Financial Education in Malaysia: A Driver of Nation-Building or Inequality?

Moonrise_over_kuala_lumpur.jpgA decade has passed since the Global Financial Crisis (GFC) which seems an apt time to begin talking about the event that has pushed the concept of financial education to the core of global policymaking debates. Despite its growing popularity today, financial education has existed in the premise of global policymaking for the past few decades. The benefits of financial education seem endless; poor national financial literacy levels have been blamed for adverse socioeconomic effects such as high national household debt and/or a general irrational exuberance in financial consumption behaviour (see e.g. here). Along the same lines, low national financial literacy rates have been seen as indicative of overall financial instability, the types that have been argued and blamed as causal mechanisms of the GFC. Thus, financial education is held as an empowering dogma, its dissemination seen as providing citizens with the knowledge that would empower them to access financial services in a sustainable and meaningful manner. Read More »

BLOG SERIES: Inclusive or Exclusive Global Development? Scrutinizing Financial Inclusion

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“Financial inclusion is a key enabler to reducing poverty and boosting prosperity.”

The World Bank (2018)

“[Policies of financial inclusion] serve to legitimize, normalize, and consolidate the claims of powerful, transnational capital interests that benefit from finance-led capitalism.”

–  Susanne Soederberg (2013).

Financial inclusion has been high on the agenda for policy-makers over the past decade, including the G20, international financial institutions, national governments and philanthropic foundations. According to Bateman and Chang (2013), it’s the international development community’s most generously funded poverty reduction policy. But what lies behind the buzzword? How can the two quotes above portray such starkly opposing views?Read More »

Inclusive Finance, Shadow Banking and the Need for Financial Citizenship

banks-229440_1280Why are poor people offered financial inclusion products? One answer to this question is that the poor have unique financial needs and require financial institutions and instruments tailored for their particular conditions. This explanation sees poverty as the driver of demand for inclusive finance, but engages only superficially with the question of why mainstream financial institutions are unable to accommodate the poor.

The alternative explanation, which I examine in my research, is that the demand for inclusive finance is driven by practices known as ‘financial infrastructure withdrawal’: this is the very same process behind the rise of predatory lending in the Anglosphere (Leyshon and Thrift, 1995) and reveals that financial systems have inbuilt tendencies to be exclusionary (Dymski and Veitch, 1992).  Given these tendencies, scholars of financial exclusion in advanced capitalist countries, have argued for a concept of financial citizenship which notes that like countries, financial systems have an inside and an outside (Leyshon and Thrift, 1995).  Those who can access finance only in the form of, for instance, high-cost loans and not through mainstream banking institutions are relegated to the outside and are hence not financial citizens. The processes that underlie this relegation include the tendency of mainstream banks to cross-sell products within groups, privileging ‘blue-chip’ clients by offering them subsidies in exchange for brand-loyalty. Less wealthy clients, as a result, inevitably pay more for the same products and services than their more affluent counterparts.

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Economic Development in the 21st Century: A Review

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by Ramiro Eugenio Álvarez (University of Siena) and Santiago José Gahn (Roma Tre University)

What drives economic development? What is the nature of the external constraints that developing economies face? What is the role of industrial policy and the central banks in the development process? These were the core questions that were posed in the recent webinar series on Development in the 21st Century, organized by the Economic Development working group of the Young Scholars Initiative (YSI). These four meetings were particularly oriented towards examining notions such as distribution, patterns of specialization, industrial policies and balance of payment constraints. The discussion of such phenomena is especially important in a context of deep academic divides regarding the drivers of economic development.

Following the tradition of the Latin American structuralist school, the meetings placed special emphasis on the inherent challenges of conditions associated with being in the periphery when the problem of development is faced. During the meetings, processes of economic integration that perpetuate asymmetric economic relations of the center-periphery type were examined, as well as the role played by public institutions, e.g. central banks, in the development of industrial economies.Read More »

The World Bank Pushes Shadow Banking in the Name of Development

10229163274_7cb142ccf3_o.jpgLast month, central bankers and politicians around the world remembered the global financial crisis and the lessons learnt in its wake. The consensus goes at follows: we have done a great deal to reform banks and protect tax payers from their aggressive risk taking but we haven’t done enough on shadow banking. At this point, the consensus fragments. Central banks claim that they need more power to deal with systemic risks stemming from the shadows, whereas politicians worry about the moral hazards involved in future rescues of shadow banks like Lehman.

