Tag Archives: World Bank

Chris Wood on Canada’s Old Testament Economics

An illustration from Bible Pictures and What They Teach Us by Charles Foster. Public domain.

Chris Wood writes that the religious faith of Canada’s prime minister is properly his business. His shepherding of the economy according to Old Testament economics, however, is everyone’s concern. An illustration from Bible Pictures and What They Teach Us by Charles Foster. Public domain.

Outside Canada, writes Natural Security columnist Chris Wood,  dangerous magical thinking — what he calls Old Testament Economics — “is increasingly being called out for its error by economists more based in reality … a Reformation is sweeping the ecclesiastical strongholds of market idolatry.” Within Canada, the reality accepted by a growing body of economists is dismissed by Prime Minister Stephen Harper and his “secular congregation” — and that should concern everyone, writes Wood. An excerpt of his new column, Kool-Aid Economics (subscription):

Canadians have been aware for some time that their Prime Minister subscribes to an arcane fundamentalist strain of Christianity. Being the polite and generally go-along types we are, we have quite properly left his faith between the man and his God. However, it is now evident that Canada’s P.M. is a credulous disciple of another not-so-fringe and much more dangerous faith, about which we have every right to be deeply concerned.

That cultic faith is Old Testament economics.

Stephen Harper is an acolyte of an especially purist strain of neo-liberalism, a pseudo-scientific theology replete with parables, miracles and catechisms of faith. It is to reliable modeling of reality roughly what witches and alchemists were to modern science. (Then again, Harper might welcome the parallel; he has spent most of his majority term metaphorically stoning Canada’s public scientists and burning their labs.)

Nonetheless, among this faith’s central tenets is the idea that to make a profitable omelette, some eggs just gotta break. Or, as Harper himself has intoned, justifying his refusal to defend his country’s environment or the global climate: “No country is going to take actions that are going to deliberately destroy jobs and growth in their country.”

It’s the black and white thinking of dogma, like good and evil, believer or heretic. Choose one: a paycheque or, you know, air. We have a tragic history of this illusion in my country, where the rotten-egg stench of a pulp mill — often a town’s only reason for being — was colloquially described as ‘the smell of money’ … log in (subscription required*) to read Kool-Aid Economics.  

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BRICS Bank a Game Changer

By Ali Burak Güven, Birkbeck, University of London, The Conversation
July 22, 2014


FORTALEZA, Brazil — Leaders announce a BRICS development bank at Brazil summit. Left to right: President of Russia Vladmir Putin, Prime Minister of India Narendra Modi, President of Brazil Dilma Rousseff, President of China Xi Jinping, President of South Africa Jacob Zuma. Photo: Russian government, public domain

The top news from this year’s BRICS summit was the announcement of a New Development Bank. Headquartered in Shanghai, the bank will become operational in 2016 with an initial capital of US$50 billion. Its core mandate is to finance infrastructure projects in the developing world.

The bank, announced at the summit in Fortaleza, Brazil, will also have a monetary twin to provide short-term emergency loans, the Contingency Reserve Arrangement. While the bank will be open to all UN members, the reserve will lend only to the contributing BRICS countries in times of crisis.

This combination of timing, actors, and institutions is noteworthy. It was in July 1944 that the Allied nations gathered at Bretton Woods to form two of the most vital institutions of the post-war era: the International Monetary Fund and what would become the World Bank. Now, 70 years later and only a few years on from the global financial crisis, the leading developing nations of our time have joined forces to forge new institutions of international economic cooperation with mandates identical to the World Bank and the IMF.

This move is born out of a belief that the Bretton Woods twins, despite numerous governance reform initiatives over the past decade, remain set to reflect the policy preferences of their original creators. In creating complementary institutions, the BRICS will be hoping to use these alternative platforms of international economic governance and as leverage to accelerate the reform of existing arrangements.

