Analysis

The IMF Trap

Massive demonstrations that swept Sri Lanka last year exposed the serious challenges at the heart of the global economy. In July 2022, former President Gotabaya Rajapaksa was forced to flee the country, only a few months after announcing a hasty default of Sri Lanka’s foreign debt obligations. He faced a wall of opposition as the nation suffered infamous kilometers-long fuel queues, power outages, and food and medicinal shortages, crippling everyday life. 

Debt and Power in Pakistan

The subcontinent’s embattled debtor isn’t merely the passive victim of the climate crisis—it is being plundered by its elites.

Crisis Response

At the dawn of the newly implemented Eurozone, Lorenzo Bini Smaghi and Daniel Gros argued that three broad issues might present problems for Europe’s Economic and Monetary Union (EMU). Bini Smaghi, then Director for International Affairs at the Italian Treasury, and Gros, then Deputy Director and Senior Research Fellow at the Brussels-based Centre for European Policy Studies and Head of its Economic Policy Programme, wrote and published their concerns in their 2000 book Open Issues in European Central Banking. 

The Long Run

Few economic terms over the last few decades have been more influential than “austerity,” invoked by governments and financial institutions as a blanket solution for economic crises, and inspiring intense debate in the public sphere. Austerity, defined by economists as “a policy of sizable reduction of government deficits,” or by the general dictionary as an “enforced or extreme economy,” is related to the size of a contractionary fiscal shock.

Unraveling Dollarization

The financial crises of the 1990s in Asia, Argentina, and Russia sparked growing interest in the phenomenon of dollarization—the use of a foreign currency to perform national currency function. Dollarization, however, has a history dating back to the nineteenth history. More recently, a growing body of work has outlined how dollarization limits the independence of monetary policy in host countries and restrains local central banks from acting as lenders of last resort.

Gender and the Great Resignation

The much anticipated “return to normal” after the Covid-19 pandemic has been anything but. In contrast to the aftermath of previous economic crises, workers have not rushed back to work. Each month over a period of nine months in 2021, an average of four million people in the United States left their jobs. Similar trends were reported elsewhere. Resignation rates and job changes have been at a historical high in the UK; rates are rising in other wealthy countries like France, Australia, Netherlands, Spain, and even Singapore.

Unmaking Orthodoxies

After a decade of low or negative interest rates, central banks are back in the business of fighting inflation. One of the clearest signs of the change in monetary policy stance is the largely synchronized tightening across high-income countries—last year, interest rates were increased by the central banks of Australia, Canada, the Euro Area, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States, which together account for around half of global gross domestic product (GDP). As interest rates go up, however, so do the risks of economic contraction. 

The Dollar and Climate

The climate crisis offers a new angle from which to evaluate US dollar hegemony, since carbon emissions are tied to economic activity.

Indian Big Business

“The systemic, long-term nexus between the political elites and big business will not go away anytime soon,” wrote journalist M. K. Venu  in 2015. Writing in the aftermath of Obama’s second visit to India, Venu suggested that “crony capitalism” had to be grasped in a deeper sense to reflect not the odd favors bestowed on this or that industrialist by the government of the day but the system that cemented the ties between state and capital, in this case a handful of family-owned businesses that knew they could always depend on India’s governing class, starting with the prime minister. Venu cited a revealing example of this bond.

Droughts and Dams

Most of Zambia’s grid electricity is generated by hydropower. Over the past decade, recurring droughts—in 2015, 2016, 2019, and now again in 2022—have exposed the deep vulnerabilities in the system. These droughts have unleashed unprecedented power outages, with low reservoir levels constraining hydroelectricity generation capacity. 

Realignments

Luiz Inácio Lula da Silva may have won last month’s presidential elections, but the strength of Bolsonarismo has been confirmed. In both houses of the National Congress, Bolsonarismo and its allies made gains, overcoming the traditional right wing. In the Federal Senate, Bolsonaro’s Liberal Party (PL) won fourteen of the twenty-seven seats up for election, giving it the largest number over all. In the Lower House, despite the fact that the left has regained some ground, the PL nevertheless elected ninety-nine deputies—a larger share than any other party. The rural, evangelical and security caucuses doubled in size. The alignment of the parliamentary forces may be more pragmatic than ideological, but as Souza and Caram put it, the 2022 Congress elected in 2022 is still “the most conservative since 1964.”

The Wall Street Consensus at COP27

At COP26, US Special Envoy for Climate John Kerry sanguinely declared the need to “de-risk the investment, and create the capacity to have bankable deals. That’s doable for water, it’s doable for electricity, it’s doable for transportation.” UN Special Envoy for Climate and head of the Glasgow Financial Alliance for Net Zero (GFANZ) Mark Carney similarly announced GFANZ’s intentions to work in partnership with governments and multilateral development institutions to mobilise its USD130 trillion for green purposes.