The Gender and Trade Coalition was initiated in 2018 by feminist and progressive activists to put forward feminist trade analysis and advocate for equitable trade policy.

This article is the second in a series of short, Q&A format 鈥榚xplainers鈥� unpacking key trade issues produced for the Gender and Trade Coalition by Regions Refocus. It was written by Senani Dehigolla (Regions Refocus), Erica Levenson (Regions Refocus), Anita Nayar (Regions Refocus), Nela Porobi膰 (WILPF), and Fatimah Kelleher (Nawi鈥揂frifem Macroeconomics Collective). Read the full article and catch up on past explainers .

1. Does Trade Enhance Post-Conflict Recovery?

Post-conflict contexts can refer to a spectrum of situations of violent political conflict (both inter-state and within states) which share similar considerations for reconstruction and development. Countries recovering from conflict wrestle with the challenges of sustaining peace while restoring their economies, rebuilding devastated social and physical infrastructure, and providing basic services to people whose lives have been upended by displacement and insurmountable loss (Cohn and Duncanson 2020; Mallett and Pain 2018). Many realities do not reflect the static term ‘post-conflict’, as conflicts can restart and end at different times in different parts of a country (Mallett and Pain 2018; Turner, Aginam and Popovski 2008). While trade may provide opportunities for exports and economic growth, unfettered trade liberalization can be counter-productive to domestic industries鈥� recovery and does not necessarily benefit affected populations or lead to lasting peace (Kurtenbach and Rettberg 2018; Langer and Brown 2016; Oxfam 2007).

According to the infamous McDonald’s theory of peace, no two countries that both have a McDonald’s have ever fought a war against each other; this is because they are assumed to engage in free trade with one another and, therefore, a war would threaten both of their economies (Friedman 2000). Adhering to this theory, the World Trade Organization (WTO) Trade for Peace Programme highlights the role of trade and economic integration in promoting peace and security. It presents post-conflict contexts as a new opportunity to generate profit for multinational corporations (MNCs) based on the argument that integration into the multilateral trading system leads to stability and economic well-being.

In reality, turning post-conflict recovery into a one-size-fits-all outcome can lead to violent and incomplete re-integration into the global economy (Kurtenbach and Rettberg 2018; Langer and Brown 2016; Mallett and Pain 2018). This directly affects disarmament, demobilization, and reintegration (DDR) programs on the ground which are critical to rebuilding post-conflict societies (Woodward 2013). Conflict can be further fueled by economic activities, with MNCs at worst capitalizing on conflict and post-conflict contexts to increase land grabs and labor rights violations, and at best continuing with business as usual despite the conflict (see for example Abed and Kelleher 2022; Frynas and Wood 2001).

Opening recovering domestic industries to highly competitive global markets can lead to the elimination of local economic actors and the further weakening of domestic industries, which deepens inequalities within and between countries (Krpec and Hodulak 2019). Even while some post-conflict countries such as Sri Lanka and Uganda have benefited from trade liberalization according to macroeconomic indicators, their GDP growth has failed to produce jobs for domestic populations, thereby neglecting to heal post-conflict wounds (Mallett and Pain 2018, 265). While trade liberalization may facilitate reintegration into the economic system, the same cannot be said for trade liberalization鈥檚 ability to facilitate the recovery of 鈥渢he conditions of people鈥檚 lives nor a society鈥檚 recovery from war鈥� (Cohn and Duncanson 2020, 5).

2. How do International Financial Institutions Impede Post-Conflict State Spending?

Countries coming out of conflicts face great challenges mobilizing sufficient domestic resources for their recovery. Given the disparity between the scale of funding needed for post-conflict recovery and the amount of aid offered by bilateral and multilateral donors, most post-conflict countries seek economic assistance through international financial institutions (IFIs)鈥� namely the World Bank, International Monetary Fund (IMF), and WTO (Coppola 2015; Tett 2022). Even as conflicts are ongoing, IFIs are often involved in assessing and planning for post-conflict recovery, giving them a unique position of power to influence the economic policies and reforms that are adopted (True and Svedberg 2019).

