Book Zone / Leading Edge
With the shower of economic and environmental reports flooding across our screens from U.N. sources, you might feel safe in ignoring the latest Trade and Development Report from UNCTAD. That would be a big mistake. A Global Geneva Special Report for subscribers to our free email newsletter (2000 words).
Margaret Thatcher, you were wrong, declares the Geneva-based United Nations Conference on Trade and Development (UNCTAD) in effect. Its point: There is an alternative — has to be — to the increasingly sclerotic, dysfunctional and dangerous climate-blazing global economy created by four decades of neo-liberal policies. At least, that's my summary.
UNCTAD says it has the answer. Its nine-point plan is set out in the latest Trade and Development Report (TDR), published on 25 September 2019.
As of now, "the world economy is heading into troubled waters, with recession in 2020 now a clear and present danger," UNCTAD warns. And "there is little sign that policymakers are prepared for the storm ahead".
In 24 pages the Report details a road map for financing what has become known as the Global Green New Deal to save us by 2030. In a longer perspective, it also urges "a new generation of trade and investment agreements".
With an annual increase in total green investments of 2% of global output — one-third of what governments today spend on subsidizing fossil fuels — the world could create 170 million jobs, with cleaner industrialization in the South and an overall reduction in carbon emissions by the target year of 2030.
The trouble is, UNCTAD has no power to implement or enforce its prescriptions.
ECOSOC, the United Nations Economic and Social Council, could do so — in theory. But will it?
"The overlords of mass financial destruction are now being asked to avert the threat of mass environmental destruction," UNCTAD exclaims in unusually passionate language for the U.N. "Money still talks but governments apparently have lost their voice."
The current recipe of corporate social responsibility, impact investing and financial innovation is "not only wishful economic thinking", UNCTAD argues. "It is, if history is any guide, a recipe for making the world less inclusive and less sustainable."
The 170+plus page Report not only takes on Margaret Thatcher by name (hence my intro). It also lambasts U.S. kindred spirits like Ronald Reagan and the neo-liberalism that still holds sway in economic policy
It even slates the Bretton Woods system that gave us the World Bank and the International Monetary Fund for being run "as a rich man's club that widened technological gaps, failed to address unequal trade relations, tolerated wasteful military spending and was indifferent to environmental pressures".
"A spluttering North, a general slowdown in the South and rising levels of debt everywhere are hanging ominously over the global economy," combined with "increased market volatility, a fractured multilateral system and mounting uncertainty", UNCTAD observes.
Too many governments, "at all levels [...] have been sucked into an unstable financial world geared to short-term trading in existing assets, prone to boom and bust cycles, with baleful distributional outcomes and large deficit overhangs that act as a persistent drag on the real economy." Austerity and liberalization are "heading in the wrong direction" to achieving the 2030 goals, UNCTAD says.
Richard Kozul-Wright, director of UNCTAD's division of globalization and development strategy, asserted at a news conference to promote TDR 2019 ahead of 25 September: "Neoliberalism still rules. It's a slash and burn agenda. It has produced over 30 years inequality, instability and insufficient investment."
"The global economy does not serve all people equally. Under the current configuration of policies, rules, market dynamics and corporate power, economic gaps are likely to increase and environmental degradation intensify."
The Geneva organization outlines the most ambitious plan in years for reshaping the global economic system. But it's probably the one with the least chance of adoption. As a consolation prize to the planet, UNCTAD details a shorter programme that could enable countries to meet their 2030 Sustainable Development Goals, provided the rest of the world goes along.
UNCTAD identifies four global trends obstructing achievement of the SDGs designed to create a fairer, more livable, safer international system:
"Since the global financial crisis, market-friendly solutions to [….] global challenges have failed to push economies in a more economically, socially and environmentally sustainable direction," UNCTAD argues. "This year's report casts doubt on proposals to do more of the same: to finance the SDGs by maximizing development finance through blending public and private sources using products and techniques taken from the playbook of banking conglomerates. These have routinely failed to boost productive investment and wereinstrumental in the boom-bust cycle that led to the 2008 global financial crisis."
So what's the answer? UNCTAD says there are "plausible global pathways" to meeting the 2030 Sustainable Development Goals.