The New Development Bank is currently the more interesting of the “Fortaleza twins”, for it is designed as a freestanding organisation that’s open to all. Yet it has not received a warm welcome in business columns. While the political symbolism of the new institution is widely acknowledged, its immediate economic utility has been challenged – why do the BRICS need a development bank of their own when infrastructure projects are already easily financed through private as well as official channels, especially through the World Bank?

This is a narrow criticism. In the long run, the New Development Bank has the potential to become a game-changer in development financing. In fact, if its evolution even remotely parallels that of the World Bank, it might end up having a formative impact on economic policy-making and overall development strategy in the Global South.

To begin, while there is no shortage of national and regional development banks as well as private financiers of infrastructure projects, there is still a massive gap in development finance, estimated to be as high as US$1 trillion per year. Many developing countries encountered significant financing problems during the global crisis of the late 2000s. This shortfall necessitated a surge in World Bank commitments, from an annual US$25 billion in 2007 to about US$60 billion in 2010.

But commitments declined just as swiftly over the past few years, and as of 2013 stood at about $30 billion. Given these figures, the New Development Bank’s readily available $10 billion in paid-up capital and the extra $40 billion available upon request are not exactly pocket money for development financing.

Yet just as the World Bank was never simply a money lender, so too will the new bank represent far more than a mere pool of funds. The existing geostrategic and policy inclinations of its founding stakeholders imply a bigger role to play for the institution. In the process, it is bound to offer a formidable challenge to the World Bank’s financial prominence and so influence policy in the developing world.

The new bank has been long in the making. It is the culmination of nearly two decades of intense South-South cooperation and engagement. In recent years especially, the BRICS and other emerging nations have become donors and investors in both their immediate regions and in less developed areas of the world – with Chinese and Brazilian involvement in sub-Saharan Africa and parts of Latin America representing the prime examples.

They have made an effort to establish more equal relationships with their lower-income developing peers and emphasised an attractive narrative of partnership, non-intervention and knowledge transfer, instead of smug, superior Western notions of top-down aid and restrictive conditionality. To the extent that it could keep its rates competitive, the New Development Bank is unlikely to suffer from a dearth of clients from among its fellow developing nations.

Paradoxically, BRICS and other large middle-income countries still remain the most valuable clients of the World Bank. Since the financial crisis, India has been the largest borrower of the World Bank, and has been closely followed by Brazil, China and a few other near-BRICS such as Indonesia, Turkey and Mexico. But, once the new bank fully kicks off, it is possible the World Bank will lose a lot more business from this traditionally lucrative market of large middle-income borrowers who now have a serious alternative.

A reduced loan portfolio will ultimately translate into declining policy influence for the World Bank, which has held near-monopoly of development wisdom over the past 70 years. Perhaps in recognition of their waning power, there has already been a slight but steady decline in World Bank loans that emphasise policy and institutional reforms.

Also, a larger portion of the Bank’s resources have been allocated to conventional development projects, such as environment and natural resource management, private sector development, human development, and social protection. These are precisely the types of projects the Bank will encounter fierce competition from the new BRICS-led bank.

Consider also that the World Bank has labelled itself as a “knowledge bank” in recent years. Employing thousands of policy specialists, it doubles as one of the biggest think tanks in the world. Yet if it loses considerable financial ground to initiatives such as the New Development Bank, this threatens a decline in the power it has through knowledge.

Crucially, none of the BRICS adhere to the Bank’s standard policy prescriptions, nor do they advocate a different common strategy either. Brazil’s social democratic neo-developmentalism is quite different from China’s state neoliberalism, which in turn differs from established policy paths in others in the group. The only common denominator is a substantially broader role given to the state. But beyond this there is much flexibility and experimentation and little in the way of templates and blueprints like there is with the Western institutions. This policy diversity itself dismisses any idea of superiority of knowledge and expertise.

None of this suggests that the World Bank, as the dominant, Northern-led development agency, is now on an ineluctable path of decline. Cumbersome as they may appear, large organisations often accumulate considerable resilience and adaptive capacity over generations. Yet the World Bank does have a serious contender in the New Development Bank.