Dominant neoliberal economic logic that 鈥渂ilateral trade interdependence and global trade openness significantly promote peace鈥� obscures the role that protectionist trade policy has historically played in post-war recovery in now-developed countries (NDCs) (Lee and Pyun 2020). The policies currently promoted by IFIs and bilateral and multilateral funders involved in post-war recovery do not reflect the importance of protectionism in post-war recovery鈥� and development in general鈥� which is clearly demonstrated by NDCs鈥� historical experiences (Chang 2002; Krpec and Hodulak 2019). The journey back to economic stability for most NDCs post-World War II was made possible by significant state spending, intense protectionism, and state intervention which limited market competition (Chang 2002; Shaikh 2007). Yet, this evidence of the policies which facilitated NDCs鈥� post-war recovery less than a century ago is completely contrary to current IFI policy prescriptions for developing countries.

In exchange for loans and trade opportunities through IFIs, countries undergo mandatory policy reforms that weaken the state in an effort to attract foreign private capital, and to enable this capital to flow without impediment (Mallett and Pain 2018; Woodward 2013). The rolling back of the state at the precise moment that active state involvement is most needed carries with it dire consequences, especially for women (Abed and Kelleher 2022; Cohn and Duncanson 2020; Mallett and Pain 2018; Mlinarevi膰 et al. 2017; Woodward 2013).

The required reforms to receive loans and trade opportunities typically include: privatization of key industries and public services such as public transport, health care, public utilities, and education; reduction of state spending, often in critical areas such as health, education, and social protection; regressive taxation and deregulation of corporations and foreign investors; dismantling of subsidies to small businesses; and trade liberalization (Ortiz and Cummins 2022; Woodward 2013). Debtor countries are then effectively forced to prioritize debt servicing as the focal point of their economic policies, which results in unfulfilled state obligations as available revenue goes towards debt repayment rather than social expenditures, DDR programs, or development strategies (Sibeko 2022; Villaroman 2010).

IFIs鈥� conflation of 鈥渞ecovery from war and recovery of the economic system鈥� is reflected in the restrictions placed on states for social investments (Cohn and Duncanson 2020, 5). Impact assessment research is often used to justify these policies, typically demonstrating their success in an effort to further encourage private capital to flow into newly available trading opportunities (see for example Gertler et al. 2016; World Bank 2009, 2021b, 2022). Unfortunately, the data cited by this research is often technocratic and biased in nature, and alternative data that reflects the starkly different realities on the ground is difficult for civil society in post-war states to resource autonomously, leaving only these ungrounded analyses as insights (Moreno-Serra et al. 2022; UN Women 2019; Weidmann 2015).

3. How do Trade and Investment Agreements Exploit Post-Conflict Economic Opportunities?

On the premise of aiding post-conflict recovery, the 鈥渇orgotten power of trade鈥� is revived and trade agreements are touted as crucial post-conflict recovery tools (Hillman 2020; see also Eichengreen and Irwin 1995; Eichengreen 1996; Terborgh 2003). Post-conflict economies are viewed as emerging markets to be molded to serve the economic interests of the Global North, accomplished through a combination of trade agreements and loan and aid conditionalities (Cohn and Duncanson 2020; Ivanova 2007; Mallett and Pain 2018).

In a post-conflict context, people are in great need of livelihoods (Mallett and Slater 2012). This makes them more vulnerable to exploitation, as they are more likely to tolerate worse working conditions (lower pay, fewer safety precautions, etc.) if it means they can secure a job and, by extension, earn a living. At the same time, post-conflict countries are often dependent on foreign investment, forcing them to dismantle labor market regulations in an effort to attract investors, as prescribed by loan conditionalities.

