Tag: Globalisation

It’s Time to Move Away from Public-Private Partnerships & Build a Future That is Public — Global Issues

Protesters in Mulhouse, France warn of the dangers of privatisation. The sign reads ‘when everything is privatised, we will be deprived of everything. Credit: NeydtStock / Shutterstock.com
  • Opinion by Oceane Blavot – Rodolfo Bejarano – Mae Buenaventura (brussels / lima / manila)
  • Inter Press Service

BRUSSELS / LIMA / MANILA, Feb 02 (IPS) – Last month, we joined more than 1000 representatives from all sectors of civil society who came together in Santiago de Chile to debate the future of – and threats to – public services the world over.

Participants discussed the chronic underfunding which continues to drive economic inequality, injustice and austerity, and the neocolonial policies that maintain the status quo.

Today those debates have resulted in the launch of “Our Future is Public: The Santiago Declaration for Public Services” – a momentous agreement signed by more than 200 organisations vowing to work to “transform our systems, valuing human rights and ecological sustainability over GDP growth and narrowly defined economic gains.”

One of the most damaging initiatives that has deeply affected the delivery of public services and infrastructure projects on all continents is the rise of public-private partnerships, or PPPs.

They have long been promoted by institutions such as the World Bank as a silver bullet to close the so-called gap to finance investments in services and infrastructure. The premise is that the private sector can deliver these services more efficiently and to a higher standard than the public sector, despite extensive evidence to the contrary.

We lay the pitfalls of PPPs bare in our new report History RePPPeated II: Why public-private partnerships are not the solution – the second in a series of investigations documenting the impacts of PPPs across Africa, Asia, Latin America and Europe.

Launched at the Santiago conference with some of the partners responsible for investigating and authoring the case studies, the report not only highlights negative impacts of PPPs, but sets out recommendations for how to better finance infrastructure and public services in the face of false solutions that have been proposed given the context of the current polycrisis.

These narratives wholly reflect red flags that are raised in the Santiago Declaration.

Through these investigations, we discovered failures on multiple levels in PPPs covering infrastructure such as roads and water supplies, as well as vital public services like healthcare and education.

From escalating costs for the stretched public sector to environmental and social impacts, we found time and again that communities had been ignored, displaced, and had their basic rights violated by thoughtless projects designed and implemented in the pursuit of profit.

A prime example is that of the the Melamchi Water Supply Project (MWSP) in Nepal. First announced nearly a quarter of a century ago, the project’s aim was to deliver clean, reliable and affordable water to 1.5 million people in Kathmandu.

And yet, 24 years later, residents are still waiting, while communities at the Melamchi water source are facing scarcity of water and eroded livelihoods. Instead of safe, clean drinking water – an internationally recognised human right – they have witnessed an extraordinary revolving door of private companies and institutional funders, including the World Bank, who have each failed to deliver.

To add to the MWSP’s colossal failure, 80 hectares of farmland have been lost to the project, a heavy blow to local residents, and up to 80 households have been forcibly displaced due to construction.

Who owns and controls our resources and public services became even more vitally important with the outbreak of the Covid pandemic in March 2020. Market-based models cannot be relied upon to deliver on human rights or the fight against inequalities as they are accountable only to their shareholders and not to their users.

This resulting focus on profit is overwhelmingly apparent in our case study from Liberia. Here, US firm Bridge International Academies (now NewGlobe) ‘abandoned’ its students and teachers during the height of the Covid-19 pandemic, shutting down schools and cutting teachers’ salaries by 80-90 per cent, despite being paid by the government.

And yet, in 2021 the Liberian government indefinitely extended the project, effectively subsidising a US for-profit firm at a cost that is at least double government spending on public schools.

In Peru, the Expressway Yellow Line has emerged as one of the most controversial projects ever carried out. This toll road was supposed to ease congestion issues in the capital city Lima, but instead toll rates have been unreasonably increased on at least eight occasions.

This generated almost $23 million for the private company involved and transpired with the complicity of public officials. Meanwhile, the Peruvian state suffered economic damages of US$1.2 million due to under the table negotiations between public officials and the private company, which led to the incorrect implementation and improper modifications of the contract years after it was initially signed.

Today, questions regarding the project and conflicts surrounding its implementation remain, while Lima residents’ expectations of quality road infrastructure to improve living conditions for those who have been most affected, continue to go unmet.

The human cost of the PPP projects showcased by History RePPPeated II is self-evident, but they are far from the exception. Rather they serve to illustrate common failures with the PPP model that risk compromising fundamental human rights and that undermine the fight against climate change and inequalities.

Their continuing promotion is one of the many reasons why we support the Santiago Declaration. Together with all its signatories, we will strengthen resistance to PPPs with their focus on private-led interests and promote public-public or public-common partnerships for a future that is public.

Océane Blavot is Senior Campaign and Outreach Coordinator, Development Finance, European Network on Debt and Development; Rodolfo Bejarano is Economist and Analyst – New Financial Architecture, Latin American Network for Economic and Social Justice; Mae Buenaventura is Debt Justice Programme, Team Manager, Asian People’s Movement on Debt and Development

The Santiago Declaration on Public Services, is a global manifesto signed by more than 300 organisations from around the world, and which was launched at the end of last week. The Declaration signals the start of an international movement to move away from the privatisation of public services and towards a future that is publicly funded and controlled. It is also the outcome of a 4-day conference during which several CSOs from around the world launched a report containing a series of investigations highlighting the failures of the PPP model in projects around the world, titled History RePPPeated II.

