MONTREAL, Canada, Nov 04 (IPS) – It is no secret that humankind’s past actions have accelerated the deterioration of ecosystems, negatively impacting our economies, societies, health, and cultures. It is estimated that humans have altered over 97% of ecosystems worldwide, to date. One million species are currently threatened with extinction (IPBES).
The writing on the wall is clear. Our planet is in crisis.
Elizabeth Mrema
The sobering reality is that if we continue on our current trajectory, biodiversity and the services it provides will continue to decline, jeopardizing the achievement of the Sustainable Development Goals and our lives as we know them. The decline in biodiversity is expected to further accelerate unless effective action is taken to address the underlying causes of biodiversity loss. These causes are often justified by societal values, norms and behaviors. Some examples include unsustainable production and consumption patterns, human population dynamics and trends, and technological innovation patterns.
With biodiversity declining faster than any other time in human history, our quality of life, our well-being, and our economies are under threat. Over 44 trillion US dollars of assets globally, or over half of the world’s GDP, is at risk from biodiversity loss (WEF). Our economies are embedded in natural systems and depend considerably on the flow of ecosystem goods and services, such as food, other raw materials, pollination, water filtration, and climate regulation. But we still have a chance. We still have a narrow window in which to transform our relationship with biodiversity and create a healthy, profitable, sustainable future. We can still bend the curve of biodiversity loss and leave future generations with prosperity and hope. We can still move to support ecosystem resilience, human well-being, and global prosperity.
This has deemed this the decisive decade. This is because after this decade, once we move past 2030, the damage done to our planet will be beyond repair. That doesn’t give us much time but it does still give us a chance. This December in Montreal, Canada we will get that chance. It is likely our only chance. I can’t emphasize that enough. This December, the Convention on Biological Diversity (CBD) will bring world leaders together to address the biodiversity crisis at the fifteenth Conference of the Parties (COP 15). Truth be told, the outcome of COP 15 will determine the trajectory of humankind on planet Earth.
The ultimate goal of COP 15 is to emerge with a plan, a roadmap to a sustainable future. We call it the post-2020 global biodiversity framework (GBF). The framework is currently being negotiated by Parties under the Convention on Biological Diversity and represents a historic opportunity to accelerate action on biodiversity at all levels. It aims to build on the outcomes of the Strategic Plan for Biodiversity 2011-2020 and its Aichi Biodiversity Targets and achieve the 2050 vision of living in harmony with nature. The draft framework, if adopted and implemented, will put biodiversity on a path to recovery before the end of this decade.
Why is it critical that the GBF is adopted and implemented? Because 90% of seabirds have plastic in their stomachs (WWF UK). Because we have lost half of the world’s corals and lose forest areas the size of 27 football fields every minute (WWF LPR). Because an estimated 4 billion people rely primarily on natural medicines for their health care and some 70 per cent of drugs used for cancer are natural or are synthetic products inspired by nature (IPBES). Because Ecosystem-based approaches (biodiversity) can provide up to 30% of the climate mitigation needed by 2030. Because monitored wildlife populations, including mammals, birds, amphibians, reptiles and fish, have seen a devastating 69% drop on average since 1970 (WWF LPR). I could go on and on.
Some key targets within the draft framework include:
Ensuring that at least 30 per cent globally of land areas and of sea areas are protected.
Preventing or reducing the rate of introduction and establishment of invasive alien species by 50%.
Reducing nutrients lost to the environment by at least half, pesticides by at least two thirds, and eliminate discharge of plastic waste.
Using ecosystem-based approaches to contribute to mitigation and adaptation to climate change and ensuring that all climate efforts avoid negative impacts on biodiversity.
Redirecting, repurposing, reforming or eliminating incentives harmful for biodiversity in a just and equitable way, reducing them by at least $500 billion per year.
Increasing financial resources from all sources to at least US$ 200 billion per year, including new, additional and effective financial resources, increasing by at least US$ 10 billion per year international financial flows to developing countries.
The post-2020 global biodiversity framework is not just important, it is critical. It will take a whole-of-society and whole-of-government approach and it will take hard work and commitment; but we can do it. We need to act now to bend the curve to halt and reverse biodiversity loss. COP 15 will be a the most crucial and decisive step towards a better and more sustainable future for generations to come. This is our chance. It’s time to decide on a future.
Elizabeth Maruma Mrema, a national of the United Republic of Tanzania, is the Executive Secretary of the United Nations Convention on Biological Diversity
ROME, Nov 03 (IPS) – When it comes to moral endorsements, having the Vatican’s backing takes some beating. So the international campaign for a legally binding Fossil Fuel Non-Proliferation Treaty took a huge step forward in July when Cardinal Michael Czerny, the prefect of the Dicastery for Promoting Integral Human Development, gave it his total support.
“The planet already is 1.2°C hotter (with respect to pre-industrial levels), yet new fossil fuel projects every day accelerate our race towards the precipice,” the Czech-Canadian prelate said.
“Enough is enough. All new exploration and production of coal, oil, and gas must immediately end, and existing production of fossil fuels must be urgently phased out.
“This must be a just transition for impacted workers into environmentally sound alternatives. The proposed Fossil Fuel Nonproliferation Treaty holds great promise to complement and enhance the Paris Agreement”.
The name of the proposed treaty has a familiar ring as it is inspired by the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) that came into force in 1970 and successfully helped reduce the threat of nuclear war.
The supporters of the proposed treaty say that, like atomic bombs, fossil fuels pose an existential threat to humankind as they are the main cause of the greenhouse gas emissions that are driving the climate crisis.
“Fossil fuels have been equated as weapons of mass destruction because of the way they threaten our ability to protect livelihoods, security, and the planet,” Rebecca Byrnes, the Deputy Director of the Fossil Fuel Treaty Initiative, told IPS.
“Fossil fuels are responsible for 86% of carbon emissions in the past decade. So despite our efforts over the last 30 years, emissions have continued to increase, and this hasn’t changed since the Paris Agreement was signed seven years ago”.
Under the Paris Agreement, the international community agreed to cut greenhouse gas emissions to a degree necessary to try to limit global temperature rises to 1.5C, and, failing that, to keep them “well below” 2C above pre-industrial levels.
But Byrnes said that, as things currently stand, governments plan to produce more than double the amount of fossil fuels consistent with limiting global temperature rises to within a 1.5-degree trajectory by 2030, and 10% more than their own climate pledges.
So, she argued that a separate treaty specifically dealing with fossil fuels is needed to stop States from making empty pledges on climate policy.
“We need both domestic action and international cooperation to explicitly stop the expansion of fossil fuel production and therefore emissions,” she said.
“Only addressing half of the equation has allowed countries and companies to claim climate leadership while also supporting new coal, oil and gas extraction projects, directly or indirectly.
“In countries that are particularly dependent on fossil fuel profits for government revenue and economic development, fossil fuel supply is now a driver of demand.
“It will not be possible to reduce demand for, and therefore emissions from, fossil fuels without first breaking this fossil-fuel lock-in through phase-out, economic diversification measures and finding new development opportunities.
“A Fossil Fuel Non-Proliferation Treaty will complement and implement the Paris Agreement by directly addressing the supply side of the equation and providing support to fossil-fuel-dependent developing countries to make this transition”.
One of the positive aspects of the treaty would be that it would help put an end to the perverse situation in which States are sometimes forced to pay compensation to polluters when they put a halt to fossil-fuel projects because of the protection that corporations enjoy under legal mechanisms such as the Energy Charter Treaty.
“A Fossil Fuel Non-Proliferation Treaty will mitigate the risk of legal liability faced by country governments in both national courts and international tribunals, by providing legal justification for phase-out policies,” Byrnes said.
Critics have suggested the plan is simply too ambitious to ever come to fruition.
“Some of the criticism we get on the idea of the treaty is that it’s unfeasible and that we don’t have time to negotiate something like this,” said Byrnes.
“The same was erroneously said about weapons treaties.
“But we don’t have time for more of the same. We know it’s unlikely that oil-producing countries will enthusiastically embrace a Fossil Fuel Non-Proliferation Treaty and the fossil fuel industry has huge influence.
“But so did the tobacco industry at one point before the formation of the WHO Framework Convention on Tobacco Control.
“Just creating the concept of a treaty is already sparking new ambition and new conversations”.