Looking at the 鈥榮uccess stories鈥� of Bangladesh and Vietnam, post-war loans from IFIs, bilateral foreign aid, and foreign investment have resulted in sustained GDP growth (Baum 2020; World Bank 2021a). However, both Bangladesh and Vietnam鈥檚 economic growth has been accompanied by some of the worst workers鈥� rights violations in the world, predominantly of women workers, characterized by unsafe working conditions, gender-based violence, forced labor, physical abuse, and sexual abuse (ActionAid 2019; Brown 2021; Marsh and Ahmed 2019; Rodriguez 2019; Zhang et al. 2021). These abuses have been made possible by labor market deregulation, a prerequisite of necessary economic stimulus. Despite former IMF Managing Director Christine Lagarde鈥檚 position that 鈥渨hen women do better, the economy does better,鈥� economic ‘opportunity’ for investors in these post-conflict contexts has been built by women鈥檚 exploitation (Lagarde 2013).

Another concern related to foreign private investment in post-conflict contexts is asymmetrical recovery: banking, telecommunication, and energy sectors are targeted by investors since they are profit generators, with little regard for social impacts such as increasing inequality within the country (Frynas and Wood 2001; Turner, Aginam and Popovski 2008; UNDP 2008). Attracting foreign investment and allowing it to flow freely is prioritized, while social concerns such as reducing inflation are demoted to 鈥渟econd order priorities鈥� (UNDP 2008, xxi). A focus on immediate profit rather than long-term recovery undermines support for local productive industries that could be key players in recovery plans and sustainable, equitable growth (Mallett and Pain 2018; Turner, Aginam and Popovski 2008).

For example, after the civil war ended in Sri Lanka, new banks and finance companies promoted exploitative microfinance schemes specifically aimed at the Tamil population in the Northern Province, as they tended to buy gold as a means of saving and also as a cultural practice (Kadirgamar 2013). In due course, the Tamil population faced widespread indebtedness, and many had no alternative but to pawn their gold to help repay their loans (ibid.). Another example is Ukraine, which has offered incentives to foreign investors including up to ten years exemption from corporate income tax (Porobi膰 2023). Ukraine鈥檚 Ministry of Economy signed a memorandum of understanding in November 2022 with BlackRock, the world鈥檚 largest investment firm; with US$8.5 trillion in assets, BlackRock has now set up and is managing an investment fund for the recovery of Ukraine (ibid.). These initiatives place foreign investment, private capital, and profit at the center of the country鈥檚 recovery instead of people鈥檚 needs.

4. What is the Role of the Extractive Sector in Post-Conflict Trade and Investment?

Enabled by privatization and deregulation, corporations around the world have taken control of large swathes of national economies (see for example Hathaway 2020; Kline 2006). Economic domination of MNCs headquartered in the Global North has maintained the trade dominance of the Global North, with one main way being through privatizing the mining sector (HormekuAjei et al. 2022). MNCs鈥� control of the extractive sector has ensured that the mining sector in developing countries remains export-oriented, as it was under colonialism, which has perpetuated primary commodity export dependence of the Global South (Hormeku-Ajei et al. 2022; Radley 2023).

Although mining contributes to the root causes of both imperial and civil wars in many countries, increasing the scale of natural resource extraction in war-affected countries is a common strategy cast as an essential component of post-conflict recovery (Bah 2014; Maconachie 2016; Petras and Veltmeyer 2016). In the context of post-conflict recovery in developing countries, private foreign control over the mining sector precludes the possibility that mining could meaningfully contribute to recovery: not only does the extraction of raw minerals mainly supply the Global North鈥檚 consumption and growth needs, but value additions (such as petroleum refining) also accrue to MNCs based in the North (Hormeku-Ajei et al. 2022). Revenue from mining that could power recovery and autonomous development processes in post-conflict developing countries is exported to the Global North along with the raw minerals.