This OpEd is authored by three of the report’s authors.

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The Value of Strong Multilateral Cooperation in a Fractured World — Global Issues

  • Opinion by Ulrika Modeer, Tsegaye Lemma (united nations)
  • Inter Press Service

UNITED NATIONS, Jan 18 (IPS) – The multilateral system, even in the face of heightened geopolitical tension and big power rivalry, remains the uniquely inclusive vehicle for managing mutual interdependencies in ways that enhance national and global welfare. The complex challenges of a global pandemic, climate emergency, inequality and the risk of nuclear conflict cannot be dealt with by one country or one region alone. Coordinated collective action is required.

Without coordinated and timely collective global action in recent years to respond to the COVID-19 pandemic, global suffering would have been far greater.

Initiatives such as COVAX and the UN’s socio-economic response to COVID-19 not only helped mitigate the public health emergency, but also help decision-makers look beyond recovery towards 2030, managing complexity and uncertainty.

The devastating war in Ukraine has been a colossal blow to multilateral efforts by the international community to maintain peace and prevent major wars. However, multilateral cooperation cannot be declared obsolete – it is crucial in efforts to put human dignity and planetary health at the heart of cross-border cooperation.

The recent Black Sea Grain Initiative agreement represents a key testament to the value of multilateral cooperation working even in the most difficult circumstances, ensuring the protection of those that are most vulnerable to global shocks.

Without this agreement, global food prices would have risen even further, and vulnerable countries pushed further into hunger and political unrest.

The multilateral system is faced with the ostensible imbalance in matching humanitarian and development needs with Official Development Assistance (ODA) commitments. Despite some donors’ efforts to maintain – and even increase – their ODA commitments, others are faced with increasing politicization of aid – and it is part of the political calculus.

With the war in Ukraine still raging, there is real possibility that several donors will tap into ODA budget to cover the partial or entire cost of hosting Ukrainian refugees and rebuilding the devastated Ukrainian infrastructure and economy.

The UN system, a core part of the rule-based international order, is funded dominantly by voluntary earmarked contributions. Ultimately, this gives donor countries influence over the objectives of global public good creation.

Funding patterns tend to be unpredictable, making it hard to strategize and plan for the long term. Although earmarked funding allows the system to deliver solutions to specific issues with scale, the system’s lack of quality funding support risks eroding its multilateral character, strategic independence, universal presence, and development effectiveness.

The recently launched report by the Dag Hammarskjöld Foundation and the UN’s Multi-Partner Trust Fund Office showed that more than 70 percent of funding to the UN development system is earmarked, compared to 24 percent for the World Bank Group and IMF, and only 3 percent for the EU.

As the world faces daunting development finance prospects in 2022-2023, investments should focus on protecting a strong and effective multilateral system; the system that remains trusted by countries and partners for its reliable delivery of services.

It has also proven to complement bilateral, south-south and other forms of cooperation – beyond the traditional development narrative. An ODI study showed that the multilateral channel, when compared with bilateral channel, remains less-politicized, more demand-driven, more selective in terms of poverty criteria and a good conduit for global public goods.

Notwithstanding the institutional and bureaucratic challenges that the multilateral system faces, which must be addressed head-on, a retreat from a shared system of rules and norms that has served the world for seven decades is the wrong response.

Those of us in the multilateral system, especially in the UN development system, must recognize the difficult work that lies ahead. We must continue to demonstrate that each tax dollar is spent judiciously and show traceable results, while upholding the highest standards set out in the UN charter.

Improved transparency on how and where we spend the funds entrusted to us by our key partners and the IATI standard have long been adopted as key requirement outlined in the funding compact.

The Multilateral Organisation Performance Assessment Network and other donor assessments have recognized the systems’ value for money and confirmed that partnerships with other UN entities improve programmes and effectively integrates multiple sources of expertise.

Of course, the system must continue to build on successes and lessons to prove to our partners that we remain worthy of their trust and drive our collective agenda.

However, the true value of multilateral cooperation can only be fully realized with strong political commitment by partners matched with the necessary financial investment.

Ulrika Modéer is UN Assistant Secretary-General and Director of the Bureau of External Relations and Advocacy, UNDP; Tsegaye Lemma is Team Leader, Strategic Analysis and Corporate Engagement, Bureau of External Relations and Advocacy, UNDP.

Source: UNDP

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Submarine Cables and the Geopolitics of Deep Seas — Global Issues

Map of the 1858 trans-Atlantic cable route. Credit: Wikipedia.
  • Opinion by Manuel Manonelles (barcelona)
  • Inter Press Service

BARCELONA, Nov 09 (IPS) – The recent incidents of sabotage of the Nord Stream gas pipeline in the depths of the Baltic Sea, the authorship of which still raises doubts today, have reminded us that some of the key infrastructures that condition geopolitics, and our daily lives, are largely located deep under the sea.

One of these strategic infrastructures, the importance of which is inversely proportional to their public awareness, also lies in the underwater environment. It is about submarine cables, generally of fiber optic, through which more than 95% of internet traffic circulates. A thick and growing network of undersea cables that connect the world and through which the lifeblood of the new economy, data, circulates.

The history of submarine cables is not new. The first submarine cables were installed around 1850 and the first intercontinental cable, 4,000 kilometers long, was put into operation in 1858, connecting Ireland and Newfoundland (Canada).

It was at that time a telegraph cable, and while the first telegram—sent by Queen Victoria to then US President James Buchanan—took seventeen hours to get from one point to the next, it was considered a technological feat. From here, the network grew unstoppably and communications in the world changed.

