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71. Structural Changes and Dominance of Finance in Contemporary Capitalism

Author:
Sunanda Sen
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Structural changes in economies as have taken place in in majority of economies in terms of the sector-wise contribution to their aggregate output as well as employment include a rising share of the services sector, often exceeding one-half of the GDP. Services include, in addition to other activities, the high value financial activities, having weights disproportionately large. Thus the rising share of services to the GDP implies simultaneous rise in share of financial activities to the GDP as well. Analyses in literature explain structural changes by relative profitability as prime mover of changes, similar to financialisation of economies. In this a circuitous link between socio- political and economic-forces and the changing weight (power relations) can be observed. With capitalism taking a multi-layered structure, the path of finance to dominance may be along a variety of trajectories including vertical shifts from real to financial activities. The quantitative strength of finance is reinforced by socio political forces as alliances. The path may face a crisis led by fundamental uncertainty where agents are ignorant of the future, and the path keeps changing by actions of agents themselves. With knowledge unattainable, ‘conventions’ help agents, as Keynes held, the calming of nerves, forming collectively a “conventional process of expectation formation”. This forms a major theoretical innovation of Keynes which brings in expectation formation and decision making by agents based on custom, habit, tradition, instinct as relevant in a model of human agency faced with fundamental uncertainty.
Topic:
Political Economy, GDP, Employment, Capitalism, Finance, and Keynes
Political Geography:
Global Focus

72. Financing Women, Peace and Security: A Review of WPS National Action Plans from 2005 to 2022

Author:
Our Secure Future
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Our Secure Future
Abstract:
This publication is a policy brief accompanying an upcoming in-depth report on financing Women, Peace and Security (WPS) National Action Plans (NAP). This brief provides an overview of WPS NAPs, as well as the current state of funding for WPS NAP implementation, and a breakdown of this data by region. Stay tuned for the upcoming report to learn more about financing WPS NAPs. Key Findings: • As of early 2023, 31 countries out of 101 have estimated the amount of money required to implement WPS NAP activities. Available information does not illuminate whether these funds are secured. • More than 50 WPS NAPs out of 101 mention that a budget is needed to implement WPS activities, but do not include specification of funding. • The majority of WPS NAPs with budget estimates identify responsible parties for activity implementation, including ministries and/or government institutions, predominantly related to foreign affairs and gender equality.
Topic:
Security, Foreign Policy, Budget, Women, Finance, and Peace
Political Geography:
Global Focus

73. Development Finance at a Turning Point: Effects and Policy Recommendations

Author:
Kathrin Berensmann, Sabine Laudage Teles, Christoph Sommer, and Yabibal M. Walle
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Development finance is at a turning point, as the macroeconomic environment has changed profoundly and the financing gap for low- and middle-income countries has widened. The events that led to this new situation are the multiple crises that the global economy is facing, such as the climate crisis, the COVID-19 crisis and the war in Ukraine. As a result, interest rates have risen sharply over the past year and are not expected to decline anytime soon. High interest rates further restrict low- and middle-income countries’ access to international financial markets by making borrowing more expensive. At the same time, debt levels in several countries are rising to levels that are almost impossible to repay. Poorer countries find themselves in a trap where financing the Sustainable Development Goals (SDGs) becomes a distant goal for them. To “get back on track” in financing the 2030 Agenda and the SDGs, a number of reform proposals have been put forward within several processes and initiatives, including the Financing for Development (FfD) process, the Bridgetown Initiative and the Macron-led Paris Summit. Despite being initiated by different actors, these proposals all highlight the importance of reforming the international financial architecture in view of the changed macroeconomic environment. The Hamburg Sustainability Conference in June 2024, the United Nation’s Summit of the Future in 2024 and the next FfD Conference in 2025 should be used to strengthen and accelerate ongoing reform processes and come up with new, innovative and bold proposals to reshape development finance in these challenging times. Against the background of the multiple crises and its effects, our key recommendations for the reform of development finance are as follows.
Topic:
Debt, Development, Reform, Finance, Sustainable Development Goals, and Multilateral Development Banks (MDBs)
Political Geography:
Germany and Global Focus

