Green Structural Adjustment in The World Bank’s Resilient Cities

 

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Jakarta, Indonesia

By Patrick Bigger and Sophie Webber

Cities across the world are facing a double-barreled existential problem: how to adapt to climate change and how to pay for it. Over the next thirty years, more than 570 coastal cities are poised to face frequent catastrophic flooding owing to sea level rise and more intense storms, while as many as 3.2 billion urban residents may run out of water by 2050. Other looming crises include soaring urban temperatures, the urgent need to transition away from fossil-fueled energy and transport systems, and plummeting rates of local biodiversity.

Responding to these problems will, international bodies project, require a virtually unprecedented buildout of infrastructure, from hardened municipal water and sewage systems, to urban afforestation, to renewable energy systems. This massive infrastructural program coincides with global economic conditions marked by the lingering ideological stranglehold of austerity, unprecedented levels of capital concentration, and now, myriad uncertainties produced by COVID-19. Cities across the world are facing a double-barreled existential problem: how to adapt to climate change and how to pay for it. Over the next thirty years, more than 570 coastal cities are poised to face frequent catastrophic flooding owing to sea level rise and more intense storms, while as many as 3.2 billion urban residents may run out of water by 2050. Other looming crises include soaring urban temperatures, the urgent need to transition away from fossil-fueled energy and transport systems, and plummeting rates of local biodiversity.

In response to the twin problems of resilient infrastructure needs and public fiscal constraints, the World Bank and an array of partner institutions from the Rockefeller Foundation to USAID have been ramping up programs to facilitate private investment in urban resilience. From a baseline of $10 billion across 77 cities in 2016, the World Bank aims to ‘catalyze’ investment of more than $500 billion into urban resilience projects across 500 cities by 2025. Read More »

COVID in Pakistan, the Role of Middle-Classes and the Unprecedented Demand for a New Social Contract

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A conversation with and Dr. Juvaria Jafri and Dr. Aasim Sajjad.

Aasim Sajjad Akhtar is Professor of Political Economy at the National Institute of Pakistan Studies, Quaid-e-Azam University and a founder of the Awami Workers Party (AWP).  His research has focused on state theory, informality, colonial history, rise of the middle classes and social movements in Pakistan. His latest book is ‘The Politics of Common Sense: State, Society and Culture in Pakistan’.

 Juvaria Jafri is a Lecturer in International Political Economy at City University. Her research is on financial development in Pakistan, including inclusive finance, fintech, and impact investing strategies. Her latest co-edited book is ‘Geofinance between Political and Financial Geographies: A Focus on the Semi-Periphery of the Global Financial System.’

Introduction

The full impact of the COVID-19 pandemic on developing countries is still unfolding. While many countries have managed to achieve some stability in eliminating the spread of the crisis, others are struggling on various fronts. In South Asia, India has received much global attention owing to the violence of a hasty lockdown which was imposed without warning and an accompanying social safety net. Other countries in the region including Bangladesh, Srilanka and Nepal also continue to grapple with the existential question of how to ensure that contagion control does not come at the expense of destroying livelihoods. 

In this interview we focus on the situation in Pakistan. We invited Aasim Sajjad and Juvaria Jafri to address some questions related to the current situation in Pakistan. The following four questions were designed to provide a glimpse of how the pandemic is impacting the existing socio-economic structure of the Pakistani economy particularly focusing on class inequality, fin-tech as a potential solution and the activist and citizen-led first historic demand for a long-term welfare package. 

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The latest significant step in the UK’s development agenda

Michael Haig DFiD CC BY-NC-ND 2.0

By Susan Newman and Sara Stevano

Johnson’s announcement on 16 June that Department for International Development (DfID) would be merged into the Foreign and Commonwealth Office (FCO) has been met with criticism and condemnation from aid charities, NGOs and humanitarian organisations. By institutionally tying aid to UK foreign policy objectives, the merger would shift humanitarian aid away from the immediate needs for relief and longer-term development.

