Jomo Kwame Sundaram’s Blog

Rapid financial globalization is due not only to financial innovations, but also to choices made by national policymakers, often with naïve expectations, trusting promoters’ promises of steady net inflows of financial resources. Rapid financialization has involved fund or asset investment managers operating internationally, managing assets for transnational institutional and retail investors and investing a growing share of transnational financial assets. Even retail investors are attracted by such fund managers offering attractive alternatives for investing in various asset markets, including index funds. To attract foreign institutional investments interested in capturing more rents, they demand more favourable terms and conditions, thus changing…

Smoking-related diseases are the major causes of premature death worldwide. Every year, six million smoking-related deaths are reported worldwide. If current smoking trends persist, 8 million deaths can be expected by 2030, of which four-fifths will occur in lower- and middle-income countries. Start them young Many studies show that smoking is typically learned and started during adolescence. Owing to nicotine addiction, the earlier someone starts to smoke, the higher the likelihood he or she will continue the habit into adulthood, and the smaller the likelihood of stopping smoking. Early smoking initiation is associated with greater risk of developing lung cancer.…

Large transnational corporations (TNCs) are widely believed to be paying little tax. The ease with which they avoid tax and the declining corporate tax rates over the decades have deprived developing countries of much needed revenues besides undermining public faith in the tax system. The rise of digital giants, such as Google, Facebook, Amazon and Apple, is an additional concern for all countries. Digitalization makes it hard to establish where ‘production’ takes place. Hence, digital tech TNCs’ revenues typically bear little relation to reported profits and tax bills. Corporate tax rules favour rich countries Through the OECD, developed economies have…

The US-China trade war has flared up again less than two weeks after US President Donald Trump delayed new tariffs of US$160 billion on Chinese imports until December, purportedly to avoid harming the holiday shopping season. Ratcheting up war talk Earlier, after two days of trade talks without much progress, Trump claimed on 1 August that China had not kept its promise to buy more US farm exports. He then announced 10 per cent tariffs on US$300 billion worth of Chinese imports, besides the 25 per cent already levied on US$250 billion of goods from China. China’s Commerce Ministry responded…

Recently, Christine Lagarde, outgoing Managing Director of the International Monetary Fund (IMF), argued that developing ‘countries need a seat at the table’ to design rules governing international corporate taxation. This acknowledges recent IMF findings that developing countries lose approximately USD200 billion in potential tax revenue yearly, about 1.3 per cent of their GDP, due to companies shifting profits to low-tax locations. Oxfam estimated in 2018 that extreme poverty could be eradicated for USD107 billion annually, i.e., about half the lost revenue. Corporate taxation? This comes on top of ‘beggar thy neighbour’ tax competition, encouraged by past policy advice from international financial institutions, such as the…

The harmful effects of falling corporate tax rates have been acknowledged in a recent International Monetary Fund (IMF) research paper. This trend, since the early 1980s, has been especially detrimental for developing countries, which rely on direct taxation much more than developed economies. Acknowledging that existing international corporate tax rules are unfair, set by developed country governments scantly considering their effects on poor countries, IMF Managing Director, Christine Lagarde, called for a new systemearlier this year. BWIs and corporate tax rates However, neither the IMF research nor Lagarde say anything about why corporate tax rates have been falling across all country groups for over three decades.…

According to their own internal evaluations, both the World Bank (WB) and the International Monetary Fund (IMF) have huge credibility deficits due to the policy conditionalities and advice they have dispensed to developing countries in recent decades. Washington Consensus Taking advantage of debt distress in many developing countries early in the 1980s, the WB championed neoliberal reforms, telling countries to ‘privatize, liberalize and globalize’. The IMF added ‘stabilization’ – primarily cutting government expenditure to contain inflation and balance of payments deficits – to the list of conditions for countries to qualify for BWI financial resources. Accepting these packages of WB…

July 2019 saw the 75th anniversary of the historic conference of 44 countries held at the Bretton Woods (BW) resort in New Hampshire during July 1-22, 1944. Conference At BW, John Maynard Keynes, representing the UK, and Harry Dexter White, for the USA, both sought a new international monetary system following the Great Depression, which many attributed to the functioning of the gold standard before World War II. Keynes wanted a powerful global central bank, to be called the Clearing Union, and a new international reserve currency, ‘bancor’, while White favoured a more modest lending fund and a greater role…

International financial institutions (IFIs) have typically imposed wide-ranging policy reforms – called ‘conditionalities’ – in exchange for country governments to secure access to financial assistance. While IFIs may demand anti-corruption policies, other IFI policy conditionalities, such as the privatization of state-owned enterprises (SOEs), can create new rentier opportunities, undermining government will and capacity to curb corruption. IMF cure worse than disease? Statistical analysis of International Monetary Fund (IMF) conditionalities on 141 developing countries from 1982 to 2014 has found that requiring privatization of SOEs has undermined anti-corruption efforts. The study finds that IMF conditions requiring SOE privatization undermine anti-corruption efforts, both…

On 17 June, a Facebook white paper proposed a new global digital currency it plans to launch in the first half of 2020. The Libra will be managed by a ‘not for profit’ Swiss-based Facebook-led consortium of ‘for profit corporations’, with Uber, eBay, Lyft, Mastercard and PayPal among its founding members. Mixed reaction The initiative has received mixed reactions. While a few have cautiously welcomed it, most commentators want it stopped or tightly regulated, with one calling it a ‘totally insane idea’. Even President Trump has declared he is ‘not a fan’ of cryptocurrencies, which facilitate illegal activity, adding, “If Facebook and other companies…