Indeed, the treaty campaign is on a roll.
It has the support of over 100 Nobel Laureates, including the Dalai Lama, and dozens of the world’s biggest cities, such as London, Barcelona, Paris, Montreal, Lima, Buenos Aires and Los Angeles.
“The modern addiction to fossil fuels is not just an act of environmental vandalism. From the health perspective, it is an act of self-sabotage,” said WHO Director-General Dr Tedros Adhanom Ghebreyesus.
Vanuatu became the first nation-state to call for a fossil fuel treaty in the speech made by President Nikenike Vurobaravu at this year’s United Nations General Assembly.
“The world has seen treaties deliver when the world has needed to manage, restrict and phase out dangerous products, including weapons of mass destruction, ozone depleting substances and tobacco,” concluded Byrnes .
“Today, we see oil and gas are fuelling war in Ukraine and elsewhere, and are a paramount danger that demands of us and world governments to rally behind a Fossil Fuel Non-Proliferation Treaty”.
It is possible to endorse the call for a Fossil Fuel Non-Proliferation Treaty via the campaign’s website.
Furthermore, the Parents For Future Global network of climate parent groups has launched a letter that people can sign online to express their support.
There are over 8,500 coal power plants in the world, with over 2,100 GWs of capacity. These plants generate about 10 gigatons of CO2 emissions per year, nearly 30% of the global total. Credit: Bigstock
Opinion by Philippe Benoit, Chandra Shekhar Sinha (washington dc)
Inter Press Service
WASHINGTON DC, Nov 02 (IPS) – Report after report highlights that we can only achieve the greenhouse gas (GHG) emission reductions required by the climate goals of the Paris Agreement if much of the existing coal power generation capacity is retired early. To this end, one concept that deserves greater consideration is conducting an auction for early retirement of coal power plants worldwide: a global coal retirement auction. This article sets out the broad outlines of how this global auction might operate.
Accordingly, climate/development organizations, like the Asian Development Bank (ADB), the World Bank, the IEA and RMI, are exploring programs to effect the early retirement of these coal plants.
But closing these plants presents two important challenges. First, retiring these plants removes electricity production that many countries rely upon for their economic development … production that would need to be replaced with preferably low-carbon sources. Second, owners are generally unwilling to shutter revenue-generating plants and want financial compensation for the returns they would forego from the premature retirement of their asset. This article addresses this second constraint.
There are various regulatory mechanisms that can be used to push early retirement, such as mandating closure of plants or imposing a carbon tax or other cost that makes operating the plant uneconomic.
But what’s a fair price? Perhaps, however, that’s not the right question. Rather, at what price are the owners willing to shutter their plants? Given that there are more than 8,500 coal power plants operating with different technical and revenue characteristics, and over 2,000 plant owners in diverse financial situations following distinctive corporate strategies (including numerous state-owned enterprises), the answer will vary.
A technique that has been used in this type of context of multiple actors is an “auction”. While in the traditional context, a seller looks to get the highest price from multiple possible buyers through an auction, in this case, we have a buyer that is interested in paying the lowest price to different plant owners (i.e., the sellers) for the retirement of their coal plants.
The reverse auction mechanism could be used to solicit proposals from coal power plant owners as to the price at which they would be willing to close their plant. Conceptually, this could be done on the basis of MWs of installed power generation capacity. Under the auction, an interested coal plant owner would offer to sell — more specifically, to shutter — their MWs of plant capacity by a fixed time at a proposed price.
Importantly, the climate benefit sought by the auction is not from the decommissioning of MWs of capacity itself, but rather from the GHG emissions that would be avoided by retiring that capacity. Accordingly, for any coal retirement tender, it will be necessary to estimate the level of emissions that would be avoided.
This determination will be based on several factors, including the particular plant’s efficiency, remaining operational life and other technical characteristics, the type of coal used, and the amount of electricity production projected to be foregone through early retirement given the power system’s expected demand for electricity from that plant.
Tenders should include sufficient information to evaluate these items and, by extension, the level of avoided emissions and related climate benefit to be produced from the proposed retirement. This, in turn, will drive how much the auction buyer should be willing to pay for the tender.
Moreover, because it would be largely counter-productive from a climate perspective to pay to retire existing coal plants to see that money used directly (or indirectly) to build new fossil fuel generation, the tender by the plant owner would need to be accompanied by an undertaking not to reinvest in new fossil fuel generation.
As has been repeatedly explained, CO2 emissions have a global impact that is essentially unaffected by the geographic location of the emitting plant. Given this global nature of emissions, the auction would likewise be conducted at a worldwide level as a global auction. From India to Indonesia, from South Africa to South Korea, from Poland to Australia, any plant anywhere would be eligible to participate in the global auction.
Given this scope, an international organization like the United Nations or a multilateral development bank would be well positioned to provide the platform for this auction. One could imagine a system where the auction bidding process sets out eligibility criteria for projects, the methodology for estimating GHG emission reductions, and other key bid-submission parameters.
Significantly, while the bidding process would be managed on an integrated basis, the funding and selection of winners need not be. Rather, a system that allows for the matching of interested coal retirement buyers with individual plant owners could be used.
For example, buyers and their funding could be mobilized on a plant-by-plant basis based on information submitted by the plant owner through the auction process. Indeed, many potential funders have areas of focus that could lead them to be attracted to retiring coal assets only in certain countries (e.g., funders interested in a targeted set of developing countries). The proposed auction structure could accommodate these preferences. Moreover, the global auction could also operate in association with country-specific approaches.
One potential source of funding for coal retirements tendered under the auction is the potentially large amounts of capital to be mobilized through expanded carbon credit mechanisms under development. Tapping into these mechanisms might require establishing defined project eligibility criteria, frameworks for calculating GHG emissions reductions, and associated monitoring and verification systems to enable payments for emission reductions at the time of decommissioning based on a price for emission reduction (“carbon”) credits.
It is also important to recall the first constraint noted earlier, namely that countries, and particularly developing countries, will need more electricity to power further economic and social development. Accordingly, any global auction to retire coal plants needs to be coupled with a program to fund new renewables electricity generation.
Climate change is a global challenge affected by GHG emissions from anywhere. We need to reduce emissions from coal power generation and that requires some program to encourage and entice owners to shutter their plants. A global auction, conducted by the United Nations or a similar international organization, would help to identify opportunities where willing plant owners and interested funders can make a deal.
Philippe Benoit has over 20 years working on international energy, finance and development issues, including management positions at the World Bank and the International Energy Agency. He is currently research director at Global Infrastructure Analytics and Sustainability 2050.
Chandra Shekhar Sinha is an Adviser in the Climate Change Group at the World Bank and works on climate and carbon finance. He previously worked at JPMorgan, TERI-India, UNDP, and the Kennedy School of Government at Harvard University.
View of the bulk fuel plant in Dhahran, Saudi Arabia. Because the kingdom needs oil prices to remain high to balance its budget, it pushed OPEC and its allies to decide on a production cut as of Nov. 1. CREDIT: Aramco
by Humberto Marquez (caracas)
Inter Press Service
CARACAS, Nov 01 (IPS) – The decision to cut oil production by the Organization of Petroleum Exporting Countries (OPEC) and its allies as of Nov. 1 comes in response to the need to face a shrinking market, although it also forms part of the current clash between Russia and the West.
The OPEC+ alliance (the 13 members of the organization and 10 allied exporters) decided to remove two million barrels per day from the market, in a world that consumes 100 million barrels per day. The decision was driven by the two largest producers, Saudi Arabia – OPEC’s de facto leader – and Russia.
The cutback “is due to economic reasons, because Saudi Arabia depends on relatively high oil prices to keep its budget balanced, so it is important for Riyadh that the price of the barrel does not fall below 80 dollars,” Daniela Stevens, director of energy at the Inter-American Dialogue think tank, told IPS.
The benchmark prices at the end of October were 94.14 dollars per barrel for Brent North Sea crude in the London market and 88.38 dollars for West Texas Intermediate in New York.
“At the time of the cutback decision (Oct. 5) oil prices had fallen 40 percent since March, and the OPEC+ countries feared that the projected slowdown in the global economy – and with it demand for oil – would drastically reduce their revenues,” Stevens said.
