As part of the Geneva Lecture Series concepted and conducted by prof. Anis H. Bajrektarevic, United Nations University Rector and Undersecretary General of the UN, Dr. David M. Malone gave a highly mesmerizing and content intensive lecture for the faculty members and Geneva-based diplomats.* Excellency Malone outlined his view on international development, focusing on how the theory and (especially) the practice of such concept has evolved over the past decades. While international development has done much to improve the socio-economic situation in developing countries, much remains to be done, especially in the wake of the COVID-19 pandemic – Dr. Malone said.
Talks about international development permeate current debates in academic and policy circles around the world. Yet, decades after its endorsement as one of the international community’s top priorities, the term continues to elude clear and univocal definitions, and it remains a contested concept. Dr. David M. Malone – an expert in international development, currently serving as UNU’s Rector in Tokyo, Japan – talked about his own take on the historical evolution of international development in an exchange with the students of Swiss UMEF University.
In a brief but comprehensive account, Dr. Malone noted that the concept of international development has emerged only fairly recently as a major issue on the world stage. The League of Nations, for instance, was not concerned with development, and even the United Nations did not initially devote much attention to this concept. Similarly, development was not on the agenda of the economic institutions established at the 1944 Bretton Woods conference – notably the International Monetary Fund (IMF), whose aim was to ensure monetary stability, and the International Bank for Reconstruction and Development (IBRD, the World Bank’s predecessor), whose focus was on the post-war reconstruction effort.
How did it happen, then, that these institutions gradually took the lead in promoting and sustaining development worldwide? The key factor underpinning this shift – according to Dr. Malone – is the process of decolonization, which started in the late 1940s with the independence of India, Pakistan, and Sri Lanka. Having freed themselves from the exploitative rule of colonial powers, these countries first sought to launch their first development programs, which often had a focus on agricultural development and famine prevention. At the time, international support to such efforts was very limited, consisting only of some experimental activities on specific technical issues, but with extremely tight budgets.
Yet, things started to change as a “huge decolonization wave” took off in the late 1950s, creating almost 80 new countries in the span of little more than 15 years. As these countries entered the UN en masse, they soon gained a majority in the organization. Questioning the UN’s single-handed focus on political and security issues, these countries – which were then labeled as “developing countries” – started to advocate for their own interest: the promotion of development throughout the developing world, with support from the international community.
These calls were rather successful. Entities such as the IBRD/World Bank, on a good track to completing their post-war reconstruction mission, soon started to shift their attention towards the developing world, ramping up the scale of their previously meager technical endeavors. Even more importantly, international support for developmental efforts started to materialize, both through bilateral agreements between countries and in the form of borrowed funds.
While the calls for international support were successful in raising the attention and the funds devoted to the topic of development, the early developmental endeavors were not always as successful. In a number of instances, the lack of adequate infrastructure prevented these endeavors from yielding the expected results, leading leaders to re-think their focus on what Dr. Malone termed “wildcat industrialization”. In addition, in their effort to finance development (and, at times, to amass personal wealth in the pockets of national elites), developing countries piled up an increasingly serious amount of debt, resulting in the debt crisis of the early 1980s.
The reaction of the industrialized world was mixed. Initially, shock and surprise prevailed, coupled with calls for developing countries to repay their debt at any cost. International institutions such as the World Bank and the IMF asked indebted countries to tighten their belt to free up funds for debt repayment. Lacking alternatives, many countries did so; yet, this came at a serious price over the medium to long term.Over time, however, a more realistic outlook on the issue emerged. Creditors organized in two groups – the “Paris Club” for official donors, and the “London Club” for private creditors – and discussed their response. Eventually, the strategy was two-fold: part of the debt was rescheduled, while another part was outright canceled.
Over the following decades, this major debt-management operation did yield important results – Dr. Malone stressed. By 1995, developing countries were fully out of the debt crisis, and government officials in industrialized countries were less worried about the overall situation. Still, tensions between developed and developing countries persisted, including at the UN. The latter asked the former to contribute to their development as a reparation of past damages under colonialism, while the former accused the latter of mismanagement and claimed full control over the use of their own funds. As of the mid-1990s, this debate had not led anywhere: everyone wanted to move on, and so they did.
