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1. Lowering the Cost of Capital for Climate and SDG Finance in Emerging Markets and Developing Economies (EMDEs)

Author:
Jeffrey Sachs, Lisa Sachs, Ana Maria Camelo Vega, and Bradford M. Willis
Publication Date:
04-2025
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Today, the world’s fastest-growing economies face the steepest borrowing costs — even for clean energy projects with solid fundamentals. This is not a function of global capital scarcity. Trillions are available. The problem lies in systemic barriers that prevent capital from flowing to where it’s most urgently needed. The high cost of capital in EMDEs not only undermines critical financing for the energy transition and sustainable development; it also limits the ability for US- and EU-based financial institutions to invest in and finance projects in EMDEs, despite institutional and stakeholder appetite and interest for transition finance. This paper provides a holistic diagnosis of the structural forces inflating the cost of capital in EMDEs – including sovereign credit ratings, investor risk perceptions, development finance mandates, and regulatory norms – and it outlines ten actionable solutions to unlock long-term, affordable finance for climate and sustainable development – at the speed and scale required by both global goals and national ambitions. Each of the proposed approaches deserves careful discussion, consideration, and exploration; they are presented in this paper as a roadmap for discussion, including in the context of relevant global discussions on financing climate action and sustainable development, including the UN Financing for Development Agenda, the UNFCCC COP process, and the G20 Sustainable Finance Working Group.
Topic:
Development, Emerging Markets, Climate Finance, Sustainable Development Goals, and Capital
Political Geography:
Global Focus

2. The Gendered Impact of Social Norms on Financial Access and Capital Misallocation

Author:
Arti Grover and Mariana Viollaz
Publication Date:
01-2025
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
This paper provides evidence on the nature of financial constraints faced by women entrepreneurs, especially in contexts of stringent social norms. Using micro-data from the World Bank Enterprise Surveys for 61 countries, the analysis shows that formal firms managed by women do not face credit constraints on the extensive margin. They are equally likely to apply for credit as their male counterparts and experience lower rates of credit rejection, with a higher likelihood of opening credit lines. However, on the intensive margin, firms managed by women receive lower credit amounts, indicating signs of credit constraints. This disparity in access to credit cannot be explained by gender differences in risk profiles, profitability, or productivity. However, firms managed by women have lower sales per worker, suggesting challenges in accessing product and labor markets. The paper finds suggestive evidence of capital misallocation based on gender, particularly in countries with more restrictive gender and cultural norms. Firms managed by women demonstrate a 15 percent higher average return on capital compared to firms managed by men, indicating the potential benefits of increased access to credit for women-led businesses. These findings emphasize the importance of addressing gender-specific constraints to accessing finance and promoting gender-inclusive policies to enhance firm growth and reduce capital misallocation.
Topic:
Culture, Fiscal Policy, Credit, Capital, Gender, and Social Norms
Political Geography:
Global Focus

3. The Profitability of Bank Capital and Household Debt

Author:
Hyun Woong Park
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
When does the banking sector profitability exceed the industrial sector profitability? In a benchmark, counterfactual scenario where banks lend to industrial firms only, the industrial profitability exceeds the bank profitability unless the banks’ financial intermediation technology is sufficiently advanced and the industrial sector’s leverage ratio is sufficiently high. In a more realistic scenario where the banks lend not only to the industrial firms and but also to households, which rely on bank loans for housing, vehicle, education, etc., the bank profitability exceeds the industrial profitability when the household sector’s total debt services are sufficiently large, regardless of the levels of the banks’ financial technology and the industrial sector’s leverage ratio. It suggests that the households’ debt and interest payments are potentially a important source of the bank profitability exceeding the industrial profitability. That is, the bank capital beat the industrial capital in terms of profitability by exploiting the households’ financial conditions that force them to rely on debt for their full reproduction. Lastly, this result is empirically confirmed through the ARDL cointegration analysis with the U.S. quarterly data for 1984–2020.
Topic:
Debt, Economy, Capital, and Banking
Political Geography:
Global Focus

