The New Global Financing Pact equals the old failed global financial arrangements

It’s Wednesday and I cover a few topics usually in less depth than usual and provide a musical entree. From tomorrow (June 22 to 23), the so-called world leaders are meeting in Paris for the – Summit for a New Global Financing Pact – which is being hosted by the French president. The aim, apparently, is to build a new global architecture to replace the Bretton Woods system (they left it a while!) to ‘address climate change, biodiversity crisis and development challenges’. The solution that is being proposed is to allow the financial markets to create debt and speculative derivative products to fund the new architecture because, apparently, governments do not have the financial capacity. The whole initiative is about replacing defunct financial architecture but it still proposes to rely on the same (defunct) approach to public infrastructure development and the like that has failed dramatically to reduce inequality and poverty. It has certainly massively enriched the top-end-of-town and the same result will come out of this Pact. I also comment on the latest Brexit claims and provide a brief entree into some Covid research that I found interesting. Then some music.

The NGF Pact

One of the claims of the Summit is to abandon the “current global financial architecture … built on the Bretton Woods system” and come up with a new Global Financing Pact.

I was interested in that mission statement because, to me, it implied that that the residual elements of the Bretton Woods system that remain were deemed to be inappropriate starting points for a program designed to:

… address simultaneously climate change, biodiversity and development challenges and help all nations to fulfill the Sustainable Development Goals.

When the Bretton Woods system collapsed most nations abandoned the fixed exchange rate arrangement that was at the heart of that system.

Notably, most European nations kept the system with variations after the US government effectively terminated it when they abandoned the convertibility of the US dollar into gold in August 1971.

In my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – I documented in detail how the decision to maintain fixed exchange rates between the European states not only led to a sequence of currency crises in Europe over the 1970s and 1980s but was part of the flawed lineage that led to the creation of the common currency in 1999.

Further, when the Bretton Woods system collapsed, the role of the IMF as a lender of last resort of foreign exchange to help nations defend their currencies under the agreement became redundant.

The IMF set about reinventing itself into its current form – a draconian organisation that provides bail out funds to nations in return for strict conditionality (austerity) – the so-called ‘structural adjustment programs’ – which has largely prevented the poorer nations from advancing in any meaningful and independent way over the last 50 years.

The IMF has helped financial capital to extract massive profits from the poorest nations under ‘debt arrangements’ while undermining the capacity of those nations to develop public education, health and sustainable agriculture.

At times it has been a free-for-all where the private capital has taken what they want at the expense of the citizens living in these nations.

These are the residual elements of the Bretton Woods system that the Summit mission statement seems to imply need to be scrapped.

So I was disappointed to read the – Open Letter – published by the UK Guardian (June 21, 2023) and authored by political leaders from France, Barbados, the UK, the US, Japan, Germany, Senegal, South Africa, Kenya, Belgium, UAE, Brazil – which claimed that:

… we acknowledge that meeting our development and climate goals, including the fight against hunger, poverty, and inequality; adapting to climate change; and averting, minimising and addressing loss and damage, will require new, innovative, and sustainable sources of finance, such as debt buy-backs, engagement from sectors that prosper thanks to globalisation, and more trusted carbon- and biodiversity-credit markets.

The claim that private financial markets must fund these major initiatives because the capacity of governments to extend loans and grants would be insufficient is a cop out and will see the initiatives, however noble in intent, be hijacked by profit-seeking capital, which pursues its own self-interest and does not factor in societal well-being unless it is incidental in achieving the former and overarching goal.

It also reinforces the fiction that the ‘rich’ should pay so that governments can fund necessary projects.

Governments should fund these projects on their merits rather than in terms of perceived financial constraints.

Certainly, industries “that prosper thanks to globalisation” should not be able to use their influence to lobby to their advantage and manipulate the media and political process.

Inasmuch as that requires they have ‘less profits’ overall or less to distribute, then various taxing options should be invoked (decades ago).

But the goal would be to ensure they have ‘less money’ available, rather that ensure the government has ‘more money’ to spend.

The latter proposition ‘more money’ to spend is nonsensical for a currency-issuing government, although for a Eurozone nation taxes are necesary to fund the spending, given these governments spend in a foreign currency.

The other consideration is not to wait until the ‘profits’ have been made but to introduce global policies to ensure that companies cannot take advantage of jurisdictional shifting type strategies to reduce reported profits, sometimes to zero in some nations, despite recording massive trading results in those nations.

