Omar al Bashir has fallen in Khartoum. Beyond regime change–managed by the military– there’s a deeper economic crisis.
Sudan鈥檚 national salvation
Category: Debt
Does one size fit all when it comes to financial inclusion? Scrutinising the effects of class, race, gender, and age
In recent decades, market-based solutions such as financial inclusion have become more popular in developed countries to reduce inequalities and boost wealth and incomes of the poor. There is no better example of this than the recent thrust of low-income families, women, ethnic minorities, and the young into the subprime mortgage lending expansion in the USA since the early 2000s. Higher access to formal loans for these households was argued to enable them to climb the magical ladder of homeownership and achieve their American Dream. But as we know, the picture didn鈥檛 turn out to be quite so rosy.
10 years since the Great Recession, many families are not seeing recovery as the impact of the crisis was substantially harsher for the subprime borrowers (Young 2010; Henry, Reese, and Torres 2013). Financial inclusion in the subprime period turned out to be predatory. In this post, I explore how things went wrong when policy makers failed to account for the institutional conditions in the US economy, which led to dramatically different experiences of financial inclusion across social classes, gender, race, and generations.Read More »
To be Poor in Times of the Current Financial Architecture
Late developers are nowadays confronted with the problem of having to earn foreign currency to finance structural transformation under extremely unfavourable conditions. The dependency on forex is rooted in the international financial architecture and represents a major pitfall for countries trying to catch up. However, this structural impediment to transformation is not paid much attention to by the dominant development economics.Read More »
BLOG SERIES: Inclusive or Exclusive Global Development? Scrutinizing Financial Inclusion
鈥淔inancial inclusion is a key enabler to reducing poverty and boosting prosperity.鈥�
–
鈥淸Policies of financial inclusion] serve to legitimize, normalize, and consolidate the claims of powerful, transnational capital interests that benefit from finance-led capitalism.鈥�
– 聽.
Financial inclusion has been high on the agenda for policy-makers over the past decade, including the G20, international financial institutions, national governments and philanthropic foundations. According to Bateman and Chang (), it鈥檚 the international development community鈥檚 most generously funded poverty reduction policy. But what lies behind the buzzword? How can the two quotes above portray such starkly opposing views?Read More »
Inclusive Finance, Shadow Banking and the Need for Financial Citizenship
Why are poor people offered financial inclusion products? One answer to this question is that the poor have This explanation sees poverty as the driver of demand for inclusive finance, but engages only superficially with the question of why mainstream financial institutions are unable to accommodate the poor.
The alternative explanation, which I examine in my research, is that the demand for inclusive finance is driven by practices known as 鈥榝inancial infrastructure withdrawal鈥�: this is the very same process behind the rise of predatory lending in the Anglosphere () and reveals that financial systems have inbuilt tendencies to be exclusionary (Dymski and Veitch, 1992). Given these tendencies, scholars of financial exclusion in advanced capitalist countries, have argued for a concept of financial citizenship which notes that like countries, financial systems have an inside and an outside (Leyshon and Thrift, 1995). Those who can access finance only in the form of, for instance, and not through mainstream banking institutions are relegated to the outside and are hence not financial citizens. The processes that underlie this relegation include the tendency of mainstream banks to cross-sell products within groups, privileging 鈥榖lue-chip鈥� clients by offering them subsidies in exchange for brand-loyalty. Less wealthy clients, as a result, inevitably pay more for the same products and services than their more affluent counterparts.
Do not take peace for granted: Adam Smith鈥檚 warning on the relation between commerce and war
By聽Maria Pia Paganelli and聽Reinhard Schumacher
Is trade a promoter of peace? Adam Smith, one of the earliest defenders of trade, worries that commerce may instigate some perverse incentives, encouraging wars. The wealth that commerce generates decreases the relative cost of wars, increases the ability to finance wars through debts, which decreases their perceived cost, and increases the willingness of commercial interests to use wars to extend their markets, increasing the number and prolonging the length of wars. Smith, therefore, cannot assume that trade would yield a peaceful world. While defending and promoting trade, Smith warns us not to take peace for granted. We unpack Smith鈥檚 ideas and their relevance for contemporary times in in the Cambridge Journal of Economics.Read More »
Currency crisis in Argentina or the IMF鈥檚 tango
By Roberto Lampa and聽狈颈肠辞濒谩蝉 贬别谤苍谩苍 Zeolla
The Argentinian government has requested financial assistance from the IMF to tackle the consequences of a serious currency crisis. Last Wednesday, the government emphatically announced the new terms of such an agreement. However, unpacking the terms of those agreements and the current situation reveals serious concerns about the country’s future .
A few months back (), we provided an analysis of the current Argentinian crisis, highlighting the excessive vulnerability of the economy produced by the abrupt financial deregulation carried out by Macri鈥檚 administration.聽Three aspects in particular threatened the country’s future prospects: the deregulation of foreign exchange that failed to stop capital flight, a boom in foreign debt (at a record level among emerging market economies) and the promotion of speculative capital inflows to carry trade (buying financial instruments issued by the Central Bank聽called LEBAC in order to pursue carry trade operations).
When international conditions worsened and the carry trade circuit came to an end, the 鈥淟EBAC bubble鈥� exploded and produced a tremendous foreign exchange crisis that shook the Argentine economy, causing a sharp rise in inflation and a severe recession from which the country has not yet managed to escape. Read More »
Unanswered Questions on Financialisation in Developing Economies
The discussions of the processes behind the growing importance of finance, financial transactions and financial motives, as well as the sustainability of the financial systems, have been located in the critical political economy debate of financialisation and neoliberalism (; ; ; ; ; ; ).
The analysis of financialisation in developing and emerging economies (DEEs) is relatively novel (). It is rooted in earlier discussions about the risks of financial globalisation and liberalisation (; ; ; ; ; ; ; ), including the Latin American Structuralist literature on the hegemonic role of the US dollar and its financial and monetary implications for DEEs (; ; ; ; ); the debate on capital account liberalisation and capital market integration (; ; ; ); and the Minsky-inspired currency and boom bust dynamics of financial crisis in developing economies (; ; ; ; ).Read More »
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