Jomo Kwame Sundaram’s Blog

With growing economic conflicts triggered by US President Donald Trump’s novel neo-mercantilist approach to overcoming his nation’s economic malaises, many voices now argue that bad free trade agreements are better than nothing. After US withdrawal following Trump’s inauguration in early 2017, there is considerable pressure on signatory governments to quickly ratify the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the successor to the TPP. To ratify or not to ratify Undoubtedly, freer trade is attractive, especially to consumers desiring lower import prices. Yet, it is now generally acknowledged that no country has ever developed without policy interventions, typically involving trade, to…

The emergence and growth of financialization from the 1980s has been driven by several factors operating at various levels – national and international, ideological and political, and of course, technological. The 1971 collapse of the Bretton Woods (BW) international monetary system arguably paved the way for financial globalization. Cross-border financing The BW dollar-gold standard had provided the basis for the relatively stable post-World War Two exchange rate system; ‘regulated’ capital flows of the BW system gave way to a new international financial order based on free-floating exchange rates and freer cross-border capital flows. These developments changed banking in two ways.…

Over recent decades, the scope, size, concentration, power and even the purpose and role of finance have changed so significantly that a new term, financialization, was coined to name this phenomenon. Financialization refers to a process that has not only transformed finance itself, but also, the real economy and society. The transformation goes beyond the quantitative to involve qualitative change as finance becomes dominant, instead of serving the needs of the real economy. Financialization involves the growth and transformation of finance such that with its hugely expanded size, scope and concentration, finance now overshadows, dominates and destabilizes the productive economy.…

After the failure and abuses of privatization and contracting-out services from the 1980s, there has been renewed appreciation for the role of the state or government. Earlier promoters of privatization have taken a step backward, only to take two more forward to instead promote public-private partnerships (PPPs). PPPs for most purposes PPPs are essentially long-term contracts, underwritten by government guarantees, with which the private sector builds (and sometimes runs) major infrastructure projects or services traditionally provided by the state, such as hospitals, schools, roads, railways, water, sanitation and energy. PPPs are promoted by many governments associated with the Organization for…

Over the last four decades, growing concentration of market power in the hands of oligopolies, if not monopolies, has been greatly enabled by ostensibly neo-liberal reforms, worsening wealth concentration and gross inequalities in the world. The ‘counter-revolution’ against Keynesian and development economics four decades ago, which inspired the Washington Consensus, claimed to promote economic liberalization, including market competition, but strengthening property rights entitlements, especially for intellectual property, has been far more important. Such oligopolistic and monopolistic trends have recently accelerated in much of the world, while already feeble anti-trust efforts have lagged far behind. Over a century after US President Teddy Roosevelt’s…

The World Bank has successfully promoted its ‘Maximizing Finance for Development' (MFD) strategy by embracing the United Nations' Sustainable Development Goals, internationally endorsed in September 2015. It has also secured support from the G20 of twenty biggest economies, and effectively pre-empted alternative approaches at the third UN Financing for Development summit in Addis Ababa in mid-2015. As the main ‘show in town', developing countries will need to address the MFD's implications by responding pro-actively and collectively to address the new challenges it poses. Managing new macro-financial challenges As the MFD agenda privileges foreign investors and portfolio inflows, multilateral development banks…

At the risk of reiterating what should be obvious, the question of private or public ownership is distinct from the issue of competition or market forces. Despite the misleading claim that privatization promotes competition, it is competition policy, not privatization, that promotes competition. Privatization the problem, not the solution Instead, privatization has typically been accompanied by collusion, which undermines competitive pricing. Formal and, more commonly, informal collusion is rife. Informal collusion is more likely among those involved in public or transparent bidding to provide privatized or contracted-out services. Transparent institutions and arrangements, such as public auctions and open, competitive bidding…

The World Bank's Enabling the Business of Agriculture (EBA) project, launched in 2013, has sought agricultural reforms favouring the corporate sector. EBA was initially established to support the New Alliance for Food Security and Nutrition, initiated by the G8 to promote private agricultural development in Africa. The New Alliance has been touted as "a new model of partnership" for agricultural transformation in Africa. The Bank has used the EBA to address the land issue in developing countries, particularly in Africa. The effort is strongly supported by the US and UK governments as well as the Gates Foundation, all strong proponents…

In most cases of privatization, some outcomes benefit some, which serves to legitimize the change. Nevertheless, overall net welfare improvements are the exception, not the rule. Never is everyone better off. Rather, some are better off, while others are not, and typically, many are even worse off. The partial gains are typically high, or even negated by overall costs, which may be diffuse, and less directly felt by losers. Privatized monopoly powers Since many SOEs are public monopolies, privatization has typically transformed them into private monopolies. In turn, abuse of such market monopoly power enables more rents and corporate profits.…

With the Washington Consensus from the 1980s being challenged, President Donald Trump withdrawing the United States from the Trans-Pacific Partnership (TPP), and China pursuing its Belt and Road Initiative (BRI), most notably with its own initiatives such as the multilateral Asian Infrastructure Investment Bank (AIIB), the political and economic landscape in East Asia continues to evolve. Jomo Kwame Sundaram was interviewed about likely implications for developing countries in the region and beyond. Belt and Road Initiative  What do you think of world growth prospects and China's Belt and Road Initiative? Although there are some hopeful signs here and there, there…