Debt crisis of the less developed countries and the transfer debate once again

In the perspective of substantial amount of net transfers from the debtor less developed countries (LDCs) to the creditor developed countries (DCs) in the recent debt crisis years, there is a renewed debate (that started in the context of German reparation payments after the First World War) on the question of transfer burden of debt. The present study assembles some evidence to show that the LDCs in general expanded their export‐volumes and faced losses in their export unit values in the process of their debt repayments. Many LDCs faced this transfer burden of debt irrespective of whether their export drive was in the field of primary products or manufactures. Thus the Keynesian analysis for German transfer problems seems to be relevant in the context of the present experience of the LDCs. For some debtor countries, the ‘insoluble’ transfer problem mentioned by Keynes exists as they are facing ‘Fisher's paradox’: The more the debtors pay, the more they owe.     

The new face of developing country debt

Developing country debt has been a major preoccupation for development policy makers and practitioners since the debt crisis of 1982. It is a major obstacle to economic and social progress in developing countries. After the resolution of the Asian financial crisis of the late 1990s and the debt relief initiatives for low-income countries of 1997–2006 concerns about developing country debt seem to have receded. However, there are a growing number of problems that warrant concern, including the accumulation of domestic debt, short-term debt and private non-guaranteed debt, and increasing recourse by low-income countries to international capital markets. At the same time developing countries have strengthened their capacity to oversee and analyse their debt portfolios. Nonetheless, significant weaknesses remain in debt management capacity at the national level. Moreover, the activities of ‘vulture funds’ and the lack of a sovereign debt restructuring mechanism reveal major shortcomings in the international institutional architecture that need to be addressed urgently.     

Financial transitions in the PRC: banking on the state?

The reappearance of substantial debt in China after 2008 has refocused attention on the sustainability of the existing financial ‘model’. It’s not just that ‘traditional’ forms of bank-centred debt have re-emerged, but that the informal ‘shadow banking’ sector also seems increasingly fragile, generating debts that do not seem easy to repay. Explanations for the current situation focus on the way in which China responded to the global financial crisis, and on the incentives that exist to go outside the formal and more regulated banking system into often riskier activities. But there are more fundamental structural issues. The current financial system contains within it some of the dna of its predecessor, while the spatial distribution of power and authority is inextricably linked to the way the financial system functions. While it might be possible to tinker with some elements of current financial problems, the relationship between local government financing, land, the banking system and key economic sectors makes it difficult to resolve more structural issues without taking a holistic approach; one that would have fundamental consequences for the nature of the Chinese state, and the distribution of power within it.     

Critical Review: the politics of sovereign debt

In this article, I interrogate what is meant by ‘the politics of sovereign debt’, and examine how various authors, especially David Graeber, have addressed this question. More specifically, I seek to extend my contribution to the goals of the ‘Repoliticizing Debt’ workshop, which inspired this special issue, by proposing a theoretical framework for understanding the role of sovereign debt in mediating the contradictions of neoliberal capitalism, and by challenging dominant treatments of the sovereign debt crisis currently underway in Greece. I argue that the existing literature fails to help grasp the complexity of sovereign debt as a social relation, and that debt must be understood as what Marx refers to as ‘fictitious capital’, that is, capital backed not by a commodity transaction, but by a claim on future value. The management of confidence in the value of fictitious capital through the use of the ‘golden noose’ of debt is the key process to be understood in order to grasp the complexity of sovereign debt crises.     

Do Governments in Developing Countries Pursue Sustainable Debt Policies? Empirical Evidence for Selected Countries in Africa and Latin America

In this paper we test for sustainability of public debt in selected low- and middle-income developing countries of Africa and Latin-America. We do this by analysing how the primary surplus to GDP reacts to variations in the debt to GDP ratio where we allow for a time-varying reaction coefficient. Moreover, we test for stationarity of the overall budget deficit of the selected countries. The results show that, despite rising debt ratios, there is empirical evidence for some of the countries that public debt is sustainable, independent of whether they belong to the low-income or middle-income group of countries.     

