Category: Finance

Financial Statecraft and its Limits in the Semi-Periphery

karasgdavidLeave a comment

Over the past decade, two, intertwined research agendas on (IFS) and (SF) have proposed to identify how an increasingly finance-dominated global capitalism incorporates the (Semi-)Peripheries.

The IFS research agenda recognizes that a 鈥渟ubordinate鈥� national currency comes with a risk premium increasing the costs of financing public debt 鈥� in other words, the current, US dollar-based currency hierarchy acts as a structural fiscal constraint in the Global South, limiting the scope for badly needed public investments. Foreign capital 鈥� in the form of foreign currency-denominated sovereign and private debt-, foreign aid, and foreign direct investment – is then to this artificial and unfair developmental constraint.

The SF agenda examines how this straightjacket on fiscal space has been further compounded with the liberalization of global capital mobility over the past forty years, diffusing credit-based accumulation strategies from the Core to the Peripheries: from socially and environmentally vital public goods and transformative industrial policies towards developmentally regressive strategies of accumulation driven by speculation and asset-price inflation.

Programmatic visions for liberating (semi-) peripheral economies from the dual constraints of a national fiscal space suffocated by the global currency hierarchy and globally mobile capital flows which deepen financialization are underdeveloped. Two scales of action are plausible: At the international level, , but it remains uncertain what forms of international financial solidarity and collaboration, if any, will materialize under its aegis. The national level comprises an alternative scale as the State continues to be perceived as the most likely candidate for ringfencing domestic social, environmental, and developmental objectives from the pressures of global capital mobility and the structural constraints of the global currency hierarchy.

In a with P谋nar E. 顿枚苍尘别锄, we study the politics governing the management of money in Hungary and Turkey, two semi-peripheral economies where the executive has built a vast array of direct and indirect tools to intervene in monetary policy, retail banking and credit allocation to manage financial subordination.

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Gendering the debt crisis: Feminists on Sri Lanka鈥檚 financial crisis

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By Kanchana N. Ruwanpura, Bhumika Muchhala and Smriti Rao

Countless images of women carers flitted through April-July 2022 on Sri Lankan television screens, social media, and newspapers. Carers with young children, mothers with new-borns leaving them with equally young children while they stood in queue for gas or kerosene, children doing their homework on tuk-tuks while their parents got in line for petrol and diesel. Yet, Sri Lankan policy pronouncements rarely mention working-class women. In a country where women comprise 52% of the population, this is astounding. Especially so when the dominant three foreign exchange earners for the country 鈥� garments, tea exports and migrant workers to the Middle East 鈥� rest on the efforts of women workers. 

In the current response to Sri Lanka鈥檚 debt crisis, the voices and needs of working-class women are once again being ignored by policymakers, despite the evidence all-around of women intensifying their unpaid labour even as the conditions under which they perform paid labour deteriorate. 

As feminist economists, our argument is straightforward: debt justice is a feminist value and principle. And at the core of our understanding of debt justice is the principle that working class women cannot be made to pay for the 鈥榦dious debt鈥� generated by the recklessness and corruption of (almost entirely male) Sri Lankan political elites.

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Building up debt traps: Risk, climate adaptation and microfinance

vincentguermond1 Comment

How to adapt to a changing climate is one of the foremost questions of our era. In the last decade, microfinance has shot to prominence as a highly-promoted tool of adaptation to climate and environmental change. In commissioned by the Grameen Foundation and Oxfam US, Dowla argues that 鈥榳ithin the populations that will be most affected by global warming, the plight of many individuals is linked to the ability of microfinance institutions to adapt to the consequences of climate change鈥�.

With access to already-existing as well as newly-adapted financial products and ser颅vices, the argument goes that people and communities will be better placed to . 鈥楪reen microfinance鈥� would facilitate adaptation in two key ways: via coping capacity enhancement, and via adaptive capacity enhancement. Recommended strategies include improving access to microcredit for climate change responses as well as promoting insurance schemes to reduce the burden of climate risk on society.

In contrast to these emerging discourses and practices that frame microfinance as a key tool of climate adaptation, our recent research with rice farmers in rural Cambodia finds that microfinance loans are leading to an over-indebtedness emergency that significantly undermines borrowers鈥� long-term coping and adaptive capacity in a changing climate. Such loans often push households to borrow more, work more, sacrifice food quality and quantity, quit farming, and erode and sell their assets, including land. The cost of financialised coping strategies can trap rural populaces in financial obligations which they struggle to service and which manifests ultimately as over-indebtedness. Microfinance ends up promoting : one that is individualised, incremental, and geared towards the further integration of populations into processes of capital accumulation.