With the cut, “OPEC+ hopes to keep Brent prices above 90 dollars per barrel,” which remains to be seen “since due to the lack of investment the real cuts will be between 0.6 and 1.1 million barrels per day and not the more striking two million,” added Stevens from her institution’s headquarters in Washington.
A month ago, the alliance set a joint production ceiling of 43.85 million barrels per day, not including Venezuela, Iran and Libya (OPEC partners exempted due to their respective crises), which would allow them to deliver 48.23 million barrels per day to the market.
But market operators estimate that they are currently producing between 3.5 and five million barrels per day below the maximum level considered.
The alliance is made up of the 13 OPEC partners: Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela, plus Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan.
The giants of the alliance are Saudi Arabia and Russia, which produce 11 million barrels per day each, followed at a distance by Iraq (4.65 million), United Arab Emirates (3.18), Kuwait (2.80) and Iran (2.56 million).
In July, U.S. President Joe Biden met with Saudi Crown Prince Mohammed bin Salman, with whom he discussed human rights and abundant oil supplies for the global market. A few months later Riyadh led the decision for an oil cut that has been seen as a betrayal by Washington. CREDIT: Bandar Algaloud/SRP
United States takes the hit
U.S. President Joe Biden was “disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine,” a White House statement said.
The price of gasoline in the United States has soared from 2.40 dollars a gallon in early 2021 to the current average of 3.83 dollars – after peaking at five dollars in June – a heavy burden for Biden and his Democratic Party in the face of the Nov. 8 mid-term elections for Congress.
Biden visited Saudi Arabia in July, while the press reminded the public that during his 2020 election campaign he talked about making the Arab country “a pariah” because of its leaders’ responsibility for the October 2018 murder in Istanbul of prominent opposition journalist in exile Jamal Khashoggi.
The U.S. president said he made clear to the powerful Saudi Crown Prince Mohammed bin Salman his conviction that he was responsible for the crime. But the thrust of his visit was to urge the kingdom to keep the taps wide open to contain crude oil and gasoline prices.
Hence the U.S. disappointment with the production cut promoted by Riyadh – double the million barrels per day predicted by market analysts – which, by propping up prices, favors Russia’s revenues, which has had to place in Asia, at a discount, the oil that Europe is no longer buying from it.
Biden then announced the release of 15 million barrels of oil from the U.S. strategic reserve – which totaled more than 600 million barrels in 2021 and just 405 million this October – completing the release of 180 million barrels authorized by Biden in March, following the Russian invasion of Ukraine, that was initially supposed to occur over six months.
Saudi Crown Prince Mohammed bin Salman and President Vladimir Putin chat cordially during a visit by the Russian leader to Riyadh in October 2019. The two major oil exporters lead the 23-state alliance that upholds production cuts to prop up prices. CREDIT: SPA
Shift in Washington-Riyadh relations
Karen Young, a senior research scholar at the Center on Global Energy Policy at Columbia University in New York, wrote that “oil politics are entering a new phase as the U.S.-Saudi relationship descends.”
“Both countries are now directly involved in each other’s domestic politics, which has not been the case in most of the 80-year bilateral relationship,” she wrote.
“….(M)arkets had anticipated a cut of about half that much. Whether the decision to announce a larger cut was hasty or politically motivated by Saudi political leadership (rather than technical advice) is not clear,” she added.
Saudi leaders could apparently see Biden as pandering to Iran, its archenemy in the Gulf area, with positions adverse to Riyadh’s in the conflict in neighboring Yemen, and would resent the accusation against the crown prince for the murder of Khashoggi.
Young argued that “the accusation that Saudi Arabia has weaponized oil to aid Russian President Vladimir Putin is extreme,” and said “The Saudi leadership may assume that keeping Putin in the OPEC+ tent is more valuable than trying to influence oil markets without him.”
Gasoline prices in the United States, while down from their June level of five dollars per gallon, are still at a high level for many consumers ahead of the upcoming midterm elections. CREDIT: Humberto Márquez/IPS
More market, less war
OPEC’s secretary general since August, Haitham Al Ghais of Kuwait, said on Oct. 7 that “Russia’s membership in OPEC+ is vital for the success of the agreement…Russia is a big, main and highly influential player in the world energy map.”
Writing for the specialized financial magazine Barron’s, Young stated that “What is certainly true is that energy markets are now highly politicized.”
“The United States is now an advocate of market manipulation, asking for favors from the world’s essential swing producer, advocating price caps on Russian crude exports and embargoes in Europe,” Young wrote.
For its part, the Saudi Foreign Ministry rejected as “not based on facts” the criticism of the OPEC+ decision, and said that Washington’s request to delay the cut by one month (until after the November elections, as the Biden administration supposedly requested) “would have had negative economic consequences.”
In its most recent monthly market analysis, OPEC noted that “The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues.”
It also mentioned geopolitical risks and the resurgence of China’s COVID-19 containment measures.
The two million barrel cut was decided “In light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market,” said the OPEC+ alliance’s statement following its Oct. 5 meeting.
Oil analyst Elie Habalian, who was Venezuela’s governor to OPEC, also opined that “notwithstanding Mohammed bin Salman’s sympathy for Putin, the cut was due to his concern about the balance of the world oil market, and not to support Russia.”
Latin America, pros and cons
Stevens said the oil outlook that opens up this November will mean, for importers in the region, that their fuels will be more expensive but probably not by a significant amount, and net importers in Central America and the Caribbean will be the hardest hit.
Exporters will benefit from higher prices. Brazil and Mexico have already increased their exports of fuel oil, and Argentina and Colombia have hiked their exports of crude oil. And higher prices would particularly benefit Brazil and Guyana, which are boosting their production capacity.
Argentina could have benefited if it had begun to invest in production years ago, but its financial instability left it with little capacity to take advantage of this moment. And Venezuela not only faces sanctions, but upgrading its worn-out oil infrastructure would require investments and time that it does not have.
Opinion by Jomo Kwame Sundaram, Anis Chowdhury (sydney and dakar)
Inter Press Service
SYDNEY and DAKAR, Nov 01 (IPS) – Developing countries have long been told to avoid borrowing from central banks (CBs) to finance government spending. Many have even legislated against CB financing of fiscal expenditure.
Central bank fiscal financing
Such laws are supposedly needed to curb inflation – below 5%, if not 2% – to accelerate growth. These arrangements have also constrained a potential CB developmental role and government ability to respond better to crises.
Anis ChowdhuryImproved monetary-fiscal policy coordination is also needed to achieve desired structural transformation, especially in decarbonizing economies. But too many developing countries have tied their own hands with restrictive legislation.
A few have pragmatically suspended or otherwise circumvented such self-imposed prohibitions. This allowed them to borrow from CBs to finance pandemic relief and recovery packages.
Such recent changes have re-opened debates over the urgent need for counter-cyclical and developmental fiscal-monetary policy coordination.
Monetary financing rubbished
But financial interests claim this enables national CBs to finance government deficits, i.e., monetary financing (MF). MF is often blamed for enabling public debt, balance of payments deficits, and runaway inflation.
As William Easterly noted, “Fiscal deficits received much of the blame for the assorted economic ills that beset developing countries in the 1980s: over indebtedness and the debt crisis, high inflation, and poor investment performance and growth”.
Hence, calls for MF are typically met with scepticism, if not outright opposition. MF undermines central bank independence (CBI) – hence, the strict segregation of monetary from fiscal authorities – supposedly needed to prevent runaway inflation.
Jomo Kwame SundaramRecent International Monetary Fund (IMF) research insists MF “involves considerable risks”. But it acknowledges MF to cope with the pandemic did not jeopardize price stability. A Bank of International Settlements paper also found MF enabled developing countries to respond countercyclically to the pandemic.
Cases of MF leading to runaway inflation have been very exceptional, e.g., Bolivia in the 1980s or Zimbabwe in 2007-08. These were often associated with the breakdown of political and economic systems, as when the Soviet Union collapsed.
Bolivia suffered major external shocks. These included Volcker’s interest rate spikes in the early 1980s, much reduced access to international capital markets, and commodity price collapses. Political and economic conflicts in Bolivian society hardly helped.
Similarly, Zimbabwe’s hyperinflation was partly due to conflicts over land rights, worsened by government mismanagement of the economy and British-led Western efforts to undermine the Mugabe government.