We are all the more concerned that the same authorities have been actively promoting shadow banking in the Global South. Under headings such as Billions to Trillions and the World Bank’s new Maximizing Finance for Development (MFD) agendathe new strategy for achieving the Sustainable Development Goals is to use shadow banking to create ‘investable’ opportunities in infrastructure, water, health or education and thus attract the trillions in global institutional investment.Read More »

Currency crisis in Argentina or the IMF’s tango

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By Roberto Lampa and Nicolás Hernán Zeolla

The Argentinian government has requested financial assistance from the IMF to tackle the consequences of a serious currency crisis. Last Wednesday, the government emphatically announced the new terms of such an agreement. However, unpacking the terms of those agreements and the current situation reveals serious concerns about the country’s future .

A few months back (see here), we provided an analysis of the current Argentinian crisis, highlighting the excessive vulnerability of the economy produced by the abrupt financial deregulation carried out by Macri’s administration. Three aspects in particular threatened the country’s future prospects: the deregulation of foreign exchange that failed to stop capital flight, a boom in foreign debt (at a record level among emerging market economies) and the promotion of speculative capital inflows to carry trade (buying financial instruments issued by the Central Bank called LEBAC in order to pursue carry trade operations).

When international conditions worsened and the carry trade circuit came to an end, the “LEBAC bubble” exploded and produced a tremendous foreign exchange crisis that shook the Argentine economy, causing a sharp rise in inflation and a severe recession from which the country has not yet managed to escape. Read More »

How History Matters in Post-Socialist Economies

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Though it has been suggested that The Beatles Rocked the Kremlin’ it was “Wind of Change” by Scorpions in the early 1991 that captured the minds of the new generation of Eastern Europe (EE) and the Former Soviet Union (FSU).

The promise of more open societies following Mikhail Gorbachev’s perestroika announcement set in motion powerful dynamics completely transforming the world. The Berlin Wall fell in 1989 and by the end of 1991 the Soviet Union disintegrated bringing down the entire socialist institutional edifice. Newly independent nation-states emerged across Europe, the Caucasus, and Central Asia. This new “wind” was that of hope, progressive stability and economic prosperity, or so it seemed at the time. And yet, “[f]or whom the wall fell?” as Branko Milanovic has recently inquired, is not as straightforward as might have been expected.

Despite the independence premium in national policy and in parallel with evidence suggesting recent strong economic growth the post-socialist economies are yet to achieve the ideals announced at the outset of market reforms. Ironically, the most unfortunate economic plan was the 1990s script of transition from planned economy to free market in the EE and FSU.

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Unanswered Questions on Financialisation in Developing Economies

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The discussions of the processes behind the growing importance of finance, financial transactions and financial motives, as well as the sustainability of the financial systems, have been located in the critical political economy debate of financialisation and neoliberalism (Crotty, 2003; Epstein, 2005; Fine, 2013; Lapavitsas, 2013; Palley, 2016; Sawyer, 2013; Stockhammer, 2004).

The analysis of financialisation in developing and emerging economies (DEEs) is relatively novel (Bonizzi, 2013). It is rooted in earlier discussions about the risks of financial globalisation and liberalisation (Akyuz & Boratav, 2005; Barbosa-Filho, 2005; Crotty & Lee, 2005; Frenkel & Rapetti, 2009; Grabel, 2003; O’Connell, 2005; Palma, 1998; Taylor, 1998), including the Latin American Structuralist literature on the hegemonic role of the US dollar and its financial and monetary implications for DEEs (Belluzzo, 1997; Braga, 1997; Fiori, 1997; Miranda, 1997; Tavares, 1997); the debate on capital account liberalisation and capital market integration (Cohen, 1996; Rodrik, 1998; Stiglitz & Ocampo, 2008; Strange, 1994); and the Minsky-inspired currency and boom bust dynamics of financial crisis in developing economies (Arestis & Glickman, 2002; de Paula & Alves, 2000; Dymski, 1999; Kregel, 1998; Schroeder, 2002).Read More »