The other problem with the ‘reliance’ on private financial markets is that the funding will be in the form of debt rather than grants.

The US government has the financial capacity to give money away (grants) and its only consideration should be whether the rate of granting is commensurate with the available real resources to actually achieve real rather than nominal outcomes.

If there are shortages of productive resources, then the grants would likely promote cost (inflationary) pressures.

So the world leaders should be talking about advancing and funding large-scale public education and training and healthcare programs in the poorer nations to build the productive capacity rather than suggesting they do not have enough money to accomplish meaningful development.

Involving the private financial markets will just create further layers of speculative behaviour via debt and derivative instruments that will likely cripple the poorer countries.

That has been the ‘same old’ strategy which has not worked.

I was surprised that the Barbadian prime minister signed up given she has previously indicated that the IMF and World Bank had failed in their mission and needed to be scrapped.

This UK Guardian article (November 7, 2022) – Barbados PM launches blistering attack on rich nations at Cop27 climate talks – provides more detail on that.

I have long advocated for the scrapping of these multilateral institutions and the creation of a new institution that actually helps nations rather than enslaves them with private capital obligations and harsh conditionalities.

If we trace the record of the IMF SAPs, we quickly see that they have in part seen the destruction of sustainable subsistence agriculture in poor nations in favour of export-led cash cropping.

Those initiatives have been a disaster in terms of poverty relief but also have been environmentally catastrophic.

Do some research on timber in Mali (if you can find any left) to see the point.

So to involve these institutions in any new architecture would be a huge mistake.

England loses cricket test yesterday because of Brexit

Australia beat England in the first Ashes test at Egbaston Cricket Ground (Birmingham) yesterday in an exciting finale.

I am guessing England lost because of Brexit.

I say that because almost everything negative that happens in Britain (to Britain) these days is blamed on Brexit despite the lack of evidence to support such a causal association.

The latest example is from the former Bank of England governor who has indicated the inflation episode in Britain is because of Brexit (Source).

He claimed that the cost-of-living crisis is all down to negative supply shock as a result of leaving the European Union.

I wondered then what caused the negative supply shock in Japan, Australia, India, the US, Canada and almost everywhere.

Carney didn’t seem to think the pandemic, Putin, and OPEC+ were significant events – or perhaps he thinks they were caused by Brexit.

Carney was in fact just trying a ‘I told you so’ stunt to justify the appallingly inaccurate predictions that the Bank of England, under his leadership, made in the lead up to the 2016 referendum.

Recall, that the Bank predicted mayhem and economic collapse none of which ever eventuated.

Remember the recession they predicted.

GDP growth in Britain is low but not recessed.

For the first time I can recall I agree with the Tories who said that Carney’s obsessive claim was “just nonsense”.

Anyway, if England did lose the cricket because of Brexit then Australia is in with a good change of retaining the Ashes on English soil (a rare occurrence).

Another wave of Covid is driving up deaths and hospital admissions in Australia

In the last few weeks, there has been an alarming increase in the death rate from Covid and the politicians are refusing to address the issue.

For them, the pandemic is over.

For the nurses and doctors in the hospital system it is anything but.

I was listening to a program on the radio the other day that interviewed a medical researcher on the topic of Sweden.

They pointed to a comprehensive research program that was published in 2022 in the Nature journal – Evaluation of science advice during the COVID-19 pandemic in Sweden.

It is an indictment of the Swedish strategy, which is still being touted on social media as the model that all nations should have followed.

Yes, only if they wanted the death carnage that Sweden endured.

I won’t go into the findings in depth because it is an Open Access journal article and fairly accessible to the layperson (in terms of research design etc).

It notes among other things that:

1. “scientific methodology was not followed by the major figures in the acting authorities—or the responsible politicians—with alternative narratives being considered as valid, resulting in arbitrary policy decisions.”

2. “The Swedish pandemic strategy seemed targeted towards “natural” herd-immunity and avoiding a societal shutdown.”

3. “The Public Health Agency labelled advice from national scientists and international authorities as extreme positions, resulting in media and political bodies to accept their own policy instead.”

4. “The Swedish people were kept in ignorance of basic facts such as the airborne SARS-CoV-2 transmission, that asymptomatic individuals can be contagious and that face masks protect both the carrier and others.”

5. “Many elderly people were administered morphine instead of oxygen despite available supplies, effectively ending their lives.”

6. “Email conversations and statements from the State Epidemiologist and others show that they at least speculated on the use of children to acquire herd-immunity, while at the same time publicly claiming children played a negligible role in transmission and did not become ill.”