Telephone cables followed, and in 1956 the first intercontinental telephone cable was put into operation, again connecting Europe and America with thirty-six telephone lines that would soon be insufficient. Thirty years later, the first fiber optic cable —replacing copper— was activated in 1988 and in recent decades the submarine cable network has dramatically increased, driven by the exponential growth in demand generated by the new digital economy and society.

It is surprising, then, that an infrastructure as critical and relevant as this goes so unnoticed, considering that it is the backbone of a society increasingly dependent on its digital dimension. This is what experts call the “paradox of invisibility”.

Because, again, more than 95% of what we see daily on our mobiles, computers, tablets and social networks, of what we upload or download from our clouds or watch through platforms —and thus millions of people, institutions and companies of all over the world— go through this submarine cable system.

The financial transactions transmitted by this network are approximately of 10 trillion dollars a day; and the global market for fiber optic submarine cables was around 13.3 billion dollars per year in 2020, expected to reach 30.8 billion in 2026, with an annual growth of 14%.

A system, however, that suffers from a significant governance deficit and, at the same time, is subject to substantial changes in its configuration and, above all, in the nature of its operators and owners. Moreover, traditionally the main operators of these networks were the telecom companies or, above all, consortiums of several companies in this sector.

Many of these companies were owned or had a close relationship with the governments of their country of origin —and, therefore, were linked in one way or another to some sort of national or regional legislation— and they generated a model focused on the interests and the interconnectivity of its clients.

In recent years, however, the growing need for hyper-connectivity of the large digital conglomerates (Google, Meta/Facebook, Microsoft, etc.) and their cloud computing provider data centers has resulted in that these have gone from being simple consumers of submarine cabling to becoming the main users (currently using 66% of the capacity of the entire current network). Even more, from users they have become the new dominant promoters of this type of infrastructure, which results in the reinforcement of their almost omnipotent power, and not only in the digital environment.

This can induce movements – albeit barely perceptible but equally relevant – in the complex balance of global power, by concentrating one of the strategic components of the global critical infrastructure into the hands of the technological giants.

All this with the absence of a global governance mechanism addressing this question, since the International Convention for the Protection of Submarine Cables of 1884 is more than outdated. As it is the case for the United Nations Convention on the Law of the Sea (UNCLOS) –in which the abovementioned convention is currently framed- whose challenges are more than evident, with the obvious conclusion about the urgent need for the international community to provide an answer to this pressing question.

A response that not only has to be at a global level, but also at a regional one, for example at the level of the European Union, especially if digital sovereignty is to be ensured, a vital element in the current present and even more in the future.

Proof of this is that in the last weeks there have been several incidents in relation to submarine cables both on the British, French and Spanish coasts that several analysts have linked to the Ukraine war.

In the case of the United Kingdom, there were cuts in the cables that connect Great Britain with the Shetland and Faroe Islands, while in France two of the main cables that land through the submarine cable hub that is Marseille were also cut. Even if some of these cases have been proven the result of fortuitous accidents, in others there is still doubt about what really happened.

Some experts have pointed to Russia, recalling the naval maneuvers that this country carried out just before the invasion of Ukraine in front of the territorial waters of Ireland, precisely in one of the areas with the highest concentration of intercontinental cables in the world.

In this context, perhaps it is not surprising that the Spanish Navy has recently reported that it monitors the activity of Russian ships near the main cables that lie in sovereign Spanish waters, indicating that in recent months more than three possible prospecting actions carried by vessels flying the Russian flag had been detected and deterred. One more proof of the growing value of these infrastructures that, despite being almost invisible, are strategic.

Manuel Manonelles is Associate Professor of International Relations, Blanquerna/University Ramon Llull, Barcelona

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Oil Exporters Make Markets, Not War — Global Issues

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.

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Macroeconomic Policy Coordination More One-Sided, Ineffective — Global Issues

  • 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”.

Workers’ real wages have remained stagnant or even declined, lowering labour’s income share and widening income inequality. As crises hit and monetary policies were tightened, workers lost jobs and incomes. Workers are doubly hit as governments pursue fiscal austerity to keep inflation low.

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.

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A Raging Storm for the Developing World that can be Avoided — Global Issues

  • Opinion by Isabel Ortiz, Matti Kohonen (london / new york)
  • Inter Press Service

LONDON / NEW YORK, Oct 24 (IPS) – Finance ministers of the G20 and the world met in Washington, October 10-16, to discuss how to navigate multiple crises, including rising cost-of-living, broken global supply chains, climate shocks, and the lingering COVID-19 pandemic.

All this weighted heavily on the IMF outlook, pointing to a bleak future ahead.

This is particularly bad news for developing countries. Using IMF data, our research showed that recovery spending in the last two years of the pandemic in the Global South was only 2.4% of GDP on average, a quarter of the level recommended by the UN and a fraction of what rich countries spent.

Meanwhile, only 38% of the total went to social protection, with corporate loans and tax breaks getting the lion’s share.

Things will get worse unless there is a fundamental policy change. This year recovery funds have dried up and, as most countries are heavily indebted, the IMF projects large expenditure cuts.

In 2023, at least 94 developing countries are expected to cut public spending in terms of GDP. Our report estimates that 85% of the world’s population living in 143 countries will live in the grip of austerity measures by 2023, and the trend is likely to continue for years.

Unless these policies are reversed, people in developing countries will suffer as a result cuts to social protection and public services at a time they are most needed, with 3.3 billion people (or nearly half of mankind) expected to be living below the poverty line of US $5.50/day by the end of 2022.