Indian lessons
Former Reserve Bank of India Governor Y.V. Reddy noted fiscal-monetary coordination had “provided funds for development of industry, agriculture, housing, etc. through development financial institutions” besides enabling borrowing by state owned enterprises (SOEs) in the early decades.
For him, less satisfactory outcomes – e.g., continued “macro imbalances” and “automatic monetization of deficits” – were not due to “fiscal activism per se but the soft-budget constraint” of SOEs, and “persistent inadequate returns” on public investments.
Monetary policy is constrained by large and persistent fiscal deficits. For Reddy, “undoubtedly the nature of interaction between depends on country-specific situation”.
Reddy urged addressing monetary-fiscal policy coordination issues within a broad common macroeconomic framework. Several lessons can be drawn from Indian experience.
First, “there is no ideal level of fiscal deficit, and critical factors are: How is it financed and what is it used for?” There is no alternative to SOE efficiency and public investment project financial viability.
Second, “the management of public debt, in countries like India, plays a critical role in development of domestic financial markets and thus on conduct of monetary policy, especially for effective transmission”.
Third, “harmonious implementation of policies may require that one policy is not unduly burdening the other for too long”.
Lessons from China?Zhou Xiaochuan, then People’s Bank of China (PBoC) Governor, emphasized CBs’ multiple responsibilities – including financial sector development and stability – in transition and developing economies.
China’s CB head noted, “monetary policy will undoubtedly be affected by balance of international payments and capital flows”. Hence, “macro-prudential and financial regulation are sensitive mandates” for CBs.
PBoC objectives – long mandated by the Chinese government – include maintaining price stability, boosting economic growth, promoting employment, and addressing balance of payments problems.
Multiple objectives have required more coordination and joint efforts with other government agencies and regulators. Therefore, “the PBoC … works closely with other government agencies”.
Zhou acknowledged, “striking the right balance between multiple objectives and the effectiveness of monetary policy is tricky”. By maintaining close ties with the government, the PBoC has facilitated needed reforms.
He also emphasized the need for policy flexibility as appropriate. “If the central bank only emphasized keeping inflation low and did not tolerate price changes during price reforms, it could have blocked the overall reform and transition”.
During the pandemic, the PBoC developed “structural monetary” policy tools, targeted to help Covid-hit sectors. Structural tools helped keep inter-bank liquidity ample, and supportive of credit growth.
More importantly, its targeted monetary policy tools were increasingly aligned with the government’s long-term strategic goals. These include supporting desired investments, e.g., in renewable energy, while preventing asset price bubbles and ‘overheating’.
In other words, the PBoC coordinates monetary policy with fiscal and industrial policies to achieve desired stable growth, thus boosting market confidence. As a result, inflation in China has remained subdued.
Needed reforms
Effective fiscal-monetary policy coordination needs appropriate arrangements. An IMF working paper showed, “neither legal independence of central bank nor a balanced budget clause or a rule-based monetary policy framework … are enough to ensure effective monetary and fiscal policy coordination”.
Appropriate institutional and operational arrangements will depend on country-specific circumstances, e.g., level of development and depth of the financial sector, as noted by both Reddy and Zhou.
When the financial sector is shallow and countries need dynamic structural transformation, setting up independent fiscal and monetary authorities is likely to hinder, not improve stability and sustainable development.
Understanding each other’s objectives and operational procedures is crucial for setting up effective coordination mechanisms – at both policy formulation and implementation levels. Such an approach should better achieve the coordination and complementarity needed to mutually reinforce fiscal and monetary policies.
Coherent macroeconomic policies must support needed structural transformation. Without effective coordination between macroeconomic policies and sectoral strategies, MF may worsen payments imbalances and inflation. Macro-prudential regulations should also avoid adverse MF impacts on exchange rates and capital flows.
Poorly accountable governments often take advantage of real, exaggerated and imagined crises to pursue macroeconomic policies for regime survival, and to benefit cronies and financial supporters.
Undoubtedly, much better governance, transparency and accountability are needed to minimize both immediate and longer-term harm due to ‘leakages’ and abuses associated with increased government borrowing and spending.
Citizens and their political representatives must develop more effective means for ‘disciplining’ policy making and implementation. This is needed to ensure public support to create fiscal space for responsible counter-cyclical and development spending.
DHAKA, Bangladesh, Oct 31 (IPS) – The digital transformation of thousands of community health workers in Bangladesh has dramatically enhanced their work, while enabling the creation and tracking of a healthcare database covering 64 million people. The resulting model holds remarkable promise for the health of the world, especially in the context of evolving pandemics.
Amid the COVID-19 pandemic, BRAC digitalised the work of our 4,100 shasthya kormi, specially trained community health workers, in Bangladesh. Shasthya kormi are women experienced in health education, antenatal and postnatal checkups, non-communicable disease prevention, reproductive health and nutrition. The digital transformation of their work created benefits on a remarkable number of levels, underscored the vast potential for further scaling, and yielded insights directly relevant to increasing the quality of healthcare globally.
Each shasthya kormi was given an Android tablet and trained in its use. That enabled immediate time saving in myriad ways: faster and more accurate record-keeping; reports conveyed online rather than in person; training conducted online and at convenient times rather than only at designated times in person; and related administrative travel and costs avoided. The time saved can exceed a full day every two weeks. The digital devices also enabled us to save approximately USD3.8 million per year in monitoring costs.
But that is just the beginning of the benefits. The digital tablets enhance the prestige of shasthya kormi, as they now have access to vital information at their fingertips. They can screen for diseases and conditions, confirm diagnoses, have complete confidence in describing required treatment and management, and arrange video chats with doctors and specialists. Their decision-making is quicker and more accurate, improving their quality of care and giving them more time to spend with patients.
Electronic reporting enabled the creation of a database that we expect will grow to cover 76 million people. That database can now be tracked and analysed for trends – in the incidence of disease or other conditions, in the delivery of services, and in outcomes. Those trends can be analysed and addressed in real time – locally and nationally, as BRAC’s shasthya kormi cover 61 of Bangladesh’s 64 districts.
For COVID-19, for instance, reports of symptoms and test results can be tracked, as can vaccinations and outcomes. Recognizing the incidence of positive test results in Bangladesh’s border regions is especially valuable to understanding how trends evolve across regions.
For tuberculosis, 1.4 million samples have been collected and tracked. Similarly, non-communicable diseases like hypertension and diabetes, for both of which the incidences are rising in Bangladesh, can be tracked and addressed. If anyone has high blood pressure, a shasthya kormi can precisely record it. A blood glucose test administered by a shasthya kormi can detect abnormal blood sugar levels indicating possible diabetes. The database can track the percentage of pregnant women who are at high risk.
The overall database – with its 150 data points so far – also enables cross-tabulation of facility-specific and community-specific data. It makes it possible to merge BRAC’s trend analyses with data from government and other institutions. It responds to internal migration, with each individual’s medical records linked to their government-issued national identification card – so each person’s health record moves with them.
When these benefits are combined with the cost-effective nature of this digital approach, the potential for scaling increases dramatically. Each digital tablet costs about $100, so 4,100 shasthya kormi can be equipped for less than half a million dollars. In addition, they save money through the efficiencies described above. Patients also save – out-of-pocket expenditure makes up 63% of medical expenses in Bangladesh, and tests conducted by shasthya kormi often cost one tenth what they would in a private clinic. This in turn also takes pressure off health facilities.
The initiative has enormous potential to scale further – within Bangladesh and around the world. Shasthya kormi can be recruited locally and trained in a matter of weeks. They can be equipped digitally without great expense. The quality of their work can be monitored digitally, and everyone benefits from the enhanced access to health care that results.
Key to scaling are several insights that emerged as we orchestrated this digital transformation.
First, it was critical to track data input closely from the start, to identify anyone struggling with the transformation. One of the first clues was a lot of data being entered after 5:00 pm. It was not because people did not know how to enter it, but because they were nervous about using the devices in public, and did not want to make errors in front of the people who trust them.
Once we saw this in the data and figured out the reason behind it, we could easily work with each person to overcome it. Early on, we created a team of 40 technical officers who provided additional training and support for anyone struggling. The help was provided in some cases over the phone, but otherwise in person. Initially most people needed it, but now only about 10% of people need assistance.