This latest move to merge the departments should be seen as the latest, and a very significant, step in the restructuring and redefinition of British Official Development Assistance (ODA) to serve the interests of British capital investment abroad, that has been taking place over the last decade. These developments need to be considered within a wider shift in development policy that has been shaped by the demand for new assets by investors in the global North in the context of a global savings glut that has grown out of economic slowdown.Read More »

Financializing state capitalism: Exchanges, financial infrastructures & the active management of capital markets in China

DCE trading floorThe development of capital markets has been a core focus of financialization research. For Epstein, financialization ‘means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies’, while Pike and Pollard define financialization as the ‘growing influence of capital markets, their intermediaries and processes in economic and political life’. Other scholars also attribute a significant role to capital markets in financialization processes, be it in the dissemination of market-based financial activities and practices, the rise of shareholder value-oriented corporate governance, or ‘the increased ability to trade risk’. At the heart of and as a precondition of many aspects of financialization stand capital markets and their development. 

This is not only the case when it comes to financialization in advanced economies, but also with respect to the study of financialization in developing and emerging economies. Financialization processes are not uniform, they are rather variegated and refracted by national institutional settings that lead to different trajectories of financialization. As Lapavitsas and Powell emphasized, ‘both the form and the content of financialization vary according to institutional, historical and political conditions in each country’. This has also been picked up in debates about the relationship between financialization and the state. Previously, many scholars argued that financialization often results in a relative loss of state power vis-à-vis finance and the effects on developing economies are often described as potentially negative with financialization for instance decreasing their borrowing capacity and thereby policy space or deepening existing power asymmetries between states. But stemming from earlier discussions on transformations of the developmental state, more recent scholarship has highlighted that financial market development has often been actively facilitated by states. It argues that an increasing hybridization of financialization processes takes place in which state and (quasi-)state institutions often co-constitute financialization processes. 

Contributing to the growing literatures on variegated financialization and the state, in a paper titled ‘Financialization with Chinese characteristics? Exchanges, control and capital markets in authoritarian capitalism’ (recently published in Economy & Society) I argue that states are not only important actors facilitating financialization but can also exercise a considerable degree of control over financialization, thereby shaping its very form. Instead of a financialization process that follows a neoliberal logic and constrains state power, what we see in China is a ‘financialization with Chinese characteristics’ where the state actively tries to manage financialization and its social outcomes. Read More »

Book Review of Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East

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Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East, Cambridge: Cambridge University Press, 2018. ISBN: 9781108453158 (paper); ISBN: 9781108614443 (ebook)

Adam Hanieh’s book ‘Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East’ is one of the most important works on contemporary Middle East. The book analyses the specificity of the Gulf Cooperation Council (GCC) as part of global capitalism by focusing on the socio-economic structures of the six Gulf States, the interlinkages between them and other socio-economic and financial relationships with the rest of the world. Joining other scholars, Hanieh draws attention to the fact that scholarship on the Middle East including the GCC has inclined towards an exceptionalism which overwhelmingly focuses on the Middle East as a resource-rich country and a site of various conflicts. This reductive emphasis diminishes the various ways in which the region integrates the contemporary patterns of capital accumulation and historical lineages of familial and monarchic capitalism. As he mentions, even the modern concept of the ‘BRICS’ excludes the large population of the Middle East. Filling this vacuum, the book focuses on how the GCC absorbs and reproduces contemporary modalities of capital accumulation in diverse sectors including finance, agribusiness, real estate, retail, telecommunications, and urban utilities. The six states of Gulf Cooperation Council (GCC) including Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain have special linkages with global powers including the US, Israel, China and other Arab states. As important logistics hubs and sites of intermediate supply chains these states also connect with other countries.Read More »

Financing Needs of Developing Countries in the wake of Covid-19: The Role of Special Drawing Rights

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Since the outbreak of the Coronavirus, developing countries have been exposed to massive withdrawals of capital flows. In this post, I unpack the financial challenges these countries are facing and consider what role the Special Drawing Rights (SDRs) of the IMF can play in easing the burden. 