This crisis will affect especially women who received half less COVID-19 recovery funds than their male counterparts.

But the impact goes far beyond women. Elderly pensioners and persons with disabilities will receive lower pension benefits. Workers around the world will see less job security, poorer pay and working conditions as regulations are dismantled.

A recent study on inequality found that the vast majority of countries were making labor markets more flexible to help big corporations. As inflation keeps rising, worsened by higher consumption taxes, families will be much affected while any support they receive will be less due to austerity cuts.

South Africa reflects the crisis of countries falling into the austerity trap. The government provided Social Relief of Distress (SRD) grants of R350 (US$24 in 2021) per month that were instituted at the start of the pandemic, supporting for the first-time low-income individuals who are of working age.

These grants have been extended several times, providing a lifeline for those worst hit by the pandemic.

However, despite the cost-of-living crisis, the government -advised by the IMF- is now considering reducing social expenditures and helping only the most vulnerable, leaving many low-income households without any support. Other austerity measures being discussed include cuts to the salaries of civil servants, and labor flexibilization reforms.

Instead of these austerity cuts, the South African government and the IMF should focus on raising additional revenues to fund social protection and public services, making sure everyone pays taxes, reducing corporate tax loopholes and exemptions, taxing excess profits and wealthy individuals.

Similarly, Ecuador has been shaken by social unrest because of austerity reforms. In 2019, after large riots, the government of Lenin Moreno flew from the capital and had to stop a loan with the IMF that had proposed cuts to subsidies and other austerity reforms.

In 2021, the same austerity policies were proposed again by the IMF, such as cuts to subsidies and public services, reducing social protection and labor regulations.

In 2022, farmers, indigenous men and women, marched again to the capital with pitchforks to join students and workers protesting austerity policies, forcing President Lasso to back down and agree to grant subsidies and other demands.

These are only two examples reflecting the austerity storm gathering around the world. This is extremely unfair and will generate unnecessary social hardship, as populations are struggling with a severe cost-of-living crisis, especially at a time when many countries are losing significant amounts of revenue to tax abuses, illicit financial flows and tax exemptions to large corporates that are wholly unnecessary.

Austerity cuts are not inevitable, there are alternatives even in the poorest countries. Instead of austerity cuts, governments can increase progressive tax revenues, restructure and eliminate debt, eradicate illicit financial flows, and re-allocate public expenditures, among other options.

Policy makers must act on this. All the human suffering and social unrest that austerity inflicts is unnecessary.

Civil society organizations have launched a global campaign to End Austerity, including, among others, ActionAid International, European Network on Debt and Development (Eurodad), Fight Inequality Alliance, Financial Transparency Coalition and Oxfam International.

Austerity campaign calls on citizens and organizations from all around the world to fight back against the wave of austerity sweeping the globe, supercharging inequality and compounding the effects of the cost-of-living crisis.

Our decision-makers need to wake up and change course. There is no time to lose.

Matti Kohonen is Executive Director of Financial Transparency Coalition; Isabel Ortiz is Director of the Global Social Justice Program at Joseph Stiglitz’s Initiative for Policy Dialogue

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How Digital Can Drive a Green Recovery — Global Issues

  • Opinion by Riad Meddeb (united nations)
  • Inter Press Service

UNITED NATIONS, Oct 13 (IPS) – As much of the world was starting to glimpse recovery from the COVID-19 pandemic, it now finds itself amid a cost-of-living crisis brought on by disruptions in global energy and food markets that are the result of conflict and climate change.

This again highlights how societal and planetary imbalances reinforce each other, as well as the need for a truly inclusive and green recovery. One that is foundational for achieving the Sustainable Development Goals (SDGs).

The COVID-19 pandemic demonstrated that digital is no longer optional. Countries with existing digital foundations were much better equipped to respond to citizens’ needs, including through the effective delivery of public services such as healthcare, social security benefits, and remote education. Digital will play a similarly important role in shaping a global green recovery.

Beyond building national socioeconomic resilience, digital transformation is also proving a key enabler in advancing global climate commitments. Countries supported by UNDP are leveraging digital in innovative ways to redouble their efforts to adopt renewable energy, transition to a circular economy, and to protect biodiversity.

Ecuador is building a digital traceability system for monitoring land use change and to track commodities through the supply chain. Papua New Guinea has piloted a mobile phone application to assist law enforcers to quickly record and report environmental harms such as illegal logging and bush fires.

Riad Meddeb

Whether it’s emerging technologies like Artificial Intelligence (AI) or more established digital tools like the mobile phone digital can be a fundamental driver of change. It is reshaping the dynamics between the economy, governments, businesses, and civil society and is an important tool in rebalancing our planetary, societal, and economic priorities.

However, digital is fast becoming the global metric of both inclusion and exclusion. With 37 percent of the world’s population still offline, the digital divide, notably, the lack of accessible broadband, gaps in digital skills, and marginalized groups excluded from technology, has become a key barrier for countries wanting to capitalize on the potential opportunities of the increasingly digital economy.

And digital technologies themselves could constrain a Green Recovery. The industry’s carbon footprint could account for about 14 percent of global emissions by 2040. If digital were a country, it would nearly surpass the US as the second largest contributor to climate change. And this impact may worsen, with emerging technologies also contributing to increased emissions.

Digital and a green recovery

Integrating sustainable development in digital is central to ensuring a green recovery – one that drives inclusive digital access and capacity, promotes openness and open data, and fosters innovations that increase the efficiency of digital technologies and mitigates their environmental footprint.