Second, the digital tablets enabled constant, on-demand professional development. Needs, equipment and trends change regularly in the health sector, and these changes can occur rapidly. Shasthya kormi could assess their skills at any time convenient to them using tests available on the tablet, and the module would identify weaknesses and suggest further training to address it. Managers could also track their supervisee’s progress. This enhanced the expertise of the network broadly.
Third, we observed a tendency to skip entering critical but more difficult to obtain inputs, like National Identity numbers and birth registration numbers. Fortunately, we can often fill gaps by cross-tabulating with our mobile-based cash transfer system. We also noticed that counselling information was not recorded as seriously as service data. Iterative training has gradually solved these challenges.
Fourth, the digital transformation addressed a decades-old challenge – prestige. Shasthya kormi are often taken for granted, and they are sometimes welcomed, sometimes not. In order to establish the rapport they need to do their work, however, which is often of a sensitive nature, particularly in conservative communities, it is crucial that they are accepted into every household. Digitalisation has elevated the level of respect they receive in the community, particularly among men.
The success of this digital transformation, if scaled, could change community health globally. The result would be superior primary health care service delivery, operational efficiency and establishment of an infrastructure for real time health trend analysis, in a time when we have never struggled more with quality and accessibility of health care around the world.
Morseda Chowdhury is Director of the Health, Nutrition, and Population Programme at BRAC in Bangladesh.
STOCKHOLM, Oct 26 (IPS) – In his treatise On War, the Prussian general Carl von Clausewitz (1780–1831) stated that war is “merely a continuation of policy with other means”. With his experience from the Napoleonic Wars von Clausewitz knew that totalitarian regimes could end up conducting huge and ruthless military campaigns. Furthermore, he assumed that to win a war it is necessary to mobilize and indoctrinate the inhabitants of an entire nation. Such an endeavour is called total war, a term that actually can be applied to Putin’s war in Ukraine.
Putin came to power during the turbulent times following the collapse of the Soviet Empire. His image as a forceful personality convinced many that Putin could make Russia “safe for democracy and business”. In June 2000, Bill Clinton proclaimed that Putin was “fully capable of building a prosperous, strong Russia, while preserving freedom and pluralism and the rule of law.”
Soon business flourished, satisfying foreign investors eager to enjoy Russia’s vast deposits of natural riches. At the same time, fear of terrorism was boosted by explosions in heavily populated residential areas. Putin’s answer to these assumed terrorist threats was in accordance with von Clausewitz´s advice to use “force unsparingly, without reference to the quantity of bloodshed.” The pursuing escalation of the war in Chechnya, pinpointed as the origin of terrorism in Russia, made Putin a nationalist hero, while his characteristics as teetotaler, capable administrator, quick learner and talented actor made him assume the role of a Hollywood-inspired saviour/hero. He single-highhandedly flew planes and rode bare-chested through the wilderness surrounding Siberian rivers. Media lionised him as a rough and strong judo/black-belt champion capable of leading an entire, long suffering nation onto a straight path to prosperity.
Some worrisome signs were nevertheless written on the wall. In 2004, Putin declared the collapse of the Soviet Union as” the greatest geopolitical catastrophe of the twentieth century.” Meanwhile, his acolytes were amassing the spoils from the collapsed Soviet Empire. Putin supported and protected those oligarchs who backed him, while bankrolling his inner circle.
In Munich 2007, Putin bared his teeth and claws in a speech given at an international Security Conference. He declared that the US was a predatory nation prone to apply an ”almost unconstrained hyper-use of force – military force – in international relations plunging the world into an abyss of conflicts.” This revelation was in 2008 followed by Russia´s military assault on neighbouring Georgia.
General elections were rigged, while some political opponents ended up dead, like Boris Nemtsov, who in 2015 was killed on a bridge close to the Kremlin. Alex Navalny, Putin’s most prominent and fearless opponent, was arrested and imprisoned for thirteen years. Out of jail, he was in 2020 poisoned on a flight to Siberia. Close to dying, he was brought to Germany for expert treatment. After recovering, Navalny went back to Russia, where he was immediately put on trial and imprisoned.
Non-compliant oligarchs were and are routinely harassed. First to be rounded up were those who controlled independent media, like Vladimir Gusinsky and Boris Berezovsky. Both fled the country. In 2013, Berezovsky died ”in suspicious circumstances”. Another oligarch, Mikhail Khodorkovsky, who had funded independent media, was already in October 2003 arrested on board his private jet and imprisoned for ten years.
Putin can now unopposed claim that the belligerent attack on Ukraine was necessary for protecting the Motherland. Subdued Russian media affirm that ruthless Ukrainian leaders have transformed their nation into a pawn in the cynical game of a Superpower intending to subjugate, or even annihilate, the Russian Federation.
It appears as if Putin is not only dedicated to make “Russia great again”. Another goal of his seems to be to enrich himself and his cronies. As a means to cover up his greed, Putin poses as upholder of “strict” morals, based on “pro-life” and traditional “family” values, as well as heroic patriotism and religious fundamentalism. Twenty years after coming to power Putin could declare: “The liberal idea has become obsolete. Liberals cannot simply dictate anything to anyone just like they have been attempting to do over recent decades.”
In spite of the Ukrainian war and his disrespect for human rights, Putin remains an icon for right-wing nationalists. A symbol of defiance to Western Liberal Establishment’s alleged encouragement of mass immigration and affinity to ”multiculturalism”, conceived as attempts to undermine morals and national identities.
As a counterweight to such assumed measures, backward looking politicians around the world pay homage to nostalgic notions, like a lost Great Chinese Tradition, a Russian Empire, Hindu pride before the arrival of Islam, a Global Britain, the Ottoman Empire, etc. This trend is occasionally joined with a global system where ruling elites consider themselves to be unrestrained by international norms, traditional modes of state governance, and democratic decision processes. Some world leaders try to pull the wool over the eyes of their followers by packaging their intents within populist opinions, like despise for political correctness, globalism, investigative journalism, LBTQ rights, feminism and environmental NGOs. A dangerous trend that, if unchecked, might as in the case of Putin´s Russia lead to socioeconomic conflicts degenerating into total war.
In the US, a strengthened adherence to illiberalism was fostered by Donald Trump. Under his watch US politics began to shift from rule-based order to one where might and wealth make right, a message boosted by media like Fox – and Breitbart News. Trump behaved like a wannabe despot, trying to apply authoritarian tactics at home, while paying homage to thugs and dictators abroad. Before him, US presidents had pledged their adherence to human rights, democracy, and freedom of speech. Nevertheless, their governments occasionally supported despots and dictators, not linking concerns for human rights to security, economy and financial affairs. A Realpolitik, which to “friendly” despots indicated that the US did not care so much about repression and corruption within the fiefdoms of their friends. Such behaviour was based on strategic reasons, while Donald Trump appeared to embrace authoritarians because he actually admired them – Dutete, Xi Jinping, Orbán, Erdo?an, Kim Jung-un, and not the least, Putin.
The former US president´s homage to ideas similar to those of Putin and his pose as a nationalistic superman might be connected with his obvious narcissism and appeal to nationalistic extremists. However, his senseless bragging is also combined with greed. A wealth of investigating reporting has demonstrated links between organized crime and corrupt rulers/oligarchs with the Trump Organization’s overseas business connections.
Money is also part of Russian foreign relations. Populist, chauvinistic parties like Italian Lega Nord (currently known as the Lega) and the French Front National (currently Rassemblement National) have received intellectual and economic support from Russia. This support to European political parties may be considered as a Russian effort to secure support for Putin’s policies abroad, as well as locally.
Germany’s former chancellor, Angela Merkel, a fluent Russian speaker far from being a friend of Putin, dismissed him as a leader using nineteenth-century means to solve twenty-first century problems. For sure, Putin’s attack on Ukraine mirrors age-old use of devastating warfare as a radical solution to complicated sociopolitical problems. It seems to be a stalwart application of the two-hundred-years-old advice provided by von Clausewitz:
Philanthropists may easily imagine there is a skillful method of disarming and overcoming an enemy without causing great bloodshed, and that this is the proper tendency of the Art of War. However plausible this may appear, still it is an error which must be extirpated; for in such dangerous things as war, the errors which proceed from a spirit of benevolence are just the worst. As the use of physical power to the utmost extent by no means excludes the co-operation of the intelligence, it follows that he who uses force unsparingly, without reference to the quantity of bloodshed, must obtain a superiority if his adversary does not act likewise. By such means the former dictates the law to the latter, and both proceed to extremities, to which the only limitations are those imposed by the amount of counteracting force on each side.