74. Health Financing in Times of Multiple Crises: Analysis and Recommendations

Author:
Christoph Strupat, Pooja Balasubramanian, Srinivasa Reddy Srigiri, and Anna-Katharina Hornidge
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
The COVID-19 pandemic has exposed the fragility of health systems and highlights the need for renewed efforts to finance pandemic preparedness, prevention and response (PPR) mechanisms, and universal health coverage (UHC). Two lessons emerge from this global health challenge. First, it has shown that global problems need global solutions, as well as the agency of local and national actors to make them work, so it is recommended that public health be considered a global public good. This requires solidarity between rich and poor countries to attain a globally “highest attainable standard” for managing pandemics and other public health emergencies. The provision of such a global public good requires substantial public resources. Furthermore, the focus should not only be on preventing the spread of diseases but also on detecting and fighting infectious diseases at their source. The second lesson is that prevention is a good investment, as it costs less than remedial interventions at later stages. Health systems can be considered as the means by which health priorities, such as pandemic PPR and UHC, can be operationalised. Studies show that health systems that could effectively leverage both robust health security core capacities (e.g. laboratories) and fundamental UHC interventions (e.g. accessible health facilities) were often in a better position to protect their citizens against the negative impacts of the COVID-19 pandemic. Focusing on the landscape of health financing in low- and middle-income countries (LMICs), it becomes clear that during the COVID-19 pandemic there was a substantial increase in international health financing. However, continued high out-of-pocket expenditure (OOPE) in LMICs points to a structural imbalance in health financing, which is one of the major barriers for achieving SDG3. Further contribution from international development assistance and an increase in domestic government expenditure by LMICs through improved mobilisation of domestic resources is therefore impera-tive. Funding gaps to achieve PPR and UHC in LMICs are small in relation to the projected costs of a pandemic such as COVID-19. However, as global debt levels soar, fiscal spaces to close these funding gaps become smaller. The following policy options for governments and international development partners should be considered to protect and improve spending on health in times of shrinking fiscal spaces: reallocation within budgets towards health, better priority-setting of health financing, and greater use of debt-to-health swaps, health taxes and national health insurance schemes. Importantly, investment in health is critical not just for the health benefits, but also because of the positive socio-economic impacts that result, in excess of the level of investment. Improved well-being and health outcomes translate into higher productivity and income, with a benefit–cost ratio of nine for low-income countries and 20 for lower-middle income countries. Given the high rates of unemployment in many LMICs, investments that create jobs in the healthcare sector are also beneficial for other sectors. Evidence shows that for every healthcare professional job that is created, 3.4 jobs are created on average in other sectors. As a large proportion of healthcare workers is female, these new jobs can be an opportunity for young women, in particular, and can help to promote female empowerment and gender equality. Altogether, these long-term benefits affirm that investment in health can enable large spillover effects on the social and economic dimensions of sustainable development and the implementation of the 2030 Agenda for Sustainable Development.
Topic:
Health, Governance, Finance, Crisis Management, and COVID-19
Political Geography:
Global Focus

75. Climate, Finance, and Geopolitics: Human Self-delusions and the Challenges for Europe

Author:
Sylvie Goulard
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Institut français des relations internationales (IFRI)
Abstract:
The combination of geopolitical tensions, climate disruption, and the growing role of finance in the economy is taking us into uncharted territory. Until recently, each of these subjects was handled separately, but they are now inextricably linked by two shared characteristics: the gravity of the threat, and the fact that they all lay bare the scale of human self-delusions. There are also interactions between them: between climate and finance, since states have a tendency to pass this “hot potato” onto the private financial sector; and between geopolitics and finance, because money remains the “sinews of war” and debt is a vulnerability, especially for any actor wanting to exercise full sovereignty. These issues are particularly acute for the European Union (EU) that is still a work in progress. Key Takeaways: Finance, climate science and geopolitics were once separate subjects. Now linked, their commonality is that they reveal the illusions of those who, in the 20th century, thought they had mastered finance, tamed nature, and prevented war. The financialization of the economy, climate change and the resurgence of armed conflict have exposed these illusions and call for a new awakening. With planetary limits about to be reached, it will not be enough to rely on finance alone. Similarly, the rise in geopolitical risks calls for resources which, in a context of high indebtedness, are no longer available to governments. For Europe, which is facing these challenges without being solidly constituted, the challenge is even greater, but across the globe it is high time to ask questions about exacerbated national sovereignty and the lack of respect by governments for the commitments they have made.
Topic:
Climate Change, European Union, Finance, Economy, and Geoeconomics
Political Geography:
Europe

76. Who Finances Energy Projects in Africa?

Author:
Oyintarelado Moses
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Public and private energy finance to Africa from countries in the Group of Twenty (G20) and multilateral development banks (MDBs) from 2012 to 2021 totaled $345.76 billion, according to this paper’s findings. Amounting to an average of about $35 billion per year, this finance was within the estimated $31.5–$45 billion range necessary to address Africa’s annual energy finance gap. However, it was distributed unevenly, with ten countries receiving 77 percent of all finance over the ten-year period. Some inequity may be a consequence of differing domestic energy demands, investment environments, or natural resource endowments across countries. However, the resulting distribution of energy finance over the past decade was such that many African countries—home to hundreds of millions of people—were left with substantial gaps in their financing necessities. This paper also shows that only a few countries and multilateral financing entities—including China, France, Italy, the United States, and the World Bank Group—supplied the majority of energy finance to Africa between 2012 and 2021. In many ways, this finding is unsurprising; however, it serves as a reminder that significant amounts of energy finance are subject to the policies and priorities of a small number of countries and institutions. To that point, this paper demonstrates a near total retrenchment of funding for coal projects beginning around 2018, reflecting the policy priority among these major funders to stop financing overseas coal projects. Most of the $345.76 billion in energy finance for African countries went to projects with gas/liquefied natural gas (LNG), mixed fossil fuels, and solar energy sources. Of the total energy finance, $197.17 billion (57 percent) came from public institutions, while $148.59 billion (43 percent) came from private corporations. The paper identifies some important similarities and differences between public and private finance. Both streams were highly concentrated in terms of senders and recipients, though the recipients differed slightly. For both streams, gas/LNG projects received the most or nearly the most finance. Public finance was directed to projects with more diverse energy sources, but less of the financing was directed to solar and wind projects. Most of the private finance was directed to fossil fuel projects, but when compared to public finance, a higher proportion of private finance supported solar and wind projects. Overall, the average amount of energy finance commitments that flowed to Africa from 2012 to 2021 may have been within the range of estimated need, but the unequal distribution of this finance risked leaving many countries behind. The small number of major players on the supply side of energy finance also created the potential for volatility, as internal guidance on funding priorities among these senders could evolve over the coming years and decades. Policymakers in financing countries could therefore prioritize finance distribution based on annual demands from historically low-level recipients, diversify financiers by redirecting financing to African regional banks and investors, and use public finance to crowd in private finance to projects with high potential for energy access in Africa.
Topic:
Development, Finance, Investment, and Energy
Political Geography:
Africa