In this context, the UNDP Global Centre for Technology, Innovation and Sustainable Development organized its flagship event ‘Digital for a Green Recovery’ on the sidelines of the World Cities Summit in Singapore. The event highlighted three priorities for an inclusive and green digital transformation.

First, we must put people at the centre of innovation. This includes ensuring the availability of foundational digital infrastructure so that everyone can benefit. We must also ensure that the technical standards and explorations of emerging technologies are ‘human-centred’, founded on the local needs and aspirations of populations, but also ‘environment-centred’.

Second, we need to strengthen collaboration between innovation ecosystems. Innovation doesn’t happen in a vacuum. It requires an enabling ecosystem comprising policies and regulations, investors, incubators and accelerators; and educational institutions. Digital can be a potent enabler for connecting dispersed national and global innovation ecosystems in pursuit of sustainability.

Third, data is the lifeblood of digital transformation and could be an important equalizer for countries in accelerating their efforts towards the Sustainable Development Goals.

However, a number of countries lack even foundational data infrastructure, such as data centres, communication networks, and energy grids. We need to accelerate efforts to build data capacity to ensure that existing digital divides are not widened.

Digital is an indispensable enabler for driving a green and inclusive recovery. But it is truly a ‘whole-of-society’ endeavour.

As a platform to showcase innovation, best practice, and to foster partnerships, the UNDP Global Centre for Technology, Innovation, and Sustainable Development will continue to convene global discussions, support and align innovation ecosystems around the world, and guide governments in leveraging the potential afforded by digital. Through driving the experimentation, adoption, and scaling of digital, we can shape a Green Recovery that works for both people and planet.

Riad Meddeb is Acting Director, UNDP Global Centre for Technology, Innovation and Sustainable Development & Senior Principal Advisor for SIDS

These insights were drawn from ‘Digital for a Green Recovery’ – the Flagship Event of the UNDP Global Centre for Technology, Innovation and Sustainable Development, held on the sidelines of the World Cities Summit 2022 in Singapore.

Source: UNDP Blog

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Chinese Fleet Threatens Latin America’s Fish Stocks — Global Issues

Only artisanal fishing is allowed in the waters surrounding the Galapagos Islands, where it is possible to catch large, valuable fish. The area is a marine reserve, a nursery of species for the eastern Pacific and is off-limits to industrial fishing. But its continental shelf is increasingly under siege by the Chinese fleet. CREDIT: MAG Ecuador
  • by Humberto Marquez (caracas)
  • Inter Press Service

CARACAS, Aug 18 (IPS) – Illegal and excessive fishing, mainly attributed to Chinese fleets, remains a threat to marine resources in the eastern Pacific and southwest Atlantic, as well as to that sector of the economy in Latin American countries bathed by either ocean.

Worldwide, “one out of every five fish consumed has been caught illegally, 20 percent of the nearly 100 million tons of fish consumed each year, and generally in areas closed to fishing,” veteran Venezuelan oceanographer Juan José Cárdenas told IPS.

An emblematic case, said the researcher from the Simón Bolívar University in Caracas, is the Galapagos Islands, 1,000 kilometers west of the coast of Ecuador, surrounded by a 193,000-square-kilometer protected marine area, a hotbed of species in great demand for human consumption.

Galapagos, an archipelago totaling 8,000 square kilometers, is famous for its unique biodiversity and as a natural laboratory used by the English naturalist Charles Darwin (1809-1882) for his theories on evolution.

The Ecuadorian Navy indicated that in June they maintained surveillance of 180 foreign vessels, including fishing boats, tankers and reefers, fishing near the 200 nautical mile (370 kilometers) limit of the Galapagos Exclusive Economic Zone (EEZ), also known as the continental shelf.

In 2017, 297 vessels were detected, 300 in 2018, 245 in 2019, and 350 in 2020. At the beginning of each summer they fish off Ecuador and Peru, then off of Chile, before crossing the Strait of Magellan and heading up the southwest Atlantic off Argentina, Uruguay and Brazil.

In the Pacific they have fished intensively for giant squid (Dosidicus gigas). According to the satellite tracking platform Global Fishing Watch, 615 vessels did so in 2021, 584 of which were Chinese.

Alfonso Miranda, president of the Committee for the Sustainable Management of the South Pacific Giant Squid (CALAMASUR), made up of businesspersons and fishers from Chile, Ecuador, Mexico and Peru, said that this year 631 Chinese-flagged vessels have entered Ecuadorian and Peruvian Pacific waters.

Miranda says that Peruvian fishermen report incursions by Chinese ships in Peru’s EEZ, and he does the math: if Peruvian squid production reaches 500,000 tons, with revenues of 860 million dollars a year, some 50,000 tons taken by the foreign fleet means the loss of 85 million dollars a year.

The giant squid is the second most important fishing resource for Peru, after anchovy, and its catch generates more than 800 million dollars a year and thousands of jobs, which is why the country seeks to prevent incursions into its waters by vessels of other flags, especially from China. CREDIT: Government of Peru

Accumulated problems

Cárdenas the oceanographer pointed out that the area is rich in tuna, of which more than 600,000 tons are caught annually (10 percent of the world total), but posing a serious threat to sustainability, for example with the use of fish aggregating devices or FADs that alter even the migratory habits of this species.

According to the Food and Agriculture Organization (FAO), 34 percent of tuna stocks in the seven most widely used tuna species are exploited at biologically unsustainable levels.

