Return of the Bond Villains

In 1825 a Javanese prince named Diponegoro touched off a five-year, ultimately unsuccessful, war of resistance against the Dutch colonial government. As detailed by Peter Carey in his biography of Diponegoro, one of the causes was a land-rent system imposed by the Dutch on the Javanese sultanate of Yogyakarta. Under this system, landowners were encouraged to rent their estates directly to European plantation owners for the production of cash crops. This had a disruptive effect on the local economy and the Governor-General ordered it halted. But there was a catch. As the land-rent system was unwound, the Javanese landowners were forced to buy out the plantation owners in order to get control of their land back.

Many had already used the rents to buy imported luxury goods, and they fell into debt paying out large and often inflated sums to the plantation owners. The sultan was expected to back-stop these debts using payments he received from the Dutch for granting them the right to collect revenue on the kingdom’s toll roads. This created a situation where a Javanese merchant travelling from Yogyakarta to Semarang had to pay fees to the Dutch toll road agents. A portion of those fees then went to the sultan, who used them to back-stop debts being incurred by Javanese landowners as they bought back their own land back from European plantation owners.

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Covid-19 and The Myth of Convergence: The West, the Rest and the urgent need for fiscal space in the Remainder

Imagining recovery, while a pandemic rumbles on, is an ominous task. But governments around the world have been forced to contend with this challenge. Several African, Asian and Latin American economies were in precarious financial positions before the pandemic hit. Fluctuations in global commodity prices in recent years and mounting trade deficits had already forced several African countries to request the International Monetary Fund (IMF) for a range of support mechanisms including credit facilities. Debt was already reaching alarming levels. The pandemic made economic dependencies more salient, with Zambia plunging towards becoming Africa’s first pandemic-related private debt default

The recent thrust of research championing possible convergence (often based on questionable and selective use of data) between ‘developed’ and ‘developing’ countries ignores the vast range of economic trajectories of former colonies. In slapdash cross-country economic studies, a strategic use of averages and unreliable categorisation is often used to draw generalisations about large-scale change. Sweeping claims made about a rising ‘developing’ world often fail to isolate China’s rise. There is rarely any acknowledgment that most countries’ economies remain undiversified and deeply dependent on foreign actors. The data used to make the case for convergence often relies on GDP and human development indicators, rarely mentioning let alone measuring the structural transformation of economies. Structural transformation remains one of the essential facets of economies that have ‘caught up’ historically. Whether countries can retain fiscal space after this crisis will inevitably depend on the nature of structural transformation and how that has shaped national growth and dependency within the global economy.

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Where Is the Risk in the COVID Economy? A look at shadow banking

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By Janet Roitman and Andrew Moon

We are witnessing a public bailout of the private sector that dwarfs the bailout response to the 2007­–2008 Great Recession. Compared to the $700 billion Troubled Asset Relief Program (TARP) implemented in 2008, today’s mobilization of public funds through the Coronavirus Aid, Relief, and Economic Security (CARES) Act amounts to a whopping $2.3 trillion, thus far.

As we know from media coverage of the CARES Act, today’s relief programs are intended to support payrolls, corporate operations, and small business overhead. What we don’t hear from the mainstream media is news on how these relief programs serve, once again, to privatize profits and socialize losses.

Unfortunately, few people are training their sights on that process — that is, on the actual mechanisms by which public funds are being used to underwrite not payrolls or job creation, but rather new sites of capital accumulation.

Just where are these new sites?Read More »

The perils of monetary policy in the global periphery during the Covid-19 pandemic

For several decades, countries of the periphery have been deeply in the grip of debt. The Covid-19-induced crisis has severely accelerated indebtedness and thus increased financial vulnerability. Recent policy measures by peripheral governments and central banks have brought momentary relief, but ultimately represent a manifestation of the interests of finance capital to get the most out of peripheral economies as long as it is still possible. 

Because of the dependence of their currencies on international capital flows, political autonomy in peripheral economies is extremely limited due to the possible effects of political decisions on the movement of such flows. The enormous power of financial markets over monetary policy in the periphery is again becoming evident during the current crisis. The crisis in the global periphery is generally much more severe than in the central countries, not only because of often inadequate health systems that have been abandoned under three decades of neoliberal policy. As peripheral assets do not serve as a store of value, “investors” withdrew almost 100 billion dollars from “emerging markets” within three months, constituting a historically unprecedented capital flight. Factors such as the deflation of prices of primary resources, the fall in external demand for manufactured products, and the fall in cash flows due to decreasing remittances and tourism mean that financial pressure has increased even more. Consequently, peripheral currencies significantly depreciated with the beginning of the crisis, in some cases by as much as 20-30%, as in the cases of Brazil and Mexico.

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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 »