4. Rethinking Monopoly as a Power Relation: The Shift from Market to Intellectual Monopoly

Author:
Cecilia Rikap
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The critical literature on monopolies, from monopoly capital to recent contributions, focuses on the organization that concentrates either market power, capital or property rights. I complement this literature by conceptualizing monopolies as a power relation, which enables me to integrate different ways in which the term is used, from capitalists’ monopoly over the means of production to intellectual monopolization. As I explain here, some firms have developed greater capacities to systematically monopolize intangibles that are essential for organizing labour beyond their owned assets and for controlling demand. Coupled with institutional, political and technological changes, larger absorptive and management capacities to produce and capture knowledge and information resulted in firms’ technological differentiation. The systematic winners of the innovation race hold persistent intellectual monopolies while other firms become subordinate due to their lack of technical autonomy. From this perspective, (intellectual) monopoly power is essential for understanding the distribution of value in capitalism.
Topic:
Political Economy, Labor Issues, Capitalism, Monopoly, Capital, Power Relations, and Value Capture
Political Geography:
Global Focus

5. The Fate of the State in a Changing World

Author:
V. Yegorov
Publication Date:
12-2023
Content Type:
Journal Article
Journal:
International Affairs: A Russian Journal of World Politics, Diplomacy and International Relations
Institution:
East View Information Services
Abstract:
The main phenomenon of the social mainstream is the institution of the state and its evolution (“shrinking”), associated with the increased activity of civil society and a reevaluation of the role of the market. Postmodernists have no faith in the future of the state. They presuppose that institutions of social organization will be replaced by a network organization of individuals tied together culturally, informationally, and spiritually, with a higher level of identities.1 Their camp includes liberal thinkers who believe in the inevitable “supplanting [of] the primacy of the nation-state by transnational corporations and organizations, and eroding [of] local cultures and traditions through a global culture.”2 The social nature of humans is deeply rooted in the past, when collective forms of human existence were a sine qua none of survival, while the state was a “product” of social organization. In the pre-state era, it was supported by the “cage of norms” (customs, traditions, etc.).3 According to Thomas Hobbes, a main factor of the emergence of states was the “war of every man against every man,” as well as the implementation of the institution of private property. The legal space and the state ensure its inviolability. The liberal order invariably produced a dichotomy between the interests of society and the institutions represented by the state on the one hand, and the rights and freedoms of the individual on the other. The logic of this social order in its extreme form is Libertarianism, with its slogan of “less government.” The dichotomy of the interests of the state and of the individual crops up in a dialectical contradiction resolved with the help of effective mechanisms of mutual obligations of individuals and society as a whole (the “ethical state,” according to Paul Collier).
Topic:
Sovereignty, Networks, State, and Capital
Political Geography:
Global Focus

6. The Impact of Patient Capital on Job Quality, Investments and Firm Performance: Cross-Country Evidence on Long-Term Finance

Author:
Christoph Sommer
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Long-term finance is not only important for development and growth, but also has the potential to contribute to better jobs. This paper provides empirical evidence to what extent long-term loans affect job quality, firms’ investments in fixed assets and innovation, as well as firm performance.
Topic:
Finance, Economic Growth, Investment, and Capital
Political Geography:
Global Focus

7. Shared Capital Initiatives – for Redistribution and Recognition

Author:
Sanjay Reddy
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center on International Cooperation (CIC)
Abstract:
Shared capital, defined as a broadly distributed pattern of rights over productive assets, can be a powerful instrument to address economic and social inequalities. We argue that initiatives to bring about shared capital can foster both redistribution and recognition, and thereby bring about more inclusive and peaceful societies. Based on experience, we suggest moreover that they are feasible and can be advanced by suitable policies and actions—at local, national, and global levels. Shared capital can involve distribution of various rights of an asset, including those of use, control, income, and transfer. This paper considers nine cases which feature some experience of shared capital involving various kinds of rights being distributed and relate these to different kinds of assets. In almost every case, the state has an important role to play in facilitating the distribution of rights.
Topic:
Regulation, Inequality, Peace, Sustainability, Capital, Redistribution, and Inclusion
Political Geography:
Global Focus