Increasing natural resource extraction to aid in post-conflict recovery by attracting foreign investment has proven to backfire, not only in terms of revenue generation but also in terms of facilitating lasting peace. For example, in 2011, a newly independent South Sudan invited international investments into a newly opened oil field that was estimated to generate $1.3 billion in oil revenue per year (Collier 2010, pp. 75-77). Not only has the majority of revenue from petroleum extraction and value additions accrued to the MNCs who control it, but since opening the oil field, the government has lost more than $4 billion in unpaid taxes to oil companies alone (Mayar 2021). Labor exploitation by oil companies is also prevalent, alongside land grabbing for crops, timber production, and tourism, sowing tensions related to this injustice (McGinnis 2020). In the case of Liberia, a country rich in rubber, diamonds, and timber, heightened competition between trading parties nearly reignited the civil war, compounded by several incidents of ex-combatants taking control of the extraction of natural resources after the war (McCandless and Tyler 2006).

Relying on foreign-controlled natural resource extraction as a source of revenue generation in post-conflict contexts also exacerbates structural gender inequality. To begin with, because of the chronic shortfalls it creates, programs cannot be funded to address the specific needs of women following the conflict, including reproductive and mental healthcare, state programs to reduce burdens of care work, and economic assistance (Puechguirbal 2012). Compounding the unaddressed gendered impacts of conflicts, mining is highly gendered, from the demographic of mining workforces to environmental impacts (Hofmann and Cabrapan Duarte 2021). As male-dominated workforces move into the area to work in mining,^[1] risks of gender-based violence (GBV) skyrocket for women in mining communities, especially Indigenous women (Cane, Terbish, and Bymbasuren 2014; Major, Longboat, and Sarapura-Escobar 2023). Moreover, large-scale mining operations are some of the most environmentally destructive activities in the world, and women are more impacted than men by degradation of the environment. This is so not only in their roles as subsistence providers of scarce natural resources but also as caregivers of increasingly ill children and families, not to mention their own health risks on top of which burdens of unpaid care work rest (Cannon 2002; Cohen and van der Meulen Rodgers 2021; Goldsworthy 2010). These impacts contradict the objectives of DDR programs, once again placing profits over social wellbeing.

5. Strategic Policy Proposals

The brutality of conflict鈥� from insurgencies, people鈥檚 wars, wars of national liberation, guerrilla wars, partisan wars, invasions, to civil wars鈥� is largely ignored in the drive to assimilate post-conflict countries into a global economic order that favors the Global North. For post-conflict recovery to be more equitable and just, a holistic approach to trade and investment issues is needed鈥� one that acknowledges the socioeconomic impacts and causes of conflicts. An intersectional and gendered understanding of how conflict affects people and groups differently鈥� through changes in ability to work, access to healthcare and education, access to natural resources such as water and land, and agency and influence over political and economic decision-making鈥� is a prerequisite to using trade as a tool to improve people鈥檚 right to live a life in safety and dignity. To this end, it is critical to:

1. Include clauses in trade agreements that put a moratorium on investment protection agreements in cases of conflict. These protections constrain national policy space to design and implement post-conflict recovery efforts and can lead to further human rights abuses. Such a moratorium clause can be a starting point for wider policy reforms that respect the right of states to regulate foreign investors and prevent runs on capital, which can deepen economic crises.

2. Limit the role of extractive industries in post-conflict recovery. While conflict-affected countries need to increase revenues to meet human needs, this must be done in a sustainable way, within safe ecological limits, and guided by human well-being and ecological regeneration (Acheson et al. 2022). In addition to the wide range of negative social and environmental impacts that extractive industries have had in conflict and post-conflict countries, they have stolen billions of dollars worth of tax and revenue from states. Increasing natural resource extraction should not be seen as a surefire way of generating domestic revenue, especially when MNCs control most or all of the mining operations. Instead, states should revive the Keynesian principle of increasing social spending as a means of stimulating the economy, and focus on reinvesting as much revenue as possible in job creation, domestic industry recovery, and lasting structural economic transformation.

3. Adopt binding international law on the duty of corporations to conduct mandatory human rights due diligence of business activities for all sectors, ensuring their operations do not exacerbate conflict. While there are non-binding agreements such as the Guiding Principles on Business and Human Rights, there is no enforcement mechanism for breach of these agreements. As corporations have clearly shown their priority is profit over people, even in conflict and post-conflict recovery contexts, it is necessary to create binding legislation regulating their activities.