While it may not overtake the World Bank in financial prowess and policy influence any time soon, at a minimum it should be able to exert significant pressure over the World Bank to respond more sincerely and effectively to the new balance of power in the global economy.

The ConversationCreative Commons

Ali Burak Güven does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.

Further reading
Crumbling of the BRICs, by Jonathan Manthorpe on Facts and Opinions, April, 2014

Facts and Opinions is a boutique for slow journalism, without borders. Independent, non-partisan and employee-owned, F&O performs journalism for citizens, sustained entirely by readers: we do not carry advertising or solicit donations from foundations or causes.  Why? If you’d like to support our journalism, for $2.95 (the price of a cheap brew) you can subscribe to F&O for a month. If that breaks your budget, a one-day pass is $1. A subscription is required for original F&O work.

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Canada’s Climate: Last Chance Tourism


More or less as yesterday’s blog post (on Risky Business and Climate-Smart Development) was emerging from my keyboard, Canada’s federal government very quietly uploaded to the website of the Department of Natural Resources the closest thing Canadians have seen since 2008 to a comprehensive survey of Canada’s climate change vulnerabilities. In fact, Canada in a Changing Climate is avowedly an update on that earlier report — with little of significance added. 


Polar bears play-fighting. Creative Commons, via Wikimedia

The nearly 300-page report confirms that all the climate trends apparent in 2008 continue: Canada is getting warmer and wetter — although droughts can still occur; big storms are more common; ice and snow are melting pretty much everywhere. “Further changes in climate are inevitable.” Adaptation is necessary, and holds opportunities for some but, “there will also be cases where maintaining current activities is not feasible and/or cost-effective.”

The report examines three economic sectors likely to be the most immediately affected by climate change: farming, fishing and certain industries. Its findings are underwhelming. The report is heavy on contextual statistics — the value of mineral production by province in 2010 — and generalized forward-looking observations not much changed since 1989. It better connects some of the dots from climate change effects to impacts on specific sectors’ activities. But its evidence is anecdotal (Diavik Diamond Mine in the Northwest Territories spent an extra $11 million flying in fuel because its ice road melted early), and it makes no attempt to estimate aggregate future costs or opportunities across industries.

A clear take-away however, is that Canada is dragging its feet in preparing for a changed climate. The report admits it can find “relatively few examples of concrete, on-the-ground adaptation measures being implemented specifically to reduce vulnerability to projected changes in climate.”

The report offers case studies of adaptation efforts it has found. The federal government is notable by the near-absence of its initiatives. (Unless you get excited by its examining tax changes that might help farmers weather even wilder weather.)

Nonetheless there is evidence of the authors’ suppressed yearning for a more activist government role. It offers as a case study of successful historic adaptation the Depression-era Prairie Farm Rehabilitation Act (passed under the Conservative government of Prime Minister R.B. Bennett, as it happened), which provided federal support to reclaim farmland devastated by drought and wind erosion.

“Several factors can help accelerate the transition between awareness [of climate threat] and action,” the authors note, “including leadership, targeted awareness-raising and supportive strategies or policies.” Here, they manage to imply, the federal government has “opportunities.”

On the other hand, the report does hold some gems of perspective revealed, surely, only when resource researchers are obliged to describe their world in terms they hope that leaders blinded to all but book-to-market variables might understand.

Among the potential negative impacts from climate change on Canada’s “destination image,” the authors report, is “the threat of a loss of 40 per cent of tourism if Churchill’s polar bears ‘appear unhealthy’ (very skinny), which is already beginning to occur.” On the upside, there is a growing opportunity for “‘last chance tourism’, where additional tourists are drawn to see either changing landscapes or certain features (e.g. glaciers or certain wildlife species) before they decline or disappear.”

There’s a silver lining to everything.