In its maximalist version, UNCTAD's new world deal proposes:
In its cutdown version for immediate action, UNCTAD's seven-point plan would require governments to be much more active to tackle income inequality, be more progressive in fiscal policy, and "directly targeting social outcomes through employment creation, decent work programmes and expanded social insurance".
In addition, governments will need to "spearhead a coordinated investment push, especially towards decarbonization of the economy". This can include direct investment through the public authorities and encouraging private investment in "more productive and sustainable economic activities".
We need immediate action to control climate change, but the economic impact will also be important, says UNCTAD. "Green investment would be a major source of income and employment growth [...] Many [...] of the jobs created by green investment are inherently local to the area where investment occurs and involve training in new skills."
UNCTAD predicts that raising labour incomes can increase economic growth by 0.5%, with 20 million more jobs in developed countries and 100 million in developing countries (20-30% of these in China).
Decarbonizing the global economy and moving towards clean energy through "an internationally coordinated package of redistribution, fiscal expansion and state-led investment can realistically yield growth rates of GDP in developed economies of at least 1 per cent above what could be expected without it". Developing countries outside China could expect 1.5-2% more growth annually, while China's would be *more moderate".
UNCTAD says a Global Green New Deal would require extra spending — nationally or internationally — for less than a decade, adding that estimates indicate "the growth impact of social spending is high in all countries, while progressive taxation (i.e. higher percentages for richer taxpayers, including corporations) has little or no cost in terms of growth."
But meeting the 2030 goals to eradicate poverty and meet the goals in nutrition, health and education will impose impossible financial burdens on many developing countries, demanding deeper reforms to the world's trade, financial and monetary system to meet these goals, it adds. Poor nations would otherwise have to borrow twice their annual GDP, and they have no hope of doing that.
The plan looks at government spending and taxation policy, investment and industrial policy, investment in the transition towards green economies, credit and climate insurance, income redistribution, internationaltrade and investment agreements, and international coordination for growth, industrialization, and crisis response.
"Reflationary strategies cannot work as intended without explicit international coordination," the Report underlines. Its six-page final section of the roadmap lays out a mid-term strategy in practical terms to rebalance the global economy.
Increasing labour incomes will require international agreement, it observes, because otherwise such action will reduce national competitiveness, even if only in labour costs. In tax policies, too, international coordination is important because tax competition can dissuade government from raising direct taxes.
Bringing climate change into the equation, UNCTAD observes that only a few economies can use new energy forms at a large enough scale to be cost-effective. Many countries will not be able to adopt a "greener" agenda because they lack the technology and cash to pay for it.
Many developing countries also depend on primary commodities and fossil-fuel dependent trade, if not oil itself. Yet with industrial nations switching away to green energy, their markets will shrink, creating "serious terms-of-trade losses".
A globally coordinated agenda could offer countries the technologies to reduce climate vulnerabilit, but this could require 10% more credits and gifts to developing countries for the first four to five years of any programme.
UNCTAD sees bottlenecks in supplies and finance in developing countries as posing a major threat. "A coordinated strategy is needed to ensure that any such shocks do not trigger capital flights."
UNCTAD admits even more action will be needed but says its plan "would effectively push the global economy in the right direction".
"The point that always comes up," observes Kozul-Wright. "Where's the money? You're talking trillions."
His answer: "There's loads of resources out there." Among them:
As for seeing this programme through, Kozul-Wright says: "The [UN] structure still makes sense. This is ECOSOC's job." It is supposed to monitor the World Bank and IMF, but a weakening of internationalism has made it difficult to overcome the neoliberalism of a few economic powers and multinational corporations, he feels.
He insists that this year's TDR should be considered the third in a series, but each year looking at a worse situation — "more Mad Max than Lord of the Rings". The 2018 Report charged the "private sector [is] not dependable to achieve SDGs, its contribution to developing countries' debt increases to 139% of GDP in 2017 from 79% in 2008" (LINK). But the complaint has had little effect.
His message goes back over five years. He argued in The Guardian on 5 February 2013: "Forget post-2015 development goals – a global new deal is what is needed. Finance-led globalization has failed – which is our cue to forget about setting targets and adopt a development-led approach." TDR2019 details what that means.
"Ultimately, I think it is a political question," Kozul-Wright admits. "Money talks, and governments have lost their financial voice to the financial sector. We need to reclaim that sense of purpose of a public realm that sets the agenda and acts on that agenda."