one of the co-authors, together with Matthew Martin (Development Finance International), Javier Pereira, and Tim Strawson (Development Initiatives) of the European Parliament’s report “Financing for Development Post-2015: Improving the Contribution of Private Finance.”

The European Parliament has just released a major report with a clear message for all those engaged in the growing debate about the role of external private finance in development: quality matters far more than quantity. As the post-2015 debate on financing development continues, and the UN gears up for a major Financing for Development conference in 2015 or 2016, this timely paper – authored by four experts (I was one of the co-authors) gives clear recommendations on how European governments can ensure that fighting poverty stays at the heart of this agenda.

The Current Picture

Firstly, here are the main findings of the report’s review of all available data on global private finance flows:

  • Domestic private investment is significant and growing. Public and private investment, taken together, have grown as a proportion of GDP, from 24.1 % in 2000 to 32.3 % in 2011.
  • Outflows of private financial resources are extremely large. Most are not productive investments in other countries but repayments on loans (over USD 500 billion in 2011), repatriated profits on foreign direct investment (FDI) (USD 420 billion) or illicit financial flows (USD 620 billion).
  • Figures greatly overstate the real net financial private flows to developing countries. Foreign Direct Investment (FDI) is the largest resource flow to developing countries, but outflows of profits made on FDI were equivalent to almost 90% of new FDI in 2011. In addition, FDI includes the reinvestment of earnings from within the ‘destination’ country: not an inflow.

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Argentina’s Economic Policy in a Time of Crisis: Don’t Throw the Baby Out With the Bathwater

Santiago Capraro, Guest Blogger

“Our definition of the concept of “monetary regime” had two parts to it: it is (a) a system of expectations governing the behavior of the public, and (b) a corresponding set of behavior rules for the policy-making authorities that will sustain these expectations.”

- A. Leijonhufvud, “Inflation and Economic Performance,” WP No. 223, UCLA, 1981.

In the first three months of 2014, the Argentine peso suffered a nominal devaluation of 20% (an annual rate of over 60%) and the real interest rate jumped from zero to around 10-15%. Argentina’s government has wanted to stop the fall of the Argentinean Central Bank’s (BCRA) international reserves. The drop in reserves has three origins:

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Erinç Yeldan

The concept of the “middle-income trap” had been brought into fashion by Barry Eichengreen and colleagues (see their recent NBER Working Paper). The concept is used to describe the challenges, for countries with GDP per capita of around $16,000 (at 2005 prices), in achieving productivity growth and key institutional transformations.

Many economists have taken note of the fact that, as economies converge to this middle-income level, “easily-accessible” sources of growth based on the transfer of virtually unlimited supplies of labor from rural agriculture to urban centers and towards capital-investment-led high profit sectors gradually lose their stimulating impact. Technologies grow mature and finally become worn out. After this threshold is reached, sources of growth must be derived from technological and institutional advances and productivity gains, which can only be achieved by investments in human capital, research and development (R&D), and institutional reforms. This, however, is no easy task, and countries often get “trapped” at this stage of development, hence the middle-income trap.

Yet, as such, the middle-income trap is an average concept defined by national boundaries. Recent work reveals, however, that divergences persist, and often times are reinforced, between regions embedded within national economies and even within municipalities. In many instances, poverty-stricken regions co-exist side by side with rich and highly productive regions. The persistent co-existence of such divergent structures leads us to ask whether poverty is in fact being reproduced by the workings of the market mechanism favoring high-income regions. This observation has its roots in a long tradition in development economics of duality and dependency theories.

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Sunita Narain

Australia is a coal country. It is big business—miners are important in politics and black gold exports dominate the country’s finances. But dirty and polluting coal evokes emotions in environmentally concerned people. Coal-based power provides 40 per cent of the world’s electricity and emits one-third of global carbon dioxide, which is pushing the world to climate change.

Given this, on my recent visit to Australia, it was obvious I would be asked about my opinion on Australian coal exports to India. My answer, at the end of a discussion on the environmental challenges the world faces, was that as long as Australia was addicted to coal for energy it would be hypocritical for it to ask countries like India to give up coal. It is also important to note that Australia’s per capita carbon dioxide emissions are the highest—18 tonnes per person per year, compared to India’s 1.5 tonnes per person per year.

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