Putin´s Ukrainian war neglects human suffering and has now disintegrated into a bloody power struggle, where Russia “to the utmost extent” makes use of its military strength, while being supported by “the co-operation” of a propaganda striving to engage the entire Russian population in the war effort.
The Ukrainian war not only concerns the protection of Mother Russia from a “predatory West”, its ultimate goal is to control a hitherto sovereign nation’s politics and natural resources. Putin’s declared support to an allegedly discriminated Russian minority in Luhansk and Donetsk seems to be a subterfuge for grabbing an essential part of Ukraine’s economic resources.
During early 2000s, privatization of state industries yielded a so called Donbas Clan control of the economic and political power in the Donbas region. These oligarchs were supported by Kremlin and a rampant corruption soon took hold of an area dominated by heavy industry, such as coal mining (60 billion tonnes of coal are waiting to be extracted) and metallurgy.
Before Russia in 2014 backed separatist forces in a ferocious civil war, this particular area produced about 30 percent of Ukraine’s exports and a huge amount of gas reserves in the Dnieper-Donets basin was beginning to be extracted. In those days, the most prominent oligarchs in the Luhansk and Donetsk regions were Putin proteges – Rinat Akhmetov and Viktor Yanukovych, the latter had become Ukraine’s President, though his attachment to Russia and conspicuous corruption led to his fall through the Maidan Uprising in 2013, starting point for Ukraine’s transformation into a prosperous nation.
The Maidan Revolution caused a wave of insecurity sweeping through the former Soviet Empire, shaking up corrupt “counterfeit” democracies/dictatorships like Belarus, Azerbaijan, Kazakhstan, Tajikistan, and Uzbekistan. Small wonder that the authoritarian leaders of these nations are stout supporters of Putin’s war in Ukraine.
While reading von Clausewitz’s On War it is quite easy to relate it to Putin’s politics that undeniably have resulted in war as a “continuation of policy with other means.” It is not the first time in history that authoritarian regimes have plunged entire nations into a blood-drained pit of war. All of us have to be be aware that support of authoritarian regimes might lead us all down into Hell.
Main Sources: Klaas, Brian (2018) The Despot´s Accomplice: How the West is Aiding and Abetting the Decline of Democracy. London. Hurst & Company. von Clausewitz, Carl (1982) On War. London: Penguin Classics.
NEW YORK, Oct 26 (IPS) – Held in-person for the first time in three years, the annual meetings of the International Monetary Fund and World Bank last week in Washington, D.C. failed to offer solutions to the dozens of developing countries in debt distress or on the forewarned global recession instigated by monetary tightening.
Meanwhile, austerity measures are reinforced through a repeated emphasis on fiscal tightening, underpinned by a monetarism upheld by the IMF and rich country central banks.
The scenario of a dual tightening in both monetary and fiscal policy is only exacerbated by the absence of political will among creditors to cooperate in debt restructuring, bolstered by narratives of losing market access to financial flows.
New loan programs are created by the IMF to boost concessional financing for food price shocks, climate transitions and liquidity shortfalls. However, these very loans create new debt and reinscribe the very austerity measures that worsen the challenges of inflation and climate.
Within these asymmetries of power and access in the world economy, and the foreclosing of developmental policy tools for developing countries, what then is the fate of the vast majority of people and nations in the world?
The IMF’s World Economic Outlook warned of an imminent recession amidst a shift of financial regime from cheap and easy money to an aggressive synchronization of global monetary tightening.
“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” said IMF Chief Economist Pierre-Olivier Gourinchas. Convening the world’s finance ministers, central bank governors, and financial market leaders, the IMF announced a slowdown in global growth by 2.7%, down from the 3.2% growth projected for this year.
On the heels of a global pandemic followed by the war in Ukraine, the US Federal Reserve’s interest rate hikes, aimed toward domestic price stability, is creating a global push toward more expensive money.
A stronger dollar, higher international and domestic interest rates, coupled with depreciating currencies and sell-offs in many developing country assets, is generating protracted economic and social pain across the globe.
The spillover impacts are seen in soaring food and fuel prices, increases in dollar-denominated debt and imports costs, volatile commodity markets and debt distress intensifying into a 50-year record across the developing world.
The UN’s 2022 Trade and Development Report warns that the most vulnerable countries and communities are being hit the hardest. Warnings of another ‘lost decade’ abound, in that the current interest rate hikes resemble those of 1979-82, which triggered debt crises in over 40 developing countries where ‘structural adjustment programs’ through IMF loans contributed to a decade of lost growth and development across the Global South.
The tightrope global central banks are walking is acknowledged by IMF Managing Director, Kristalina Georgieva, who says, “Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people.
On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”
Meanwhile, the topline recommendation of the IMF’s Global Financial and Stability Report is that “central banks must act resolutely to bring inflation back to target.” Doing otherwise would risk credibility and market volatility, or in other words, create difficulties in market access to financial and investment flows and/or worsen borrowing terms.
One of the central tenets of neoclassical economic consensus among global central banks is that of maintaining price stability through a low inflation target of 2%. Financial rulemakers have for decades deemed inflation a threat to economic growth by way of the specter of hyperinflation. However, empirical evidence points to the contrary.
Collating data from 31 countries from 1961-94, World Bank chief economist Michael Bruno and William Easterly concluded that the inflation does not lead to lower growth, even when the significant oil price increase of 1974-75 is included.
The US Federal Reserve’s own historical archives demonstrate that the so-called ‘Great Inflation’ of 1965-82 did not harm growth either. In light of these studies by neoclassical economists and central bank institutions, economists Anis Chowdhury and Jomo Kwame Sundaram argue that “there is no empirical basis for setting a particular threshold, such as the now standard 2% inflation target – long acknowledged as ‘plucked from the air.’”
From press conferences to panel speeches, the IMF leadership repeats that the danger of “entrenched” inflation requires a global commitment to tackle it head on through global to domestic monetary tightening.
This stems in large part from a belief that once inflation begins, it has an inherent tendency to accelerate. Consequently, IMF loans and surveillance recommend central bank independence (from the executive) as a means to ensure unbiased financial policymaking, while critics contend that it has only enhanced the influence and power of big banks and financial actors, largely at the expense of the real economy.
However, history again demonstrates that inflation does not accelerate easily, even when workers have more bargaining power, or wages are indexed to consumer prices – as in some countries.
Lost decade redux?
The IMF’s Fiscal Monitor, published on October 12, called upon all policymakers to “maintain a tight fiscal stance, so that fiscal policy does not work at cross-purposes with monetary policy.” In essence, fiscal policy must serve monetary policy in its “fight against inflation,” by retrenching public spending for the singular objective of sending “a powerful signal that policymakers are aligned in the fight against inflation.”
The rationale is straightforward: “In a time of high inflation, policies to address high food and energy prices should not add to aggregate demand.” Increased demand is anathema, as it “forces central banks to raise interest rates even higher.”
The fiscal tightening is not new. In 2021, 131 governments started scaling back public spending. The geographic and population scale of austerity cuts is expected to intensify up to 2025.
Governments are implementing, or discussing, a range of fiscal adjustment policies, such as targeting social protection, regressive taxation, reducing public expenditure in social sectors, eliminating subsidies, privatizing public services or State-Owned Enterprises, pension reforms, labor flexibilization.
All have long histories of negative social impacts on economic and social rights, such as the right to food, water, health, housing, education, and livelihoods. The human impact will reach over 6 billion people, or 85% of humanity, in 2023.
In a time of poly-crisis, retrenching public spending and imposing regressive taxes that disproportionately hurt the poor, especially women, not only extinguishes the hope of achieving the Sustainable Development Goals by 2030, but more fundamentally, regresses decades of fighting poverty.
Meanwhile, the IMF’s Board has approved the creation of two new loan facilities, the new Food Shock Window, available for a year to countries reeling from the global food price crisis, and the Resilience and Sustainability Trust (RST), through which many rich countries may re-channel their unused Special Drawing Rights if the funds are used to address “external shocks, including climate change and pandemics” by rules set out by the Fund.
While both loans address urgent threats, they also create new debt. The RST is also conditional upon an IMF loan program hinged on fiscal consolidation.
