Jomo Kwame Sundaram
- September 28, 2019
- The United Nations (UN) Sustainable Development Goals (SDGs) can only be achieved by 2030 with the political will to change international economic rules and mobilize resources needed for a massive public sector-led investment push to reinvigorate world economic progress sustainably, says UNCTAD’s Trade and Development Report 2019 (TDR 2019).
Global Green New Deal
Existing international economic rules enhance market forces, corporate power and national policies which sustain, if not increase economic disparities and environmental destruction. TDR 2019 calls for a Global Green New Deal (GGND) which would at least reverse the austerity, stagnation and vulnerability since the 2008-2009 global financial crisis.
This new multilateral contract proposes reforms to ensure that banks, capital and debt help finance investments for more sustainable development with less economic inequality and environmental degradation. TDR 2019 argues for new trade and investment agreements as well as reforms to intellectual property and licensing regulations to support the GGND and the SDGs.
Global warming is already causing severe, albeit uneven damage all over the world and threatens much worse. Mitigating climate change will require large public-led investments, especially in renewable energy, sustainable food systems and clean transport, to complement effective industrial policies, with selective subsidies, tax incentives, loans and guarantees.
As one size does not fit all, developing countries will need appropriate investment and technology policy measures to bypass traditional carbon-intensive energy trajectories. The best policy package varies with context, but all will need fiscal stimulus, public infrastructure investment, renewable energy and better working conditions.
TDR 2019 offers a GGND proposal with developed economies’ growth rates 1~1.5% above those currently envisaged. The envisaged benefits for developing economies are greater, with growth rates around 1.5~2% more, although China will benefit less.
Are such win-win solutions still feasible in a world facing severe constraints and pressures? TDR 2019 doubts other proposals, e.g., the World Bank initiative to raise private finance using shadow banking and public finance to guarantee high private returns to investments. Thus far, such incentives have largely failed to boost productive investments. Instead, TDR 2019 proposes measures and reforms for the public sector to lead financing the GGND. Fiscal policy and strategic public investments can not only stimulate private investments, but also draw them in, rather than ‘crowd them out’.
Increasing total green investments by 2% of global income annually – around US$1.7 trillion, or a third of what governments currently spend on fossil fuel subsidies – could create over 170 million jobs, ensure cleaner industrialization in the South, and reduce greenhouse gas emissions.
Investing much more to achieve the nutrition, health, education and poverty SDGs will require extensive international trade, finance and monetary reforms. But policy responses to the 2008-2009 global financial crisis have failed to enable more economically, socially and environmentally sustainable recovery, let alone longer-term development.
Fiscal expansion, to be financed with progressive tax increases and credit creation, needs to be consistently counter-cyclical, better coordinated, and capable of paying for itself. With many economies currently facing insufficient demand, TDR 2019 argues fiscal stimulus is necessary to boost private investment and productivity.
Innovative Development Finance
Rebuilding multilateralism and international cooperation around the GGND requires meeting Agenda 2030’s financing requirements. TDR 2019 proposes various reforms to ensure capital, banks and debt contribute to accelerating development, including:
- providing better multilateral oversight, coordination and support of capital account management.
- expanding special drawing rights as a flexible financing mechanism, without strict policy conditionalities or onerous eligibility criteria, beyond providing reliable liquidity for global environmental protection and emergency funding.
- greater regional monetary cooperation to promote intraregional trade and value chains, moving beyond regional reserve swaps and pooling liquidity, while developing regional payments systems and clearing unions.
- a rules-based facility, governed by agreed principles and international law, for orderly and equitable restructuring of sovereign debt that can no longer be serviced as per the original contract.
- a global SDG-oriented concessional lending facility for low and lower middle-income developing countries, with a refinancing facility for borrowing on concessional terms, and an additional lending facility for the external share of public sector financing needs.
- a global sustainable development fund, capitalized and replenished by donor countries paying their previously unfulfilled commitments to the official development assistance target of 0.7% of national income, thus compensating for past shortfalls, estimated at over US$3.5 trillion since 1990.
- unitary taxation of transnational corporations’ (TNCs) profits with a global minimum effective corporate tax rate on all TNC profits set at 20~25%, i.e., the international average of current nominal rates, to check tax-evading illicit financial flows.
- additional climate financing using unconventional monetary tools.
- increasing finance for development, including strengthening South-South financing, e.g., by mobilising sovereign wealth funds, with assets of almost US$8 trillion, to finance development.
(This article was originally published in Inter Press service (IPS) news on September 27, 2019.)