Developing countries have long been told to avoid borrowing from central banks (CBs) to finance government spending. Many have even legislated against CB financing of fiscal expenditure. Central bank fiscal financing Such laws are supposedly needed to curb inflation – below 5%, if not 2% – to accelerate growth. These arrangements have
Author: Anis Chowdhury & Jomo Kwame Sundaram, IPS
Macroeconomic policy coordination more one-sided, ineffective
Widespread adverse reactions to the UK government’s recent ‘mini-budget’ forced new Prime Minister Liz Truss to resign. The episode highlighted problems of macroeconomic policy coordination and the interests involved. Macro-policy coordination But macroeconomic, specifically fiscal-monetary policy coordination almost became “taboo” as central bank independence (CBI) became the new orthodoxy. It has been
Stop worshiping central banks
Preoccupied with enhancing their own ‘credibility’ and reputations, central banks (CBs) are again driving the world economy into recession, financial turmoil and debt crises. Wall Street ‘cred’ Most CB governors believe ‘credibility’ is desirable and must be achieved by fighting inflation at any cost. To justify their own more harmful policies, they
Ideology and Dogma Ensure Policy Disaster
Central banks (CBs) around the world – led by the US Fed, European Central Bank and Bank of England – are raising interest rates, ostensibly to check inflation. The ensuing race to the bottom is hastening world economic recession. Going for broke New UK Prime Minister Liz Truss has already revived ‘supply
Inflation phobia hastens recessions, debt crises
Inflation phobia among central banks (CBs) is dragging economies into recession and debt crises. Their dogmatic beliefs prevent them from doing right. Instead, they take their cues from Washington: the US Fed, Treasury and Bretton Woods institutions (BWIs). Costly recessions Both BWIs – the International Monetary Fund (IMF) and World Bank –
Africa struggles with neo-colonialism
After a quarter century of economic stagnation, African economic recovery early in the 21st century was under great pressure even before the pandemic, due to new trade arrangements, falling commodity prices and severe environmental stress. European scramble for Africa Africa’s borders were drawn up by European powers, especially following their ‘Scramble for
1980s’ Redux? New context, Old Threats
As rich countries raise interest rates in double-edged efforts to address inflation, developing countries are struggling to cope with slowdowns, inflation, higher interest rates and other costs, plus growing debt distress. Rich countries’ interest rate hikes have triggered capital outflows, currency depreciations and higher debt servicing costs. Developing country woes have
How not to win friends and influence people
After four years of Trump’s ‘America first’ isolationism, US President Joe Biden announced “America is back”. His White House has since tried to find allies against China and Russia. But it has not found many, especially in the Global South. His summit with Southeast Asian leaders was well attended, but promised
Stagflation: From Tragedy to Farce
Half a century after the 1970s’ stagflation, economies are slowing, even contracting, as prices rise again. Thus, the World Bank warns, “Surging energy and food prices heighten the risk of a prolonged period of global stagflation reminiscent of the 1970s.” In March, Reuters reported, “With surging oil prices, concerns about the
Neo-colonial currency enables French exploitation
Colonial-style currency board arrangements have enabled continuing imperialist exploitation decades after the end of formal colonial rule. Such neo-colonial monetary systems persist despite modest reforms. In 2019, Italian Deputy Prime Minister Luigi Di Maio accused France of using currency arrangements to “exploit” its former African colonies, “impoverishing Africa” and causing refugees