For several species in the eastern Pacific, including some whose fishing is banned such as sharks, “we are already at the edge of the environmental precipice with legal fishing; a small additional fishing effort, illegal fishing, is enough to affect the sustainability and food security that these species provide,” said Cárdenas.

Pedro Díaz, a fisherman in northern Peru, told the Diálogo Chino news platform in the port of Paita that “we don’t just want to fish and catch. We want to allow the giant squid to breed and grow so that it can generate employment and foreign currency for the State.

“We also want the giant squid to have a sustainable season, and what will those who come after us, the young people who take up fishing, find?” he added.

FAO fisheries officer Alicia Mosteiro Cabanelas told IPS from the U.N. agency’s regional headquarters in Santiago, Chile that “it is not always possible to measure the impact of a given fleet operating in areas adjacent to the exclusive economic zone of coastal nations.”

This is because “there is not always a stock assessment of the target species, nor is there information available on retained, discarded and incidental catch, or on the number of vessels authorized to operate by the respective flag States and unauthorized vessels.”

In 2017 Ecuador seized the Chinese vessel Fu Tuang Yu Leng after finding in its holds more than 6000 sharks illegally caught in the Galapagos Marine Reserve. CREDIT: DPN Galapagos

Mosteiro Cabanelas noted that “overfishing always has a direct impact on the sustainability of resources, generating a decrease in income for the fishing sector and in the availability of fishery products for local communities and consumers in general. Latin America is no exception.”

And for FAO it is clear that “illegal, unreported and unregulated (IUU) fishing is a global problem that compromises the conservation and sustainable use of fishery resources,” said the expert.

It also “harms fishers’ livelihoods and related activities, and aggravates malnutrition, poverty and food insecurity.”

The media in coastal countries also report that fishers in Latin America – citing cases from Brazil, Chile and Mexico – are violating bans and extracting valuable species whose fishing is not permitted. Ecuadorians have exported large quantities of shark fins, after declaring the sharks as bycatch.

Shark fins are highly sought after in places like Hong Kong – where shark fin soup can cost up to 200 dollars – and the World Wildlife Fund (WWF) estimates the global trade in shark and ray meat at 2.6 billion dollars.

The Argentine Navy carries out surveillance of a Chinese fishing vessel at the limits of the country’s Exclusive Economic Zone, which is rich in squid, hake and prawns. CREDIT: Argentine Naval Prefecture

Keeping an eye on poachers

Last year, some 350 Chinese-flagged vessels fished during the first half of the year off Argentina’s territorial waters, where there is a wealth of another kind of squid, the Argentine shortfin squid (Illex argentines), as well as Argentine hake, prawns and other prized species.

It is a fleet that, according to Argentine ship captains, commits IUU with unreported transshipments that camouflage illegal fishing, transferring fish between vessels and turning off the transponders that indicate the ships’ location.

A report published in June by Oceana, an international non-governmental organization that tracks IUU fishing, claimed that more than 400 Chinese-flagged vessels fished for about 621,000 hours along the Argentine EEZ between 2018 and 2021, and disappeared from tracking systems more than 4,000 times.

The Argentine government has reported that, in contrast to the 400,000 tons per year of Argentine shortfin squid that landed in its ports at the end of the 20th century, since 2015 less than 100,000 tons per year are caught, with just 60,000 in 2016.

Industry reports in the local media indicate that foreign vessels (Chinese, South Korean, Taiwanese or Spanish) have caught up to 500,000 tons of squid annually, near or within its EEZ – a volume that can represent between five and 14 billion dollars a year.

Fish aggregating devices or FADs are used in the eastern Pacific to facilitate and increase tuna catches, aggravating the threat of overfishing and even posing a risk of altering the migratory habits of the species. CREDIT: WWF

And the problem is not only seen in Argentina: last Jul. 4, the Uruguayan Navy captured in its territorial waters, 280 kilometers from the Punta del Este beach resort, a Chinese-flagged vessel, the “Lu Rong Yuan Yu 606”, dedicated to squid fishing, which was apparently fishing furtively at night in that area.

As the holds were empty, it could not be established with certainty that it was fishing in the Uruguayan EEZ, and the ship was released after payment of a fine for contravening other navigation regulations.

There was no repeat of the 2017 experience in Ecuador with the “Fu Yuan Yu Leng 999”, a vessel that functioned as a large refrigerator to store the catch of other vessels, which was operating illegally in the Galapagos Marine Reserve.

About 500 tons of fish, including vulnerable and protected species, were found on the ship, especially some 6,000 hammerhead sharks.

The Ecuadorian justice system handed prison sentences to the captain of the ship and three crew members for the crime of fishing for protected species, and fined them 6.1 million dollars. As the payment was not made, the vessel became the property of the Ecuadorian Navy.

China has formally banned its fleet from operating in prohibited waters and warned captains that it will withdraw licenses from those who violate these rules, and President Xi Jinping gave assurances to that effect to his Ecuadorian counterpart Guillermo Lasso when the latter visited Beijing in February.

Far from the shores of Latin America, on May 24 in Tokyo, Australian Prime Minister Anthony Albanese, U.S. President Joe Biden, Prime Minister Narendra Modi of India, and Japanese Prime Minister Fumio Kishida, of the Quadrilateral Security Dialogue (QSD) bloc, agreed on new surveillance mechanisms for the Chinese fishing fleet.

At the same time, Washington is working with countries such as Colombia, Costa Rica, Ecuador, Mexico and Panama on agreements to help monitor the Chinese fleet, the largest in the world, which has 17,000 ships catching 15 million tons a year in the world’s seas.