4. Publish accessible, transparent, thorough gender analysis before finalizing any lending or trade agreements with conflict or post-conflict countries. Concessional financing and trade agreements could aid post-conflict recovery, but different countries recovering from war need different economic policy reforms and packages that address the intersectional and gendered needs of their populations. National trade policy space needs to be carefully tailored and customized for each post-conflict scenario, as predatory or insensitive lending and trade agreements drive fragile post-conflict countries deeper into debt.

5. Ensure the participation of diverse civil society groups鈥� including NGOs, farmers, workers, women鈥檚 and indigenous groups鈥� in post-conflict trade negotiations and other economic decision-making processes to allow for inclusive policymaking that is reflective of the range of views and experiences across different social stratifications. Relatedly, it is critical to protect the right to protest free of violent reprisals, which have become increasingly common across the world as CCTV and other forms of digital surveillance have enabled identification and persecution of protestors.

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^[1] Not all mining operations are male-dominated. Most women who work in mining, however, work in small-scale artisanal mining, which is itself marked by high rates of gender-based violence (see for example Pillinger and Wintour 2022).

If it still looks like a duck, swims like a duck, and quacks like a duck – then it probably still is a

Recent years have witnessed a notable re-embrace of the state鈥檚 role in the economy, leading to declare that the set of free market economic policy reforms widely known as the Washington Consensus has .

First popularized by U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher in the 1980s, the Washington Consensus policies offered a set of policy guidelines for developing countries, many of which were struggling with high debt and high inflation at the time. These free market reforms included trade and financial liberalization, privatization, deregulation, the removal of capital controls, fiscal austerity (cutting public spending) in order to achieve strict targets for maintaining low inflation and low fiscal deficits, the adoption of independent central banks, and deregulating restrictions on foreign investment, among others. Broadly speaking, the policies sought to roll back the role of the state in the economy and unshackle the animal spirits of the free market. In the 1980s, adopting the policies became binding conditions for developing countries to receive debt relief and new lending by the International Monetary Fund (IMF) and World Bank, in the 1990s, the policies served as the basis for World Trade Organization (WTO) membership rules 鈥� and ever since then, the policies have become a cornerstone of the curricula in economics departments at universities across the world.

In addition to diminishing the importance of the role of the state in development, one of the profound changes introduced with the Washington Consensus was to overturn the previous, long-standing notion that developing countries needed to adopt long-term national economic development strategies which sought to achieve structural transformation 鈥� i.e., shifting their economies over time from being based on primary commodities towards ones based more on manufacturing over time. The old idea was that countries would first develop their national economies and only later focus more on integrating into international markets. But the Washington Consensus inverted that logic, throwing out the focus on long-term development strategies and manufacturing and instead encouraging developing countries to integrate into the global economy right now, as they are, and to just stick with their current comparative advantages in primary commodities. Simply being successful commodity producers would be the new ticket to their development.  

Despite the widespread acceptance of these ideas for the last four decades, recent years have seen the Washington Consensus grapple with new forms of state capitalism. And on the face of it, some of these trends appear to mark a significant departure from the Washington Consensus. For example, even before the Trump administration dramatically increased tariffs on major trading partners, there had been an increase in the number of new , sovereign wealth funds, and state-owned enterprises of various types in both advanced and emerging economies around the world. China, Russia and others appear to be promoting new types of hybrid . Notably, the changes have occurred in the aftermath of 2008 global financial crisis, when free market enthusiasts were by the failure of markets to 鈥渟elf-regulate鈥� as promised, leading to the crash and nearly a decade of the state coming to the rescue with 鈥渆xtraordinary monetary policies鈥� adopted by the world鈥檚 largest central banks.