This form of adaptation is highly profitable. Indeed, as Dowla argues in that same , each new climate-linked shock 鈥榦pens up opportunities for the microfinance institutions and their clients鈥�. Yet the corollary to this profitability is that the costs of such an adaptation tend to be borne by the poor, who find themselves exposed not only to the rigours of the environment but now the global market too.

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Who鈥檚 in control? Wall Street Consensus, state capitalism, and spatialised industrial policy

Ilias ALAMI1 Comment

By Seth Schindler, Ilias Alami and Nick Jepson

Recent trends may well have puzzled critical observers of global development policy. On the one hand, we witness the rise of聽what Daniela Gabor has aptly termed聽the聽鈥�,鈥櫬燼n emerging聽paradigm聽promoting聽the mobilisation of private finance as a developmental priority.聽Southern states are encouraged to聽re-engineer聽their聽domestic financial systems around securities and derivatives markets, create聽鈥榠nvestable鈥� opportunities in聽sectors such as聽infrastructure, water, climate adaptation, health and education, as well as聽deploy聽policies that聽specifically 鈥榙e-risk鈥櫬爄nvestment聽for global investors. In this formulation Southern states are subordinated to global financial capital and their policy space is significantly constrained.

On the other hand, however, we observe a tendency towards , wherein states are increasingly active within markets, as entrepreneurs and owners of capital as well as regulatory agents in the world economy. Across the income spectrum states have embraced the role of agents of transformation and development. In the , one way these trends manifest is in the proliferation of new modalities of spatialised industrial policy underpinned by . Examples include the China鈥揚akistan Economic Corridor, Indonesia Vision 2045, the Plan S茅n茅gal 脡mergent, Morocco鈥檚 New Development Model, and the developmental aspects of Mexico鈥檚 Fourth Transformation such as the Tehuantepec Isthmus Interoceanic Corridor. Some of these plans have benefitted from the rise of China and its multitrillion-dollar Belt and Road Initiative, which traditional development actors now increasingly seek to counter by providing .

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Land and the Mortgage: History, Culture, Belonging

daivirt1 Comment

By Daivi Rodima-Taylor and

The mortgaging of land, a risky practice usually treated as just an economic and legal contract, hasneeded a broader set of perspectives for a fuller, more humanist understanding. Most of the existing scholarly literature on land and mortgages has been written by economists and legal specialists, reflecting the perspectives of their disciplinary traditions. Lacking are assessments from a wider range of disciplines in the social sciences and humanities, drawing upon historical experiences, cultural meanings, and locally informed perspectives.

Our recent edited volume, drawing on historical and observational research in different parts of the world, is meant to help fill that gap. It examines mortgaging as a social and cultural phenomenon to show its origins, variation, and effects on human lives and communities. Here anthropologists, historians, and economists explore archival, printed, and ethnographic evidence about mortgage. The book shows how mortgages affect people on the ground, where local forms of mutuality mix with larger bureaucracies. Tracing origins of land titling, pledging, and the mortgage in over millennia and incorporating findings from authors鈥� original field research, the book explores effects of government, bank, and aid agency attempts and impositions meant to encourage mortgage lending and borrowing.  It shows how these mix in practice, in different languages, currencies, and contexts, with locally rooted understandings, and how all parties have sought, and too often failed, to make adjustments. The outcomes of mortgage in Africa, Europe, Asia, and America challenge economic development orthodoxies, calling for a human-centered exploration of this age-old institution.  It must take account, we insist, of emotions, vulnerabilities, and histories of unexpected outcomes, as shown in different societies, cultures, and environmental and political conditions.