The U.S. initiative is part of its renewed global confrontation with the Asian giant, the so-called new cold war.

© Inter Press Service (2022) — All Rights ReservedOriginal source: Inter Press Service

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Reject CPTPP, Stay out of New Cold War — Global Issues

  • Opinion by Jomo Kwame Sundaram, Anis Chowdhury (kuala lumpur and sydney)
  • Inter Press Service

KUALA LUMPUR and SYDNEY, Jul 19 (IPS) – Joining or ratifying dubious trade deals is supposed to offer miraculous solutions to recent lacklustre economic progress. Such naïve advocacy is misleading at best, and downright irresponsible, even reckless, at worst.

TPP ‘pivot to Asia’
US President Barack Obama’s ‘pivot to Asia’ after his 2012 re-election sought to check China’s sustained economic growth and technological progress. Its economic centrepiece was the Trans-Pacific Partnership (TPP).

Jomo Kwame SundaramBut the US International Trade Commission (ITC) doubted the Washington-based Peterson Institute for International Economics (PIIE) and other exaggerated claims of significant TPP economic benefits in mid-2016, well before US President Donald Trump’s election.

The ITC report found projected TPP growth gains to be paltry over the long-term. Its finding was in line with the earlier 2014 findings of the Economic Research Service of the US Department of Agriculture.

Meanwhile, many US manufacturing jobs have been lost to corporations automating and relocating abroad. Worse, Trump’s rhetoric has greatly transformed US public discourse. Many Americans now blame globalization, immigration, foreigners and, increasingly, China for the problems they face.

Trump U-turn
The TPP was believed to be dead and buried after Trump withdrew the US from it immediately after his inauguration in January 2017. After all, most aspirants in the November 2016 election – including Hillary Clinton, once a TPP cheerleader – had opposed it in the presidential campaign.

Trump National Economic Council director Gary Cohn has accused presidential confidantes of ‘dirty tactics’ to escalate the trade war with China.

Cohn acknowledged “he didn’t quit over the tariffs, per se, but rather because of the totally shady, ratfucking way Commerce Secretary Wilbur Ross and economic adviser Peter Navarro went about convincing the president to implement them.”

Cohn, previously Goldman Sachs president, insisted it “was a terrible idea that would only hurt the US, and not extract the concessions from Beijing Trump wanted, or do anything to shrink the trade deficit.”

Anis ChowdhuryBut US allies against China, the Japanese, Australian and Singapore governments have tried to keep the TPP alive. First, they mooted ‘TPP11’ – without the USA.

This was later rebranded the Comprehensive and Progressive TPP (CPTPP), with no new features to justify its ‘progressive’ pretensions. Following its earlier support for the TPP, the PIIE has been the principal cheerleader for the CPTPP in the West.

Although US President Joe Biden was loyal as Vice-President, he did not make any effort to revive Obama’s TPP initiative during his campaign, or since entering the White House. Apparently, re-joining the TPP is politically impossible in the US today.

Panning the Trump approach, Biden’s US Trade Representative has stressed, “Addressing the China challenge will require a comprehensive strategy and more systematic approach than the piecemeal approach of the recent past.” Now, instead of backing off from Trump’s belligerent approach, the US will go all out.

Favouring foreign investors
Rather than promote trade, the TPP prioritized transnational corporation (TNC)-friendly rules. The CPTPP did not even eliminate the most onerous TPP provisions demanded by US TNCs, but only suspended some, e.g., on intellectual property (IP). Suspension was favoured to induce a future US regime to re-join.

Onerous TPP provisions – e.g., for investor-state dispute settlement (ISDS) – remain. This extrajudicial system supersedes national laws and judiciaries, with secret rulings by private tribunals not bound by precedent or subject to appeal.

Lawyers have been advising TNCs on how to sue host governments for resorting to extraordinary COVID-19 measures since 2020. Most countries can rarely afford to incur huge legal costs fighting powerful TNCs, even if they win.

The Trump administration cited vulnerability to onerous ISDS provisions to justify US withdrawal from the TPP. Now, citizens of smaller, weaker and poorer nations are being told to believe ISDS does not pose any real threat to them!

After ratifying the CPTPP, TNCs can sue governments for supposed loss of profits due to policy changes – even if in the national or public interest, e.g., to contain COVID-19 contagion, or ensure food security.

Thus, supposed CPTPP gains mainly come from expected additional foreign direct investment (FDI) due to enhanced investor benefits – not more trade. This implies more host economy concessions, and hence, less net benefits for them.

Who benefits?
Those who have seriously studied the CPTPP agree it offers even fewer benefits than the TPP. After all, the main TPP attraction was access to the US market, now no longer a CPTPP member. Thus, the CPTPP will mainly benefit Japanese TNC exports subject to lower tariffs.

Unsurprisingly, South Korea and Taiwan want to join so that their TNCs do not lose out. China too wants to join, but presumably also to ensure the CPTPP is not used against it. However, the closest US allies are expected to block China.

The Soviet Union sought to join NATO in the 1950s before convening the Warsaw Pact to counter it. Russian President Vladimir Putin also tried to join NATO years after Vaclav Havel ended the Warsaw Pact and Boris Yeltsin dissolved the Soviet Union in 1991.

Unlike Northeast Asian countries, Southeast Asian economies seek FDI. But when foreign investors are favoured, domestic investors may relocate abroad, e.g., to ‘tax havens’ within the CPTPP, often benefiting from special incentives for foreign investment, even if ‘roundtrip’.