77. Reimagining Africa’s role in revitalizing the global economy

Author:
Amin Mohseni-Cheraghlou
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
The world economy now finds itself at a critical juncture, facing a series of extraordinary setbacks that have pushed down growth. Reigniting growth requires a unique combination of targeted policies, robust international cooperation, and a renewed look at the global economy, with a particular focus on Africa. Due to its burgeoning and youthful population, abundant natural resources, and a strategic geographical location that can facilitate global trade, Africa can play a major role in—and should be front and center of—any renewed efforts for revitalizing the global economy. A decade-long robust, inclusive, and green growth in Africa will not only move hundreds of millions living in the continent out of poverty but will also accelerate a global rebound and recovery. However, for this to materialize, Africa needs substantial investments in its failing and inadequate physical and social infrastructure. With access to basic infrastructure, alongside efficient institutions as well as its young population, massive natural endowments, and strategic location Africa can seize its economic potential and act as an engine of growth for the global economy for decades to come. Therefore, it is crucial to support Africa to unleash its immense economic potential, through massive and focused investments in the continent’s human capital and its physical and social infrastructure.
Topic:
Development, International Organization, Reform, European Union, Regulation, Finance, Economy, and Economic Growth
Political Geography:
Africa, China, Europe, and United States of America

78. Does Aid to Domestic Revenue Mobilization Support Tax Fairness? A synthesis of Oxfam research

Author:
Marc J. Cohen, Nathan Coplin, and Marc James-Finel
Publication Date:
03-2023
Content Type:
Special Report
Institution:
Oxfam Publishing
Abstract:
Between 2017 and 2022, Oxfam examined aid to DRM from multiple donors provided to multiple low- and middle-income countries. This synthesis report seeks to draw lessons across these studies. The key issues examined include tradeoffs between efficiency and effectiveness in generating revenues on the one hand, and equity on the other; whether donors support direct or indirect taxation; the progressivity of instruments supported; whether aid to DRM explicitly links revenues to poverty reduction (health, education, social protection); whether aid supports country ownership; and whether aid explicitly seeks to advance gender equality.
Topic:
Finance, Tax Systems, Donors, and Revenue
Political Geography:
Global Focus

79. IMF Social Spending Floors: A fig leaf for austerity?

Author:
Alexandros Kentikelenis and Thomas Stubbs
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
The International Monetary Fund has said that it protects spending on education, health and social protection from cuts in its loan programmes through social spending floors. These measures are a welcome step forward, but are they effective? Analysis of all 17 IMF loan programmes (Extended Credit Facilities, or ECFs, and Extended Fund Facilities, or EFFs) for low- and middle-income countries during the first two years of the pandemic shows that these floors are deeply inadequate, inconsistent, opaque and failing. They are little more than a fig leaf for harmful austerity, which is driving inequality, poverty and suffering.
Topic:
Finance, Austerity, IMF, and Social Spending
Political Geography:
Global Focus

80. Pandemic Responses in the MENA Region: Lessons learned for an inclusive economic recovery

Author:
Salma Jrad, Amine Bouzaine, Nadine Mezher, and Anna Chernova
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
The COVID-19 pandemic exacerbated existing inequalities and poor governance practices in the MENA region and had a disproportionate impact on the most vulnerable people. These persistent and structural issues also threaten a post-COVID inclusive recovery process. Austerity steers from institutions like the IMF risk further inequality and social exclusion, as evidenced by diverse and gendered impacts on the most vulnerable, including through low public spending on health and social protection. Economic and fiscal justice through progressive taxation and inclusive, crisis-resilient public spending are two key policy solutions to prevent future crises impoverishing the most vulnerable in the region. As the world recovers from the pandemic, now is the time for national and global policymakers – including international financial institutions – to take stock and seek policy alternatives that take a rights-based, inclusive, holistic and resilience-focused approach to recovery efforts, resourced through progressive taxation.
Topic:
Governance, Inequality, Finance, COVID-19, Inclusion, and Economic Recovery
Political Geography:
Middle East and North Africa