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Exploring the Platform Political Economy of Self-Help in Africa

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Informal savings group in Tarime district, Tanzania. Photo: Daivi Rodima-Taylor

Self-help groups can be found in many areas of Africa鈥攊ncluding the chama groups of Kenya, isusu of Nigeria, and stokvels of South Africa (Ardener and Burman 1995). Their customary rotating credit arrangement is also popular among African diaspora communities (Hossein 2018; Ardener 2010). A significant rise has occurred in these groups at the wake of the neoliberal restructuring reforms of the 1980s-90s, with a decline in formal sector employment and state-funded producer cooperatives. At present, these mutual support groups are targeted by FinTech platforms as well as conventional banks with various financial products and software apps. My recent research explores of the contentious interplay between the formal and informal finance in these emerging digital interfaces in Africa. It studies the intersection of FinTech with the social economies of African mutual help groups in Kenya and South Africa, situating this dynamic in longer-term colonial legacies and present-day policies of extractive financialization (Rodima-Taylor 2022).

Informal mutual support groups with their saving-credit patterns have long served as an inspiration for the development industry. The initially successful micro-finance model drew on pre-existing reciprocities and mutually negotiated liability in largely informal contexts. However, as the microfinance formula shifted from socially situated lending towards 鈥榝ast-scaling鈥� and universalizing group lending in an expanding range of localities, the industry was faced with repayment crisis (see Haldar and Stiglitz 2016). The recent conceptual shift from microfinance to digital financial inclusion foregrounds mobile payments and fee-based service delivery, with payment industry also experimenting with new sources of value such as customer data (Maurer 2015). Microloans have remained an important part of the digital financial inclusion enterprise, with poorly regulated lending apps fueling over-indebtedness. As informal savings groups and mutual support associations have become central in the livelihoods in many low-income communities, I suggest that more attention is needed to the intersection between the self-help groups and FinTech initiatives in the global South.

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Price Wars: How the Commodities Markets Made Our Chaotic World: Q&A with Rupert Russel

Farwa Sial1 Comment

In Price Wars: How the Commodities Markets Made Our Chaotic World, sociologist and filmmaker Rupert Russell travelled to some of the world鈥檚 most chaotic places: war zones in Ukraine, Iraq, and Somalia, the climate wars in Kenya and Guatemala, and Venezuela鈥檚 economic catastrophe. Told as gonzo investigation into what made the 2010s so tumultuous, Russell links each of these eruptions to swings in commodity prices, and the financial speculators whose bets set their prices.

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The colonial geographies of Kenya鈥檚 fintech boom

Nick BernardsLeave a comment

Digital and mobile finance applications have boomed in Kenya over the last decade. Mobile money, Vodafone鈥檚 M-Pesa system in particular, is ubiquitous. Kenyan banks and smaller start-ups have led the adoption of a wider range of mobile and digital financial applications.

For promoters of fintech as a tool for development, Kenya is a paradigm case. from Tavneet Suri and William Jack 鈥� suggesting that the advent of M-Pesa had directly moved 194 000 households, equivalent to 2 percent of the country, out of extreme poverty 鈥� have been triumphantly cited across a wide range of and policy documents. The rapid adoption of mobile and digital finance, according to advocates, has allowed Kenya to 鈥樷�� the developmental constraints of its existing financial system. In the words of : 鈥榥ew technologies solve problems arising from weak institutional infrastructure and the cost structure of conventional banking鈥�.

There are good reasons to question this rosy narrative, as recent critics have demonstrated compellingly. Among others, raise a number of important methodological and other objections to Suri and Jack鈥檚 claims, and shows how narratives of 鈥榠nclusion鈥� mask the perpetuation of gendered patterns of exclusion and inequality. Wider applications of fintech in Kenya have come in for critique as well. highlight emerging patterns of digitally-enabled over-indebtedness. trace the emergence of monopolistic corporate power enacted through the extension of digital platforms (including for finance) in Kenyan agriculture. show the emergence of new forms of racialized dispossession and exploitation through efforts to extend fintech applications to refugees in Kenya.

On a more basic level, 鈥榣eapfrogging鈥� narratives have to contend with the fact that the geography of Kenyan fintech looks a lot like that of the financial system more generally. The fintech boom is predominantly an urban phenomenon, and especially concentrated in Mombasa and in and around Nairobi. Data from the 2019 national 鈥樷�� survey shows that 6.6 percent of respondents currently or had previously used of mobile lending services, and 6.4 percent reported the same of digital lending apps. The corresponding figures among urban residents were 17.2 and 11.4 percent. The proportion of residents in Nairobi Metropolitan Area and Mombasa using mobile money services (25 percent) and digital lending apps (18.2 percent) is more than double the respective use rates of mobile (12.3 percent) and digital borrowing (7.1 percent) among urban residents elsewhere.

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