The game changer emerged around the turn of the new millennium, when the UN – under the lead of Secretary General Kofi Annan – heavily invested in the creation and promotion of the Millennium Development Goals (MDGs). The goals were narrow but ambitious; and yet, despite this ambition, most (although not all) of them were met by 2015. According to Dr. Malone, this success was made possible by the high growth rates enjoyed by developing countries through the first 15 years of the new millennium – a growth that, among other factors, was enabled by the previous debt-management strategy and by the increasing flow of international capital to the developing world.
The success in achieving the MDGs thus triggered a new process at the UN, which raised the bar and set for the world even more ambitious goals – the Sustainable Development Goals (SDGs). These objectives were underpinned by an assumption that the high rates of growth that had characterized the first decade of the new millennium would continue. As it became clear, however, this assumption was overly optimistic. The 2008 global financial crisis significantly slowed down growth, both in the industrialized world and (albeit to a lesser extent) in developing countries. As a result, international development efforts faced – and still face – increasing challenges. To respond to these challenges, the 2015 Addis Ababa Action plan sought to adopt a more sophisticated strategy to ensure funding for international development efforts. Moving away from a single-handed focus on official development assistance, the plan stressed the importance of multiple funding streams, including remittances and lending instruments. Yet, significant challenges remain as of today, and the path of international development remains uphill.
This is the context in which we can place the advent of COVID-19, which has been sweeping through the world since early 2020. So far, in direct terms, the virus has not affected developing countries significantly harder than developed ones, Dr. Malone noted. However, in a post-COVID world, the needs of developing countries will likely be much more compelling that those of their industrialized counterparts. In short, international cooperation and developmental efforts have achieved a lot over the past 70 years, but much more has yet to be achieved. As we enter the post-COVID era, the world should be aware of that.
* United Nations University Rector and Undersecretary General of the UN, Dr. David M. Malone answered the call of the Swiss UMEF University in Geneva on November 05th2020, and gave this lecture under the auspices of so-called Geneva Lecture Series – Contemporary World of Geo-economics. Lecture series so far hosted former President of Austria, former Secretary-General of the Paris-based OECD and prominent scholars such as prof. Ioannis Varoufakis. Some of the following guests are presidents and prime ministers of western countries, notable scholars as well as the Nobel prize laureates.
On the Role of Sovereign Wealth Funds (SWFs) in Supporting a Green Recovery
Perhaps one of the few areas where a consensus is crystallizing across the major powers of the global economy is on the urgency of advancing the green environmental agendas and reducing the carbon emissions. Global institutions such as the IMF are emphasizing the need for a green recovery to take hold in the world economy as the global community emerges from one of the starkest crises in the past century. The world’s sovereign wealth funds as a powerful force in international financial markets could play a vital role in advancing green projects as well as green finance. This is particularly relevant for Russia, where the National Wellbeing Fund could be partly invested into green financial instruments.
At this stage there is a number of global networks and initiatives that bring together the world’s largest institutional investors, including sovereign wealth funds, to drive the green investment agenda. These include European Long Term Investors, the Institutional Group on Climate Change and the Network on Climate Risk. Some of the wealth funds from the Middle East, including the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the Qatar Investment Authority and the Public Investment Fund of Saudi Arabia, are signatories to the One Planet SWF Framework. The meeting held by the International Forum of Sovereign Wealth Funds in 2016 “participants highlighted that SWFs are particularly well-positioned to become trailblazers in green investment”.
Recent data and surveys reveal a growing integration of the green agenda into the decision-making and strategies of the world’s sovereign wealth funds. These were the findings of an inaugural survey of 34 sovereign wealth funds, representing 43% of the world’s sovereign funds, conducted in September by the International Forum of Sovereign Wealth Funds and the One Planet Sovereign Wealth Funds .