Copyright Chris Wood 2014

Further reading:
Canada in a Changing Climate is available here: http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/earthsciences/pdf/assess/2014/pdf/Full-Report_Eng.pdf
Natural Security, Chris Wood’s bimonthly Facts and Opinions column , is here. (Subscription)

Facts and Opinions is a boutique for slow journalism, without borders. Independent, non-partisan and employee-owned, F&O performs journalism for citizens, sustained entirely by readers: we do not carry advertising or solicit donations from foundations or causes. If you’d like to support our journalism, for $2.95 (the price of a cheap brew) you can subscribe to F&O for a month. If that breaks your budget, a one-day pass is $1.) 





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Risky Business vs Smart Development


If Canada’s Prime Minister Stephen Harper and Australia’s Tony Abbott, the world’s most unabashed national cheerleaders for Big Carbon, were really the ‘frank,’ hard-nosed pair they pretend to be, two reports out in as many days would surely shake their certainty that acting to slow down and adapt to climate change will “destroy jobs and growth in their country,” as the first of the pair said earlier this month. 

English Bay, Vancouver, British Columbia. © Deborah Jones 2014

ENGLISH BAY, Vancouver. Canada is considering two new pipelines to increase exports of bitumen to Asia from Alberta’s oil sands, shipped through ports on British Columbia’s coast. Photo © Deborah Jones 2014

In fact, the opposite is more likely to be true. Failure to tackle climate change seriously, a bipartisan, independent and business-oriented study group in the United States has found, is likely to cost that country hundreds of billions of dollars in economic losses. According to the World Bank — hardly a nest of lefties — on the other hand, acting to contain climate damage could make the world trillions of dollars richer as soon as 2030. 

Risky Business, funded by former New York Mayor Michael Bloomberg, former U.S. Treasury Secretary (under President George W. Bush) Henry Paulson and green-minded billionaire Tom Steyer, identifies some ‘wins’ for the economies of northern-tier American states, but staggering losses in its southern and coastal states. Sea-level rise alone puts more than US$700 billion in coastal property at risk, the report warns: “On our current climate path, some homes and commercial properties with 30-year mortgages in places in Virginia, North Carolina, New Jersey, Alabama, Florida, and Louisiana and elsewhere could quite literally be underwater before the note is paid off.” Hurricanes and other coastal storms will cost the U.S.  an additional $35 billion a year by 2030. Key harvests, including corn, soybeans and cotton, are likely to fall by 10 to 20 percent within as little as five years; more certainly within the quarter-century. 

Although the study is limited to the United States, elsewhere in the world Canada and Australia both face similar threats of coastal inundations, and droughts and heat waves in key interior agricultural regions. Neither country’s government has comprehensively assessed their economy’s vulnerability to climate change (although Canada’s independent advisory National Round Table on the Environment and the Economy did in 2011, a year before being shuttered by the Harper government).

While climate change, according to Paulsen et al, will likely destroy more than a trillion dollars of property and livelihoods in the U.S. alone, just a day earlier the World Bank’s reported that tackling the problem has the potential to boost world gross economic product by $2.6 trillion by 2030. 

The Bank’s report, Climate-Smart Development: Adding Up the Benefits, finds that even if only the United States, China, Brazil, India, Mexico and the European Union institute new policies aimed at cutting emissions, world GDP would rise by 1.5 percent more than it will on its current track. “This report removes another false barrier, another false argument, not to take action against climate change,” said World Bank President Jim Kim. 

Are you listening, Mr. Prime Ministers?

Copyright Chris Wood 2014

Further reading and viewing:

Natural Security, Chris Wood’s bimonthly Facts and Opinions column , is here.
The report Risky Business is available at: http://riskybusiness.org/
Climate-Smart Development: Adding Up the Benefits is available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/06/20/000456286_20140620100846/Rendered/PDF/889080WP0v10Bo0elopment0Main0report.pdf
The Canadian NRTEE’s Paying the Price is available here: http://collectionscanada.gc.ca/webarchives2/20130322143115/http:/nrtee-trnee.ca/climate/climate-prosperity/the-economic-impacts-of-climate-change-for-canada/paying-the-price

Video of the press conference announcing Risky Business:

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