Debt,Uneven Development and Capitalist Crisis in South Africa: from Moody’s macroeconomic monitoring to Marikana microfinance mashonisas

The power, vulnerability and destructiveness of financial markets are out of control in South Africa, now among the most unequal, economically volatile and protest-intensive countries worldwide. While debt made itself felt in many sites, of interest in both criticising and promoting solutions is the ‘scale jumping’ required from South Africa’s national insertion into the world financial system, entailing the Reserve Bank setting very high interest rates, in turn leading to unpayable levels of consumer debt, and at a time when microfinance is suddenly discredited as a development strategy. Macro- and micro-financial problems fused in the course of the Marikana Massacre of August 2012, reflecting the local and global powers of the Moody’s rating agency and ‘mashonisa’ loan sharks. The over-indebted Marikana mineworkers, who led a strike which catalysed many wildcat strikes elsewhere, confronted the local crisis by displacing it into the national economy. This only heightened the contradictions that Moody’s punished with its September 2012 credit-rating downgrade. Without a genuine ‘debt relief’ solution at both scales, society will continue to unravel, as financialisation reaches its limits within one of the world’s most extreme cases of uneven and combined development.     

Varieties and crises of neoliberal globalisation: Argentina,Turkey and the imf

Argentina and Turkey are two important ‘emerging market countries’ that experienced a major economic crisis during the same year. Focusing on the period leading up to the respective 2001 crises in the two countries, this article attempts to place the two experiments in historical perspective and provide an understanding of the common elements as well as the diversity of the neoliberal restructuring process in semi-peripheral settings. The article also attempts to identify some of the key mistakes made by the imf, which was, in part, responsible for the crises experienced. A central conclusion is that ‘new’ or unconsolidated democracies find themselves particularly vulnerable when they are suddenly and prematurely exposed to financial and capital account liberalisation. The outcome is a highly fragile, debt-led growth path with costly consequences. Indeed, although both countries have managed to accomplish impressive recoveries in the post-crisis period, given their past trajectories and the heavy debt burden that they face, it is too early to say that the recovery process will be translated into sustained and crisis-free growth. The regional environment in which the two countries find themselves might be particularly important in this context, with the powerful EU anchor a possible important advantage in the Turkish context.     

‘We Are All Poor Here’: Economic Difference,Social Divisiveness and Targeting Cash Transfers in Sub-Saharan Africa

While the central thrust of Michael Lipton's work has been the crucial role of productivity gains in small farm agriculture for rural poverty reduction, in many sub-Saharan African countries this desirable outcome has stubbornly refused to materialise, and growing numbers of rural poor people are found persistently to fail to secure even minimal acceptable levels of food consumption. A social protection policy response is to target social cash transfers to the chronic extreme poor. This article focuses on the level of cash transfers relative to income differences between households in the bottom half of the income distribution, and the social tensions that arise from beneficiary selection and exclusion. It is found that cash transfers to target groups such as ‘the poorest 10 per cent’ or the ‘ultra-poor labour constrained’ must be set low, even below the welfare levels they seek to achieve, if they are to avoid socially invidious reshuffling of the income distribution. The article identifies critical trade-offs between the cost and coverage of different types of social transfer, their social acceptability and their political traction, helping to explain the reluctance of governments to adopt scaled-up poverty-targeted transfers as the preferred form of social cash transfer to those most in need in their societies.     

Debt Politics and the Free Trade ‘Package’: the case of the Caribbean

While much has been written on how powerful institutions have used debt crises to foist free trade agreements on poorer states, this paper explores how the foisting of free trade agreements on poorer states has resulted in debt crises. Part one critiques the common-sense understanding of ‘free trade’ as a mere technical or policy issue, arguing that it is an intricate political, economic and ideological ‘package’ rooted in complex social, historical and cultural forces. Part two explores the role of debt in the free trade package by examining the impact of free trade agreements on the Caribbean over the past decade, during which time the region has experienced growing public and personal debt crises, further fuelled by an aid packages that included millions of dollars of concessional loans. It is argued that the contradictions of ‘free trade’ are mitigated through a ‘debt for trade’ paradigm, which Caribbean states are beginning to subvert through new preferential South–South partnerships.     

Public administration,public leadership and the construction of public value in the age of the algorithm and ‘big data’

Public administration scholarship has to a significant degree neglected technological change. The age of the algorithm and ‘big data’ is throwing up new challenges for public leadership, which are already being confronted by public leaders in different jurisdictions. Algorithms may be perceived as presenting new kinds of ‘wicked problems’ for public authorities. The article offers a tentative overview of the kind of algorithmic challenges facing public leaders in an environment where the discursive context is shaped by corporate technology companies. Public value theory is assessed as an analytical framework to examine how public leaders are seeking to address the ethical and public value issues affecting governance and regulation, drawing on recent UK experience in particular. The article suggests that this is a fruitful area for future research.     