The survey reveals that climate-related strategies represent more than 10% of portfolios for 30% of responding wealth funds. The survey also found that these funds made 18 investments in agriculture technology, forestry and renewables opportunities in 2020 at a total value of $2 billion, up from eight investments valued at $324 million in 2015. Overall, according to the survey “sovereign wealth funds have invested more than $5 billion in agritech, forestry and renewables opportunities over the past five years as part of an increased push toward climate change-aware investing”.
Just over a third of responding funds (36%) have a formal climate-change strategy in place, with 55% of these funds adopting the policies since 2015 and 30% since 2018.
The survey came up with the following recommendations to wealth funds based on the survey findings:
· to adopt and implement climate-related strategies;
· to seek appropriate talent and expertise;
· to explore board member and executive education;
· to use metrics to show not only climate impact but also comparable returns and risk reduction;
· to communicate to all stakeholders the strategic importance of climate change;
· to partner with peers and international initiatives to share experience and generate greater leadership from within the wealth fund network.
The latter recommendation dovetails the recent Valdai Club initiative to enhance cooperation among the largest sovereign wealth funds against the backdrop of the Covid pandemic. In particular, in 2020 the Valdai Club together with Shafi Aldamer and Curran Flynn from King Fahd University of Oil and Minerals advanced the proposal to create a platform for the sovereign wealth funds (SWFs) of G20 countries to boost long-term cooperation, direct investments, and the formation of bilateral/trilateral/multilateral investment accords. The findings of this policy brief were included in the T20 communiqué, which encourages the G20 to promote “the creation of a platform that would bring together the sovereign wealth funds of its members, possibly in coordination with the International Forum of Sovereign Wealth Funds.”
Such a platform would encourage the G20 states to strengthen their economic cooperation, bolster mutual interests, improve multilateralism, and develop opportunities for their SWFs. Additionally, it would act as an emergency tool in easing the impact of a global crisis, such as the current COVID-19 pandemic, as it can be employed as an anti-crisis measure via the investments of the G20 states’ SWFs. One important venue of cooperation for such a platform for sovereign wealth funds could be the elaboration of green investing principles and benchmarks for the major sovereign wealth funds, which in turn would support the advancement of a green recovery in the global economy in the aftermath of the Covid pandemic.
As regards Russia’s sovereign wealth funds, most notably the National Wellbeing Fund (NWF), which by Q1 2021 has accumulated more than USD 180 bn in overall resources there may be a case for investing part of the liquid reserve into green instruments, including sovereign green bonds. In particular, the investment guidelines for the NWF may involve a formal target on the share of green assets in the Fund’s portfolio. These in turn may include corporate and sovereign green bonds from advanced economies as well as an allocation reserved for Russia’s corporate and sovereign green bonds. The latter would potentially deliver a significant boost to the development of Russia’s green bond market. Currently green bonds account for just 1.5% of total corporate bonds outstanding in Russia and the emergence of sizeable demand from Russia’s sovereign wealth fund would raise the potential growth for this very important market segment.
From our partner RIAC
5 things you should know about the state of the global economy
Is this the year we overcome the global economic crisis caused by the pandemic? Are our jobs in danger? Who has lost the most in the crisis and what can be done to recover? As the UN Department of Social and Economic Affairs (DESA) prepares to launch the mid-year update of the 2021 World Economic Situation and Prospects (WESP) report, here are five things you need to know about the state of the global economy.
1) US and China bounce back, but a slow recovery for developing countries
While economic output in the United States and China is expected to grow robustly and lift global growth, many developing economies are not expected to return to pre-pandemic output levels anytime soon. The pandemic is far from over for most developing countries where vaccination is advancing slowly, and fiscal pressures have intensified.
2) The situation of the most vulnerable has become even more precarious
Lockdowns and social distancing measures resulted in large job losses in contact-intensive and labour-intensive service sectors, which predominantly employ women. The pandemic has also exposed the vulnerability of informal employment, which is the main source of jobs in many countries and which offers less job security, social protection and access to healthcare.