7. “The Swedish strategy has also been at the base of the controversial Great Barrington Declaration (published October 4, 2020) aiming for natural herd-immunity by letting the infections spread in a “controlled way” in society … This strategy is considered internationally as unscientific, unethical, and unfeasible.”

It is apparent in Australia, that the Federal government has not progressed in any effective way a new pandemic strategy.

The ’emergency’ is apparently over and so developing a framework with processes to deal with the ongoing Covid issues, but also the likelihood of another pandemic from something else is a lower priority.

That neglect will be at our collective loss.

Music – Lynton Kwesi Johnson

This is what I have been listening to while working this morning.

Lynton Kwesi Johnson – is a Jamaican dub poet who lives in Britain.

He is also an activist and his poetry prosecutes issues relating to racism and poverty in Britain.

I have all his albums.

Of particular note is that he works with great dub players to present a musical poetry that is second to none.

He was a fierce critic of the Thatcher government, which is when I came across him.

I was studying for my PhD at the University of Manchester in the early 1980s just after the large street riots across the UK.

I started seeing painted names on bridges etc when I was out running in the mornings and some research revealed they were in memory of young Caribbean youth who had been beaten by police or murdered in struggles between gangs (sometimes over the territory that rival sound systems claimed as their own).

That is when I came across LKJ.

This track – Sonny’s Lettah (Anti-sus Poem) – was his first poem and was released on his second album (1979) – Forces of Victory.

It was about Thatcher’s revival of the – 1824 Vagrancy Act – also known as the ‘Sus Law’ in Britain, which led to mass arrests of innocent black youths in the poor districts.

‘Sus’ refers to ‘suspicion’ and the cops would just claim they didn’t like the look of someone and arrest and beat them.

The Act was repealed in 2000.

But it was a major issue during the race riots in Britain in the early 1980s.

The song is a dreadful indictment of the Tory government of the time and the reality of life for young Jamaican immigrants in London and other major British cities.

The other musicians are among the best:

1. Lloyd ‘Jah Bunny’ Donaldson – drums.

2. Rico Rodrigues – trombone.

3. John Kpiaye – guitar.

4. Vivian Weathers – bass.

5. Julio Finn – harmonica.

6. Dick Cluthell – flugel horn.

7. Dennis Bovell – producer and keyboards.

Pretty chilling even today.

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.

This Post Has 7 Comments

  1. bill, I’m similarly appalled by the behaviour of our government’s Social Darwinism approach toward the citizenry via their response to the pandemic. Just a suggested change to your intro on that subject as follows: “In the last few weeks, there has been an alarming increase in the death rate from Covid [despite the] because of politicians refusing to address the issue.”

  2. “(…)debt buy-backs (…)”
    The Titanic sinks, but the band keeps playing. Maybe if we keep clapping our hands, we won’t go down with the ship.

  3. “The fight against hunger, poverty, and inequality” is code. The phrase is intended to prevent discussion of de-growth.

  4. The IMF is a tool of neocolonialism. Michael Hudson’s “The Destiny of Civilization” and the 3rd edition of his “Super Imperialism” explain the history in considerable detail, beginning with US refusal to write down the debts of its WWI “allies.”

  5. Sometimes, one thinks that the intellectual world should evolve as intelligent people take account of the dissonance between their ideas and the facts before them and adapt their views…

  6. Hi Mr Mitchell, I just want ask why Sweden rank 43 and France rank 37 in deaths/1million ranking. It looks like Covid is dangerous for the same category of people, and those should be protected directly (through more protection, less contact, no work for example no industry shut down because of covid even in countries that did lockdown, it means vulnerable people in those fields did not do lockdowns) and not indirectly (trying to stop the virus from spreading which could never happen, we can only help reduce the rate of infection per day but the sum in the long term is the same).
    Sorry for my bad English.

  7. Thanks for another insightful and informative post. It’s good to see that the Swedish Covid-19 policy gets scrutinised in peer reviewed press.

    Concerning the NGF Pact, is it somehow related to the plan to introduce BRICS gold standard? It’s an idea that the LaRouche movement has promoted in the BRICS camp. Also, “Russian economist Sergey Glazyev proposes a kind of bancor backed by a basket of commodities” (South Asia Journal, 26 June 2023). As we know, Russian rouble is still on gold standard. Is there a line that connects all these dots? How would you comment the “basket of commodities” idea?

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