We need to make our voices heard
I have been thinking more and more about the global finance and economic agenda as we – Belize and the rest of the world – come to terms with the economic devastation that the Covid pandemic has laid bare. I have been following and participating in the discussions being organized by UN agencies in which some CARICOM countries have been participating. Jamaica has played a lead role along with Canada in ensuring these discussions take place. The discussions have been lively and some proposals are emerging.
But in large measure, the particular needs and concerns of the so-called middle-income countries, like the Small Island Developing States of CARICOM, have not been sufficiently factored into the proposals that have emerged so far. The needs and concerns of the most highly indebted poor countries are being addressed in some ways, and that is good and necessary. The proposals include increased access to particular sources of funding to meet some aspects of their needs. But one fundamental concern seems to be about ensuring continued access to capital markets and protecting the way the market functions – such as the primacy of credit ratings to determine access. The private creditors, who have benefited tremendously from the operations of the international capital market in developing countries, seem unwilling to seriously consider the fact they may have to absorb losses that they do risk making every time they participate in the credit markets.
In my intervention at the Ministers of Finance Meeting on September 8, 2020, I reminded the participants that SIDS are facing both the pandemic and climate change impacts at the same time. And with particular reference to climate change, “while we do not contribute to the changes that that are increasing these climate events in both their regularity and intensity, we do carry the disproportionate burden of their impacts and consequential cost.”
Several policy options and financing mechanisms are being proposed. But, so far, they do not really expand, for SIDS like Belize and the rest of CARICOM, access to finance at reasonable costs. This, as we seek to meet the need for expanded investment in healthcare and social safety nets for those made unemployed by Covid as well as other vulnerable populations. How do we meet those expanding demands and still manage “to stay on track to achieve our sustainable development goals and our ambitious climate targets by keeping our economies and our people alive.”
I have suggested that “the options that will enable Belize and other SIDS to recover and do better, must include: access to liquidity for all SIDS on grant and concessional terms; debt workouts inclusive of private creditors; debt for development and debt for climate swaps; and recovery aligned with the Paris Agreement.” Climate action is fundamental to sustainable development. There is no one without the other.
So far, there has been great hesitation in considering any approach other than the usual “seek debt sustainability” and need “structural adjustment” kind of approach, which is all well and necessary when we are addressing the concerns of individual countries that may be performing poorly in relation to others. But we are in a situation where there has been a structural shift across the global economy. Every corner of the globe has been affected. But the response so far has exposed the inefficiencies of the global financial and economic systems in addressing global economic contraction. So, for me, the options on the table largely represent “an unabashed affirmation of business as usual … a choice of upholding markets at the expense of the public good.”
But this is the nature of global economic and financial system. We have to realize that and understand it for what it is. We cannot expect a system to do anything other than what it has been constructed to do.
Almost 30 years ago, when I was fresh out of graduate school, I was invited by the Society for the Promotion of Education and Research [SPEAR] to give the keynote address at its Annual Studies on Belize Conference. The theme that year was “Globalization and Development: Challenges and Prospects for Belize.” In that speech, I suggested that there was nothing new about the concept of globalization, that we can see the globalisation impetus way back in the Greek and Roman civilizations in the middle ages. For us in the Western Hemisphere, the process “began at least 500 years ago when Columbus thought he had landed on islands in the Indian ocean.”
At that time, it was becoming increasingly accepted that globalization and liberalization results in income inequality within and across countries. Economists were beginning to realize that attention needed to be paid to ensuring that the benefits of free trade are more evenly spread. The international financial market, having shifted from an emphasis on commercial bank lending in the 1970s, through the debt crisis of the 1980s, was shifting to securities as the means of mobilizing finances. In this process, developing countries, as they moved towards investment financing through securities, would become increasingly vulnerable to a highly integrated capital market which facilitates rapid and frequent movements of large sums in search of the best returns.
Just about ten years later, I was invited by the Caribbean Studies Association to address the Opening Plenary of its 2003 Annual Conference, which was held in Belize that year, to speak on the issue of “Belize and the Wider Caribbean – Between Independence and Globalisation”. Of course, I returned to the some of the same themes but with a primary focus on the global acceptance of the ideology of the market.
Even though we accept that markets often fail, the ideology of the market focuses much of policymakers’ attention on making markets work. It was my view then and it still is now that even where it was clear “that markets were not working, we did not hear any questions about the efficacy of the approach. Rather, the focus of the multi-laterals turned to the creation of an enabling environment for the markets to function. When the markets still did not function, new issues were raised: commitment to market driven development, governance, labour market flexibility. And even now, that there is acknowledgement of a need for social safety nets, there is no acknowledgement within the multilateral institutions that the fundamental policy stance may be based on the flawed application of an inappropriate theory.”
So, I come back to 2020 and the global economic collapse brought on by the Covid crisis. Maybe we really do need to accept that markets often do not work and often cannot achieve the impact that we seek. Global financial markets, in particular, are not designed to address the fundamental development challenges facing our types of economies in normal times, much less in the global Covid crisis. So, our response may well have to be totally different, led by different thinking, focused on production and safety nets, not on market solutions; guarding our hard-won development gains and our environment for the future.