According to the calculations by the Institute for International Finance (IIF), investors withdrew almost $80 billion over recent weeks from emerging markets (Wheatley 2020). During periods of crisis, investors ‘fly to safety’ by selling risky assets and purchasing safe assets such as US Dollars and the US Treasury Securities. As international investors flee to dollars amidst the financial turmoil caused by the Coronavirus, there is an acute concern that low and middle-income countries will be short of dollars. Furthermore, the scale of the withdrawal suggests that these countries will face great difficulty in raising funds for their sovereign debt payments. Besides governments, firms based in developing countries are also expected to face difficulties in raising foreign currency-denominated debt in international capital markets. Meeting this growing demand requires a global lender of last resort that can provide dollars on request. Within the existing global financial order, the Fed and the IMF are two major organizations that are capable of meeting this demand. 

The Fed can provide dollar liquidity through swap lines, which allows global central banks access to dollars in exchange for their own currency with the promise that the principal, as well as the interest, will be paid later. When engaging in a swap operation, the Fed provides dollars to the recipient central bank for an equivalent amount of their currency at a given market exchange rate. After a certain period, the two central banks resell to each other their respective currencies at the initial exchange rate. The recipient central bank provides the dollars to financial institutions in its jurisdictions at the same maturity and rate. This way, swap lines provide dollar liquidity to recipient countries’ central bank and financial institutions (Bahaj and Reis 2018).Read More »

BNDES’ multidimensional retreat from the Brazilian economy

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Brazil is in a crisis again. The COVID-19 pandemic has spread across the country and political incompetence has led to a massive health crisis. Investment outflows have been rapid and the Brazilian real has depreciated dramatically. The Brazilian economy is set to contract again after three years of weak positive growth.

Brazil’s development bank Banco Nacional de Desenvolvimento Econômico e Social (BNDES) has announced some measures to deal with the financial instability caused by the COVID-19 pandemic. However, these measures are being criticised for being insufficient. Rather than being a temporary policy mistake that can be corrected easily, BNDES’ passive response is linked to the bank’s structural retreat from the economy over the past five years.

During the 2000s, BNDES was acclaimed as a catalyst of the country’s economic growth. Globally, developing countries such as Indonesia saw the rise of BNDES as something favourable and sought to mobilise their own national development banks.

By acting as a lender and a minority shareholder of major domestic companies, BNDES played a key role in Brazil’s state-activist growth model of which the observers have labelled liberal neo-developmentalism,’developmental neoliberalism,’ or ‘democratic state capitalism.’ Furthermore, BNDES actively supported national champions’ internationalisation strategy by financing export and investment activities. During and after the global financial crisis, BNDES’ role extended and was used by the government to carry out counter-cyclical operations. Read More »

Abolish Africa’s Sovereign Debtors’ Prisons Now

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By Ndongo Samba Sylla and Peter Doyle

This piece was written before the Coronavirus outbreak. It is a timely proposal of action. Given the high exposure of the developing world to the virus in contexts of medical and other logistical shortcomings, the damage to their productive capacity is likely to be much more severe than for the advanced world.  This fact is already reflected in particularly sharp virus-stirred capital outflows from these countries.  All this greatly increases their exposure to the present global structures for sovereign insolvency, and the urgent need for those structures to be radically reformed—as the authors propose with the Pre-Emptive Sovereign Insolvency Regime (PSIR).

In a radical call for reform of the IMF’s pro-creditor and anti-growth approach to indebted countries in Africa, Ndongo Sylla and Peter Doyle argue that the continent has a choice to make. Creditors, using the IMF, must be stopped from forcing devastating output losses by imposing high primary surpluses.

Within a decade, just to keep up with the flow of new entrants into its labour markets, sub-Saharan Africa needs to create 20 million new jobs every year. This is a huge challenge. But it is also a thrilling opportunity—to harness the energy and creativity of all of Africa’s young.

However, after it reviews these issues in Africa, the IMF’s immediate message—literally in the same sentence—is to pivot to ‘budget cuts to secure debt sustainability!’

That is plain wrong. For Africa to meet its development objectives, the IMF must radically change its pro-creditor anti-growth approach to highly indebted/insolvent countries.Read More »