The severity of the food crisis warrants aid in the form of grants not loans. Based on prior research done by the World Bank and Center for Global Development on food price spikes, Oxfam estimates that another 65 million people could be pushed below the $1.90 extreme poverty line as a consequence of food price increases.
Debt crises nearing point of no return
Despite the imminent threat of a debt crises imploding across many developing countries, sovereign debt solutions, the Group of 20, IMF, World Bank as well as the Institute of International Finance, the consortium of private financial actors, have to date failed to create viable solutions.
The G20’s Debt Service Suspension Initiative, which suspended debt payments for 73 low-income countries, was terminated at the end of 2021. And two years after the Common Framework was established in 2020, it’s multiple flaws have led even the World Bank to call it a ‘slow-motion debt tragedy.’
One key dilemma is the lack of political will to enforce a comparability of treatment, where all creditors, including private, participate on equivalent terms or restructuring and in the principle of burden sharing. Another challenge is the glacial pace of restructuring is not only protracted but also riddled with uncertainty.
Middle-income countries, where the vast majority of the world’s poor reside and where serious debt defaults are taking place, are not included. Low-income countries fear that access to commercial financing will be cut off if they apply to the Common Framework, as evidenced by Fitch and S&P slashed Ethiopia’s sovereign rating when the nation applied to the Common Framework in 2021.
Out of the three countries that have so far asked for their debt to be treated – Chad, Ethiopia and Zambia – only Zambia has seen some forward movement.
The narratives coming from within the IMF reiterate a subservience to market access and creditor interests. Across panels and webinars, senior level IMF staff remarked that a large debt restructuring is a serious event, which may result in a decrease of future multilateral and private financing, in amounts that outweigh the financing gained in relief or restructuring.
Some warned that private creditors will not participate in debt restructuring where national fiscal instability reigns. To secure market access, countries have to tighten fiscal belts even more. The logic here is that financial stability imperative for accessing private credit requires fiscal consolidation that generates social devastation.
The lack of official creditor participation and the dilemma of transparency, referring in large part to China, was repeatedly stressed as a key problem. At the same time, an old and wholly condescending trope of the need to increase debtor discipline in light of its financial mismanagement and irresponsibility repeatedly emerged.
Meanwhile, there is no mention of the often-legalized corruption of private actors, such as tax evasion and avoidance, speculative and/or rigged trading. Amidst the talk, actual debt solutions are in omission. While political will is already in short supply, the lack of cooperation toward problem-solving is exacerbated by the finger-pointing between the creditor groups of bilateral, private, and multilateral.
History has repeatedly illustrated the way forward on debt, and the waves of austerity that it generates. For decades, advocates and policymakers alike have called for a transparent and binding debt workout mechanism within a multilateral framework for debt crisis resolution, in a process convening all creditors.
The UN General Assembly has adopted multiple resolutions calling for such a mechanism over the years. Debt justice movements from across the developing world have urged for the cancellation of all unsustainable and illegitimate debts in a manner that is ambitious, unconditional, and without repercussions for future market access.
Past cases show how reducing debt stock and payments allow for countries to increase their public financing for urgent domestic needs.
The principle of burden-sharing ensures genuine debt relief, as does the commitment to include all creditors in an automatic or orderly way. Recognizing that multilateral institutions account for around one-third of the outstanding debt of low- and lower-middle-income countries, the World Bank and IMF must participate in such efforts.
They should both cancel debt payments owed, and the IMF should eliminate surcharges. Protection needs to be provided to debtor states against holdouts and lawsuits by non-participating creditors, while laws and procedures for responsible borrowing and lending need to be ensured to protect citizens and communities against corrupt, predatory and odious debts.
Last but not least, an automatic mechanism for a debt standstill in the wake of an extreme exogenous shock should be created. As proposed by the G77 group of developing countries in the UN General Assembly in response to the global financial crisis of 2007-8, such a mechanism must “be established for a determined period in response to external catastrophe events, as climate and natural disasters, health pandemic, military conflict and inflation.” The prescience of the G77 group in 2009 offers a salient message.
While the developing world has little recourse but to ‘dance to the tune of the Federal Reserve,’ the devastating toll of the human, social and economic crisis must be addressed through tools and choices that can be generated.
The question is how to muster political will, be it from the moral pressure of global justice movement to analysis of the effects that soaring poverty and intensifying climate change will have on the very survival of our planet and species.
Bhumika Muchhala is development economist and senior advocate on economic governance at Third World Network. She works on research, analysis, advocacy and public education on the international political economy of development, feminist economics and decolonial theory and approaches.
Opinion by Jomo Kwame Sundaram, Anis Chowdhury (sydney and kuala lumpur)
Inter Press Service
SYDNEY and KUALA LUMPUR, Oct 25 (IPS) – Widespread adverse reactions to the UK government’s recent ‘mini-budget’ forced new Prime Minister Liz Truss to resign. The episode highlighted problems of macroeconomic policy coordination and the interests involved.
Macro-policy coordination
But macroeconomic, specifically fiscal-monetary policy coordination almost became “taboo” as central bank independence (CBI) became the new orthodoxy. It has been accused of enabling CBs to finance government deficits. Critics claim inflation, even hyperinflation, becomes inevitable.
Anis ChowdhuryGovernment finance ministries and CBs are the two main macroeconomic policy protagonists. Poor ‘macro-policy’ coordination has generated problems, including contradictory policy responses. This has meant more macroeconomic and financial instability, worrying markets and investors.
Fiscal policy – notably variations in government tax and spending – mainly aims to influence long-term growth and distribution. CB monetary policy – e.g., variations in short-term interest rates and credit growth – claims to prioritize price and exchange rate stability.
By the early 1990s, the ‘Washington consensus’ implied the two macro-policy actors should work independently due to their different time horizons. After all, governments are subject to short-term political considerations inimical to monetary stability needed for long-term growth.
Claiming to be “technocratic”, CBs have increasingly set their own goals or targets. CBI has involved both ‘goal’ and ‘instrument’ independence, instead of ‘goal dependence’ with ‘instrument independence’.
CBI was ostensibly to avoid ‘fiscal dominance’ of monetary policy. Meanwhile, government fiscal policy became subordinated to CB inflation targets. For former Reserve Bank of Australia Deputy Governor Guy Debelle, monetary policy became “the only game in town for demand management”.
Debelle noted that except for rare and brief coordinated fiscal stimuli in early 2009, after the onset of the global financial crisis, “demand management continued to be the sole purview of central banks. Fiscal policy was not much in the mix”.
Jomo Kwame SundaramSub-optimal outcomes
But more than three decades of “divorce” between independent CBs and fiscal authorities have failed to deliver its promised benefits. Instead, monetary policy dominance has worsened financial instability.
Adam Posen found the costs of disinflation, or keeping inflation low, higher in OECD countries with CBI. Carl Walsh found likewise in the European Community.
For Guy Debelle and Stanley Fischer, CBs have sought to enhance their credibility by being tougher on inflation, even at the expense of output and employment losses.
Committed to arbitrary targets, independent CBs have sought credit for keeping inflation low. They deny other contributory factors, e.g., labour’s diminished bargaining power and globalization, particularly cheaper supplies.
John Taylor, author of the ‘Taylor rule’ CB mantra, concluded CB “performance was not associated with de jure central bank independence”. De jure CB independence has not prevented them from “deviating from policies that lead to both price and output stability”.
The de facto independent US Fed has also taken “actions that have led to high unemployment and/or high inflation”. As single-minded independent CBs pursued low inflation, they neglected their responsibility for financial stability.
CBs’ indiscriminate monetary expansion during the 2000s’ Great Moderation enabled asset price bubbles and dangerous speculation, culminating in the global financial crisis (GFC).
Since the GFC, “the financial sector has become dependent on easy liquidity… To compensate for quantitative easing (QE)-induced low return…, increased the risk profile of their other assets, taking on more leverage, and hedging interest rate risk with derivatives”.
Independent CBs also never acknowledge the adverse distributional consequences of their policies. This has been true of both conventional policies, involving interest rate adjustments, and unconventional ones, with bond buying, or QE. All have enabled speculation, credit provision and other financial investments.
They have also helped inefficient and uncompetitive ‘zombie’ enterprises survive. Instead of reversing declining long-term productivity growth, the slowdown since the GFC “has been steep and prolonged”.