Stay non-aligned
The ‘pivot to Asia’ has become more explicitly military. As the new Cold War unfolds, foreign policy considerations – rather than serious expectations of significant economic benefits from the CPTPP – have become more important.

Trade protectionism in the North has grown since the 2008 global financial crisis. More recently, the pandemic has disrupted supply chains. With the new Cold War, the US, Japan and others are demanding their TNCs ‘onshore’, i.e., stop investing in and outsourcing to China, also hurting transborder suppliers.

Hence, net gains from joining the CPTPP – or from ratifying it for those who signed up in 2018 – are dubious for most, especially with its paltry benefits. After all, trade liberalization only benefits everyone when ‘winners’ compensate ‘losers’ – which neither the CPTPP nor its requirements do.

With big powers clashing in the new Cold War, developing countries should remain ‘non-aligned’ – albeit as appropriate for these new times. They should not take sides between the dominant West and its adversaries – led by China, the major trading partner, by far, for more and more countries.

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What Developing Countries Need to Do — Global Issues

  • Opinion by Daud Khan (rome)
  • Inter Press Service

ROME, Jun 03 (IPS) – Developing countries are facing a combination of crises that are unprecedented in recent times. Over the last three years they have had to face the COVID-19 crisis, the food crisis, the energy crisis, the climate change crisis, the debt crisis and, on top of all this, a global recession. The crises have overlapped, and each has added to the problems created by the previous ones.

Daud KhanMuch of the “fault” for these crises lies with the big countries – their desire for geo-political domination, the continued emission of GHGs, the tight money policy of recent months.

There are strong calls for increased aid flows and debt relief, as well as special funds for the countries most affected by high prices, debt burdens or climate change. These actions, much of which will be funded by the developed countries, are needed and necessary to avoid widespread suffering, political turbulence and increased migratory flows.

But these short term actions will not solve underlying problems. There is a need for new thinking; for paradigm shifts; and for new directions by developing countries. So what needs to be done?

Most importantly and most urgently, there needs to be a reform of food systems. Food systems have already shown incredible resilience by coping with COVID related lockdowns, and with the large reverse migrations that took place from urban to rural areas as people lost jobs and incomes. But new directions are needed for food systems to take on the current challenges. Actions are needed in four areas.

    • First – developing countries need to reduce their dependence on rice, maize and wheat, three crops which account for half of all calories consumed. For many counties agro-climatic conditions are not suitable for these crops and there is a high reliance on imports. This import reliance has been exacerbated by rapid urbanization that has raised the demand for easily-prepared, convenience food. But there are hundreds, if not thousands of indigenous products – cereals, oilseeds and crops and livestock products that have been ignored by policy makers, researchers and Government extension services. This needs to change.
    • Second – food production systems must make increased use of Green Technologies, technologies that are much less reliant on purchased inputs in particular pesticides and chemical fertilizers. Such improved techniques, many of which have been already tried and tested, include integrated pest management, improved crop rotation and multi-cropping, greater use of nitrogen-fixing crops, zero-tillage and mulching. These techniques that make much more intelligent use of the complex interaction between soil, plants, plant residues and livestock waste.
    • Third – value chains need to be shortened with monopolies and restrictive practices by traders and middlemen reduced. Progress was made in this regard during the COVID crisis, mainly through greater use of ICT, but this needs to be followed through much more strongly.
    • Finally, social safety nets need to be strengthened. Governments cannot cushion the entire population from price increases but does have a responsibility to ensure that children and vulnerable groups are cushioned.

Next in terms of urgency is the energy crisis. A large part of the import bill of many developing countries comprises oil and gas. Reducing this dependence is now more urgent than ever. There are two complementary actions needed:

    • First – there has to be a major drive towards increasing production of renewable energy – particularly solar energy. With falling prices of panels, solar energy is now the cheapest form of energy and most developing countries have plenty of space and sunshine.
    • Second – solar or wind energy needs to be complemented with other forms of energy that can meet base needs. The most suitable for doing this is through greater use of nuclear energy which, with today’s fourth generation technology, is much safer and less polluting than it used to be. Given high investments costs, as well as the difficulties in setting up suitable regulatory, oversight and contingency systems, smaller countries may need to work jointly to create such nuclear power facilities.

The debt crisis has created a large and growing risk of defaults with the poorest being the most vulnerable. Already in 2019, almost half of low-income and least developed countries (LDCs) were assessed as being at high risk of external debt distress or already in debt distress. Since then, the external debts of developing country have continued to rise and are eating up a growing proportion of export earnings. And this was before the present interest rate hike. Most debt was taken when real interest rate (corrected for perceived risk) were close to zero.

    • In addition to ongoing discussions on debt forgiveness, there has to be a discussion between creditors and debtors on repayments especially on interest payments. The burden of the unexpected rise in interest rate needs to be a shared burden.

Finally, developing countries need to find ways to cushion themselves against the recessionary effects of slowing growth world trade. In the current system, global trade flows are dominated by USA, China and Europe.

    • In order to break their dependence on these large economies, developing countries need to work to create regional and bilateral trade agreements. Such trade agreements may not be easy. However, the crisis has created conditions where out-of-the-box thinking is essential and cultural and political barriers to regional trade – such as those which limit trade between India and Pakistan – need to be overcome.

Daud Khan works as consultant and advisor for various Governments and international agencies. He has degrees in Economics from the LSE and Oxford – where he was a Rhodes Scholar; and a degree in Environmental Management from the Imperial College of Science and Technology. He lives partly in Italy and partly in Pakistan.

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