8. The Soft Touch of International Financial Regulation: Status, Flaws and Future

Author:
Niall O'Shaughnessy
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Goettingen Journal of International Law
Institution:
The Goettingen Journal of International Law
Abstract:
The 2008 global financial crisis focused attention on the relationship between the behaviour of international financial institutions and the rules they follow. Many banks in the US and Europe failed, in part, due to their inability to absorb the fallout of the US mortgage market collapse. If international financial institutions could not protect themselves from the cycles of the market, how come regulators were unable to do so either? The most relevant instrument of international financial regulation for understanding the 2008 crisis is the Basel Accords, the rules that specify how much capital a bank should always hold in reserve. However, these rules are ‘soft law’ and so, non-binding. It is a myth of course that soft law is the only way to regulate international finance, as many scholars argue. Despite numerous rounds of reform, the Basel Accords have always been inadequate. The purpose of this paper is to account for the flaws of the Basel Accords and the role that soft law plays in creating those flaws. This paper also analyses the competing theories behind the rise of soft law within financial regulation and the ‘political economy’ explanation is endorsed. The final section of the paper discusses the future of financial regulation and soft law, as well as highlighting innovations from outside the hard/soft law dichotomy and outside the Global North. This paper concludes by stating that the theory behind soft law does not play out in practice within finance and that it remains in place because it suits the interests of large institutions and powerful states. At the same time, a return to Bretton Woods or a new World Financial Organization is problematic and, as such, we must look beyond the hard/soft law debate and embrace the work of the Global South and East.
Topic:
Markets, Financial Crisis, Regulation, Capital, and Banking
Political Geography:
Global Focus

9. Capital Account Regulation and National Autonomy: The Political Economy of the New Welfare Economics

Author:
Luiza Peruffo, Pedro Perfeito da Silva, and Andre Moreira Cunha
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
Contexto Internacional
Institution:
Institute of International Relations, Pontifical Catholic University of Rio de Janeiro
Abstract:
The 2007-2009 Global Financial Crisis (GFC) eroded the consensus around the benefits of capital mobility within mainstream economics. Against this background, this paper discusses to what extent the new mainstream position on capital flow management measures, based on the New Welfare Economics, expands the policy space of developing and emerging economies (DEEs). This paper argues that the new position can be classified as an embedded neoliberal one, given that it keeps liberalization as its ultimate goal, while nonetheless accepting to mitigate some of its harmful consequences. After comparing the capital account policies of China and Brazil, this paper concludes that the policy prescriptions of the New Welfare Economics do not lead to higher levels of national autonomy for DEEs and are likewise unable to curb financial instability in these countries.
Topic:
Global Political Economy, Neoliberalism, Autonomy, and Capital
Political Geography:
Global Focus

10. Sovereign wealth funds are growing more slowly, and governance issues remain

Author:
Julien Maire, Adnan Mazarei, and Edwin M. Truman
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
In the last two decades, sovereign wealth funds (SWFs)—funds accumulated by a government that are invested in whole or in part abroad to benefit the country in the future—have faced increased public scrutiny over their investment patterns, financial results, and governance. This Policy Brief updates and expands a prototype scoreboard rating the transparency and accountability of SWFs, which Truman established in 2007. This fifth edition of the scoreboard shows that the average scores continued to improve for the 64 SWFs examined, but governance issues remain. New funds have emerged—many of them government holding companies or strategic investment funds—but the growth of assets under management by SWFs has slowed, in some cases partly because of withdrawals to help finance expenses related to the COVID-19 pandemic, raising questions about their future role.
Topic:
Government, Markets, Sovereign Wealth Funds, Governance, Regulation, and Capital
Political Geography:
Global Focus