Institutions, Governance, and Policy Space Manuel F Montes UNRISD 23 October 2013 Updated: 18 February 2013
Order of Discussion • Show graphs, make the argument • Discuss the proposals 2
Aid Volatility and Economic Growth 3 Source: Kharas 2008
Trade Instability 4 Source: UN 2010
International Finance Instability 5 Source: Akyüz 2012
Long-Term Impact of Crises Episodes: Turkey 6 Source: van der Hoeven 2010
Long-Term Impact of Crises Episodes: Chile Source: van der Hoeven 2010 7
Concentration of Exports 8 Source: UNCTAD 2010
Re-Primarización in Latin America 9 Source: CEPAL 2010
Investment Volatility and Growth 10 Source: UN 2008
Investment in Fixed Assets - Africa 11 Source: UN 2010
At Stake • How to achieve higher investment rates over a longer time period in developing countries? • How to increase patient investment and financing for long-term projects? Reduce crisis vulnerability from external economic events How economies/states can validate primarily long-term investment by the private sector 12
Institutions - Malfunctioning and Missing • Disciplines over reserve-issuing countries • Triffin’s dilemma, over-reliance on US dollar • Regulation and supervision of int’l private financial markets and private capital flows • Compensatory financing for commodity exporters • Demand-driven ODA and transiting away from aid dependence 13
Enabling Global Environment - 1 • Impartial, predictable, timely, comprehensive sovereign debt restructuring mechanism • Elimination of agricultural subsidies in developed countries - enabling of food security policies in developing countries/ 2 reduced reliance on trade • Removal of policy conditionality in ODA • Wider tariff ranges, restoration of trade tools to discipline/harness private sector participation 14
Enabling Global Environment - 2 • Capital controls both on inflows and outflows • Reforming investor protection: Removing policy restrictions from bilateral investment treaties and investment chapters in FTAs 2 15
Is a Deal Possible? • Not within sight, but a process can be launched – – Bretton Woods II – Piecemeal – South-South self-organization (BRICS bank?) • Must the Reform Process be outside IMF, OECD ? • Extreme global private risk aversion – Private sector waiting for government guarantees and insurance to risk cash holdings – More state (regulation) means more investment • 7-10 years of anemic growth, possibly another crisis 16
“Boy you’re gonna carry that weight a long time” -Lennon and McCartney [1969] “Carry that Weight” montes@southcentre.int www.southcentre.int Tel: +41 22 791 80 50 Fax: +41 22 798 85 31 17-19 Chemin du Champ d'Anier 1209 Petit Saconnex, Geneva 17
Rapid Financial Growth not Matched by Fixed Investment 18 Source: UN 2010
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