Dire consequences
The pandemic has seen unprecedented fiscal and monetary responses. But there has been little coordination between fiscal and monetary authorities. Unsurprisingly, greater pandemic-induced fiscal deficits and monetary expansion have raised inflationary pressures, especially with supply disruptions.
This could have been avoided if policymakers had better coordinated fiscal and monetary measures to unlock key supply bottlenecks. War and economic sanctions have made the supply situation even more dire.
Government debt has been rising since the GFC, reaching record levels due to pandemic measures. CBs hiking interest rates to contain inflation have thus worsened public debt burdens, inviting austerity measures.
Thus, countries go through cycles of debt accumulation and output contraction. Supposed to contain inflation, they adversely impact livelihoods. Many more developing countries face debt crises, further setting back progress.
Needed reforms
Sixty years ago, Milton Friedman asserted, “money is too important to be left to the central bankers”. He elaborated, “One economic defect of an independent central bank … is that it almost invariably involves dispersal of responsibility… Another defect … is the extent to which policy is … made highly dependent on personalities… third … defect is that an independent central bank will almost invariably give undue emphasis to the point of view of bankers”.
Thus, government-sceptic Friedman recommended, “either to make the Federal Reserve a bureau in the Treasury under the secretary of the Treasury, or to put the Federal Reserve under direct congressional control.
“Either involves terminating the so-called independence of the system… either would establish a strong incentive for the Fed to produce a stabler monetary environment than we have had”.
Undoubtedly, this is an extreme solution. Friedman also suggested replacing CB discretion with monetary policy rules to resolve the problem of lack of coordination. But, as Alan Blinder has observed, such rules are “unlikely to score highly”.
Effective fiscal-monetary policy coordination requires appropriate supporting institutions and operating arrangements. As IMF research has shown, “neither legal independence of central bank nor a balanced budget clause or a rule-based monetary policy framework … are enough to ensure effective monetary and fiscal policy coordination”.
Although rules-based policies may enhance transparency and strengthen discipline, they cannot create “credibility”, which depends on policy content, not policy frameworks.
For Debelle, a combination of “goal dependence” and “instrument or operational independence” of CBs under strong democratic or parliamentary oversight may be appropriate for developed countries.
There is also a need to broaden membership of CB governing boards to avoid dominance by financial interests and to represent broader national interests.
But macro-policy coordination should involve more than merely an appropriate fiscal-monetary policy mix. A more coherent approach should also incorporate sectoral strategies, e.g., public investment in renewable energy, education & training, healthcare. Such policy coordination should enable sustainable development and reverse declining productivity growth.
As Buiter urges, it is up to governments “to make appropriate use of … fiscal space” created by fiscal-monetary coordination. Democratic checks and balances are needed to prevent “pork-barrelling” and other fiscal abuses and to protect fiscal decision-making from corruption.
European Union leaders struggle to find solutions for the energy crisis. Credit: Bigstock
by Baher Kamal (madrid)
Inter Press Service
MADRID, Oct 24 (IPS) – European politicians continue to run in all directions to find a way out of their energy crisis. One of them – Simonetta Sommaruga, the Swiss Environment Minister, asked people to ‘shower together’. Others are competing to grant the business of transporting energy from the North of Africa to the continent. All this is not new.
The MidCat
In 2010, a project aimed at transporting 7.500 million cubic metres of gas by linking Catalonia (Spain) to Occitania (France) and from there to other European Union countries.
With an initial estimated cost at over three billion Euro, this MidCat project quasi-blocked just one year later, to be finally stopped in 2018 following cost and impact studies.
Following the energy impact of the condemnable proxy war in Ukraine, Spain has recently proposed relaunching the MIDCAT. But France continued to block the project alleging high costs. Maybe also under the heavy pressure of its extended, powerful business of nuclear plants?
The Italian Connexion
Meanwhile, taking advantage of the deteriorated relations between Spain and Algeria due to Madrid’s support to the annexation of Western Sahara by Morocco, Rome rushed to negotiate with Algiers the transportation of the Algerian gas and oil to Europe through Italy.
But this project hasn’t worked out either.
The Turkish Pipe
At that state, Ankara proposed in September 2022 transporting Russian fossil fuels to Europe through a Turkish pipeline crossing the country’s territory. Also this way out was soon discarded.
The BarMar
During their yet another summit in late October, the European Union’s heads of state and governments launched more debates on how to grant their energy supplies.
At the end, the leaders of Spain, Portugal, and France agreed on 20 October 2022 to replace the MidCat project with a new “green energy corridor” that would be able to transport hydrogen. And they called it BarMar.
Where From?
So far, no accurate details are known of the major features of such a project. For instance: where will this hydrogen come from?
According to the European Union’s data, hydrogen accounts for less than 2% of Europe’s present energy consumption and is primarily used to produce chemical products, such as plastics and fertilisers. 96% of this hydrogen production is through natural gas, resulting in significant amounts of CO2 emissions. So?
How Green Is the “Green Energy Corridor”?
The BarMar project’s defenders say that hydrogen is the future of energy. Critics insist that hydrogen is most efficient if it is used around its source.
Anyway, if it is so green, why has the West, including Europe, not turned up sooner to this source of energy?
For How Long. How Much? Who Will Pay?
This BarMar project implies great costs and, according to European sources, it would be a sort of a “transitional” plan. To what? How long will it take to implement the project?
Not having released specific final details, the Spanish, Portuguese and French leaders decided to meet in December 2022 to discuss those details.
Where Will the Money Come From?
For now, French President Emmanuel Macron rushed to put the bandage before the wound, saying that the BarMar project would “benefit from European funding.”
The European Union’s funds are composed of the proportional contribution of each one of its 27 member countries, with Germany being the major contributor.
However, in view of the big European financial crisis caused by the COVID-19 pandemic and now exacerbated by Ukraine’s proxy war, a big portion of such reserves have been designated to alleviate the economic and social impacts, let alone the spectacular rise of fossil fuels prices for citizens.
The Military Race
During NATO’s Summit in Madrid, this Western alliance of 30 countries, decided to further militarise Europe by increasing the continent’s spending on weapons and multiplying its troops, in addition to further extending its presence in Africa. Such militarisation process implies high costs to Europe.
In addition, following the United States’ huge weapons supplies to Ukraine, which for now are estimated at more than 17 billion US dollars, European countries have also continued to send weapons to Ukraine.
Here, some European politicians started talking about the urgent need to replenish the continent’s “empty weapons shelves.”
Furthermore, the European leaders have just decided to transfer to Ukraine up to 1.5 billion US dollars… every single month… as part of the estimated 3 to 3.5 billion… a month… that the West decided to send to Ukraine.
Is the Fossil Fuels Rush Over Soon?
Not really. Germany seems to be thinking about reopening their nuclear plants to produce electricity.
Norway is reported as planning to increase oil production from the Northern Sea. The United States, being the world’s largest oil producer, has doubled its liquified gas supplies to Europe.
Venezuela, Saudi Arabia
Washington decided that the heavily sanctioned Nicolas Maduro’s government in Venezuela is not all that bad, therefore the US has approached Caracas to increase its fossil fuels production.
At the time, Western leaders pressured the Organisation of the Petroleum Exporting Countries (OPEC), which groups 13 oil-exporting ‘developing nations,’ to pump more oil and gas in the market.
Having OPEC’s top producer: Saudi Arabia shown reluctance, the US-led West has threatened to punish their own “friend and ally” — the Saudis, through sanctions.
Carbon, Fracking
Meanwhile, several European states, mostly the EU Eastern member countries, have been steadily intensifying the extraction and use of another fossil fuel: coal.
And one more European country however is no longer an EU member: the United Kingdom plans to extend the business of “fracking”.
Further to the United Kingdom’s parliamentary debates around the already ousted Liz Truss Conservative government plan to lift the 2019 decision to ban fracking, the British Broadcasting Corporation (BBC) reminded that hydraulic fracturing, or fracking, is a technique for recovering gas and oil from shale rock.
And that it involves drilling into the earth and directing a high-pressure mixture of water, sand and chemicals at a rock layer in order to release the gas inside.
Environmental organisations and activists worldwide continue to warn about the high dangers to Earth of carrying out such an activity. An activity that, by the way, is still widely extended in the world’s biggest fossil energy producer–the United States.
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