3) Global trade recovery is strong, particularly in Asia
Merchandise trade has already surpassed pre-pandemic levels, buoyed by strong demand for electrical and electronic equipment, personal protective equipment (PPE) and other manufactured goods. Trade in services remains constrained by restrictions on international travel. While exports from Asian economies have soared, exports from Africa, Western Asia, and the Commonwealth of Independent States has stalled.
4) The COVID-19 crisis has inflicted more harm on women and girls
This crisis disproportionately affected women, who suffered significant job and income losses, contributing to the worsening of gender poverty gaps. Burdened by increased home care duties, many girls and women gave up on schools, and the workforce altogether. Returning to school and work might take longer or may not happen at all for many of them, further widening gender gaps in education, income and wealth.
5) Countries need to do more to address the uneven impact of the COVID-19 crisis
There is an urgent need for countries to formulate better targeted and gender-sensitive policies to drive a more resilient and inclusive recovery from the crisis. Though on the frontlines of the pandemic, women have been under-represented in pandemic related decision-making and economic policy responses. The severe and disproportionate impact of the pandemic on women and girls call for more targeted policy and support measures for women and girls, not only to accelerate the recovery but also to ensure that the recovery is inclusive and resilient.
Biden’s shift from neo-liberal economic model
Mercantilism; which was the ‘Hall of Fame’ from 15th-18th Century had emerged from the decaying of feudal economic system in Europe. It was initially started from the Mediterranean trade in bullion on the cities like Venice, Genoa and Pisa. In the course of history, this idea was challenged by the writings of John Lock’s Second Treatise of Government and A Letter Concerning Toleration with larger than life of Adam Smith’s, The Wealth of Nations of 1776—gave rise to Classical Liberalism. This idea also even started shaking during the 1930s followed by the Great Depression. The Keynesian economic model came to escape the consequences of this Great economic shortfall till 1970s. Afterwards, Neo-liberalism was the ‘lifeline of the global economy’. Soon, this also diminished from the rapid financialization and globalization process of 1990s. The financialization, which was the ‘Heart of the Town’ till 2008; devastated by the 2008 financial crisis. The US government rescued this crisis via Dodd-Frank Act and greater stimulus package to economy. And, lastly current COVID-19 pandemic crisis is much more powerful than that of 1930’s Great Depression or any other crisis in observable history. To cope of with this crisis, Biden administration is rescuing the economy with comprehensive stimulus package by challenging the internationally accepted fundamental economic model.
Today, Keynesian economic model is taking shape in the US. The central theme of Keynesian theory —measured as the sum of the spending by households, business, and the government; which Biden is doing so by $640 billion housing plans over 10 years to provide affordable, safe housing for all individuals, by increasing tax for corporations and high-income filers by $3.3 trillion. In addition to this, he is creating massive government spending ($2trillion) on infrastructure for job creation, spending on public goods( health care, education, job, security, child care), and less interested in fiscal deficits and his more critical view on an unregulated market controlled by big corporations. These steps of Biden correlated with that of the Keynesian economic model (the model which remained ‘talk of the town’ from WWII to the 1970s). Following this, new Washington Consensus is born against the low levels of government spending, minimizing fiscal deficits, nonintervention, and deregulation in the market, and liberations of trade and foreign investment. All these ‘values’ are undermined by the current Biden administration.
The world economy is in the same historical place as that of WWII followed by the great depression comparing today of the COVID-19 pandemic. So, whenever there is an unprecedented shock on capitalism; it has always transformed itself within. From the Mercantilism(16th-18th Century), Classical liberalism, Keynesian/ neoliberalism, and financialization–capitalism has survived astonishingly. This new ‘Bidenomics’ will behave as an influential replica in the other parts of the world as the land, labor, capital, and productivity is impacted immensely by the COVID-19 pandemic. This succeeding market intervention by the US government could replicate in other international liberalism followers nations of the world. The era of government-led intervention in the market started.
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