Outlook for the ‘developing country’ category: a paradox of demise and continuity

In the 2016 edition of its World Development Indicators (WDI), the World Bank introduced an important change in the way it categorises countries: it explicitly stated the intention to eliminate the distinction of countries as ‘developing’ and ‘developed’. This decision represents the first time one of the world’s most powerful and influential international organisation has overtly decided to move away from this fuzzy-yet-ubiquitous terminology for categorising countries (and not proposing to replace the division). This paper takes this shift to discuss country groupings based on development levels, particularly the ‘developed’/’developing’ dichotomy, focusing on the latter term. The paper argues for a paradoxical scenario, wherein the label ‘developing’ will increasingly become analytically useless while concurrently retaining – or even strengthening – its power in the context of foreign policy strategies. The analysis details the motives behind this paradox and provides a reasoning for when and why the term’s usage is likely to be weakened or strengthened. Simply put, the ‘developed’/’developing’ dichotomy is weakening in its analytical capacity, mostly due to the increasing heterogeneity among countries under the ‘developing’ label and concurrent porosity of ‘boundaries’ between the two categories, while showing little sign of being phased as a term for self-identification.     

Beyond import substitution and export promotion: A new typology of trade strategies

There is considerable confusion in the literature as to what exactly is meant by ‘export promotion’, or ‘outward‐orientation’. This article identifies five mutually‐exclusive trade strategies, and defines the underlying sectoral and market orientations of each. It then measures empirically the strategies of six developing countries. The empirical findings indicate that some of the successful East Asian countries actually pursued an infant industry‐based, exporter‐oriented, ‘protected export promotion’ strategy, not the commonly perceived, static comparative advantage‐based ‘export promotion’ strategy; their protectionist policies are not mere exceptions, but integral elements of their export‐oriented strategy.     

Are the LDCs really the world’s least developed countries?

The term ‘the least developed countries’ (LDCs) is widely understood to designate, exactly as stated, the world’s least developed countries. In conjunction with the 2015 United Nations (UN) triennial review of the LDC category, this article attempts to critically evaluate the UN’s list of LDC countries in the light of various indicators – economic, social, political, military and security related, and psychological. It concludes that the official and actual lists of LDCs, despite important similarities, are not completely identical. The term ‘the LDCs’ as used by the UN is therefore not fully consistent with the reality it attempts to designate and describe.     

‘Subsistence’ Readings: World Bank and State Approaches to Commercialising Agriculture in Post-Communist Eurasia

This article explores the World Bank’s project of ‘returning agriculture to the market’ through land titling reforms. It describes how World Bank and national government strategy papers distinguish between a ‘commercial’ or ‘entrepreneurial’ sector of farming and a ‘subsistence’ agricultural sector in post-communist Eurasia. The extension and growth of the former represents the desired goal of policies since the 1990s, while the latter’s numerical prominence in many countries constitutes a source of concern for authorities. The article argues that ‘subsistence’ represents a misreading of the rural population that confounds self-sufficiency with the size of farms, and casts millions of smallholders as non-economic and alien to markets. It focuses on two post-communist countries (Romania and Ukraine, extremes in terms of the introduction of property rights over agricultural land) to argue that efforts to reduce ‘subsistence’ translate into measures that increase the households’ monetary needs and are therefore going to be resisted. The article relies on analyses of World Bank and national government’s strategy papers as well as ethnographic data collected in 2013–2017 in the Ukrainian-Romanian border region.     

The Challenges for Developing Countries in International Tax Justice

Developing countries face three main challenges in international tax cooperation. The most widely known are the twin problems of tax avoidance by foreign investors and tax evasion by domestic actors, which have become a major focus of debate in international organisations and of civil society activism in recent years. The second problem, tax competition, incorporates a range of issues from the ‘prisoners’ dilemma’ facing countries competing for inward direct investment through to the harmful tax rules used by tax havens that enable tax avoidance and evasion. This article reviews four recent monographs that analyse these problems at an international level. While they contain much useful discussion of the problems and potential technical solutions, there remains a need for political economy research to understand why certain technical solutions have not been adopted by governments. A third challenge faced by developing countries, barely considered in the tax and development literature up to now, leads to a note of caution: international tax institutions tend to be designed in ways that place disproportionate restrictions on capital-importing countries’ ability to tax foreign investors.     

Economic Transformation Outside the Law: Corruption,Trust in Public Institutions and the Informal Economy in Transition Countries of Central and Eastern Europe

This article considers the role of the informal economy in Central and Eastern European post-communist countries. The informal economy is defined as the ‘black’ economy, which is monetised but outside the law (often illegal) on the one hand and the ‘household’ and ‘social’ economies which are non-monetised and non-legal in the sense that they are outside of legislation. The article shows that in some countries the black economy is very important for supporting household incomes (Serbia and Croatia) and in other countries the household or social economies are predominant (especially Romania and Ukraine). In a third group of countries the formal economy predominates over other economies (especially the Czech Republic and Hungary). The article goes on to look at what kinds of people participate in these different economies and concludes that whilst the household and social economies are a social safety net for the poor, the elderly and those in rural areas, the black economy is more likely to be an option for those who are already better off to improve their incomes. The article considers the implications of this for attitudes to the legitimacy of the public realm and finds that greater participation in the informal economy is associated with both loss of trust in public institutions and increased perception of corruption. Therefore it is hypothesised that economic activities that take place ‘outside the law’ could lead to a decline in confidence in the state, although there are important variations between countries.     

Principal,Agent or Bystander? Governance and Leadership in Chinese and Russian Villages

Abstract

What does ‘local self-governance’ mean in post-communist Russia and China? In order to answer this question, the article focuses on village-level governance in both countries by employing a four-fold typology of village leadership in public affairs. In both countries, the withdrawal of state power from local communities and the introduction of legislative ‘self-government’ has not brought autonomy to the local and community levels. The findings here suggest that the single ‘state agent’ category of village leadership that emerged under the communist regime is shifting to become one of the remaining three types, ‘principal’, ‘local agent’ and ‘bystander’. There was a growing tendency towards a non-autonomous type of ‘bystander’-style leadership in China and the ‘local agent’ type in Russia. This article suggests that the development of these local governance styles should not be attributed to a common transitional process departing from the communist past, but is the outcome of four factors that influence village leaders in two countries: administrative distance between local and village level, village social structure, fiscal arrangements and electoral relationships.     

Mechanisms of the ‘Aid Curse’: Lessons from South Korea and Pakistan

Recently scholars have argued that, far from contributing to development, foreign aid hinders development. But in the 1960s the East Asian countries developed rapidly despite receiving large amounts of aid. To examine why aid seems to undermine development in some cases but not in others, we conduct a detailed comparison of the mechanisms of the ‘aid curse’ in South Korea and Pakistan. We show that South Korea saw astonishing levels of corruption, but this did not hinder its development; and Pakistan had a strong bureaucracy, which did not help it to grow. The key difference between the two countries was in the strength of their tax systems: foreign aid in the context of underdeveloped tax administration leads to increasing cycles of debt that undermine development. When foreign aid arrives in the context of commitment to strong taxation, a country can avoid the ‘aid curse.’     

The goals and reality of the water–food–energy security nexus: the case of China and its southern neighbours

The so-called ‘nexus’ approach has recently been promoted as addressing externalities across the water, food and energy sectors, thus helping to achieve ‘water/energy/food security for all’, ‘equitable and sustainable growth’ and a ‘resilient and productive environment’. While these are noble goals, this article argues that the reality on the ground appears to be taking a different direction, at least when it comes to China and its neighbours in South and Southeast Asia. There, a new era of large-scale water infrastructure development is creating several security-related problems, which represent serious challenges to the nexus goals. These challenges include food–energy tensions, human security threats and ecological risks. These challenges can also be linked to rising friction surrounding the management of water, food and energy resources in the region. The article argues that, in order for the nexus goals to be achieved in China and the countries on its southern periphery, there must first be increased awareness of this nexus among policy-making elites.     

‘Illegitimate’ loans: lenders,not borrowers,are responsible

Debt relief has focused on the borrower—debt is cancelled if a country is too poor to repay and now has acceptable policies. Iraq shifted the focus to the lender—debt should be cancelled because creditors should never have lent money to the repressive regime. This paper uses domestic and international law to establish the concept of ‘illegitimate debt’, which should not be repaid independent of the status of the borrower. The concept of ‘moral hazard’ is used to argue that non-payment of illegitimate debt is necessary to discipline lenders and to prevent future lending to oppressive dictators.