Shortly after the IMF changed its official on capital controls from 鈥渁bsolutely never鈥� to 鈥渨ell, maybe sometimes,鈥� the former IMF Managing Director, Christine Lagarde, sought to distance the fund from its notorious structural adjustment programs with loan conditions based on Washington Consensus policies. 鈥淪tructural adjustments? That was before my time,鈥� she to a press conference question. 鈥淚 have no idea what it is. We do not do that anymore.鈥�

In 2016, the IMF鈥檚 internal research department made a stunning : for decades, the institution had been overselling the benefits of two of its major policies on fiscal austerity during economic slowdowns and the deregulation of financial markets. It that not only had the two policies 鈥渘ot delivered鈥� the higher economic growth rates that had been promised, but they may have even done more harm than good by exacerbating economic inequality, which itself could become a drag on future economic growth rates.

Even before the COVID crisis struck in 2020, the IMF鈥檚 new chief economist, Gita Gopinath, sometimes sounded more like John Maynard Keynes than Milton Friedman as she questioned the conventional wisdom on capital account liberalization and openly championed the use of large fiscal deficits for fiscal stimulus (in the rich countries). The change in tone has also come from other unexpected free market stalwarts ranging from the to the president of the to , all of whom now say that 鈥渋ndustrial policy鈥� is back in fashion. Thomas Piketty鈥檚 was a best-seller, resonating with growing concerns about widening economic inequality and making it to call for raising taxes on the rich. And now, with post-COVID fiscal policy let loose, central banks are funding massive fiscal stimuluses, deficits have been blown out of historic proportion, while very few seem worried about inflation. Even the IMF, as it doled out billions of dollars in emergency lending to developing countries in the wake of the COVID economic slowdown, seemed to the immense deficits being run up by its borrowing countries without its traditional consternation. All of these developments led Financial Times columnist Martin Sandbu to recently that the IMF and World Bank have undergone a remarkable 鈥渃onversion鈥� from free markets orthodoxy to now supporting the 鈥渁ctivist state.鈥�

But is it all really so?

While the IMF has certainly on its new flexibility during the COVID crisis, an independent of expenditure projections in the IMF鈥檚 October 2020 World Economic Outlook database shows that austerity cuts are expected in 154 countries in 2021, and as many as 159 countries in 2022, with the trend continuing for an average of 139 countries per year through 2025 鈥� not exactly a striking departure from its traditional predilection for austerity.

But beyond the issue of the IMF鈥檚 fiscal austerity, the policies of the Washington Consensus are collectively much farther-ranging and have often had a critical impact on the shape of the economic development strategies of developing countries. In order to believe the consensus has really ended, we would need to ask many more questions about the policy challenges still faced by developing countries that are struggling with integrating into the global economy. For example, if the IMF and World Bank have truly renounced the Washington Consensus, have they changed their position on trade liberalization for developing countries, or what critics would call premature trade liberalization, i.e. lowering tariffs before domestic industries have become competitive in international markets? (In contrast, tended to do , by keeping tariffs high until industries were competitive in global markets, and lowering tariffs). Have the institutions called on the WTO to alter its membership rules that require premature trade liberalization of its developing country members?

Similarly, have the IMF and World Bank called on the WTO to undo its restrictions on a host of critical 鈥渁ctivist state鈥� industrial policies that had been used historically by rich countries to build up their manufacturing sectors over time? Rather than discouraging industrial policies and telling countries to just focus on their current (static) comparative advantages in primary commodities, are the institutions now really advising countries to adopt ambitious industrial policies that defy their current comparative advantages and seek to develop higher valued-added manufacturing industries over time? Have they called on developing countries to renegotiate their many international investment agreements and free trade agreements that contain on industrial policies?

Have the IMF and World Bank advocated for the re-regulation of FDI in developing countries to ensure that it supports domestic industry and the pursuit of strategic priorities of long-term national development strategies? On labor issues, has the Bank finally stopped giving countries higher scores on its coveted annual Doing Business rankings if they lower wages and quash labor rights? On monetary policy, has the IMF renounced its fixation with raising interest rates in order to keep inflation at unnecessarily low levels, a practice that can end up blocking needed increases in public investment? Is the IMF now advising countries to abandon tight fiscal and monetary policies in favor of more expansionary ones to support increased public investment, employment and GDP growth? And to enable this, is the fund now suggesting that countries bring their 鈥渋ndependent central banks鈥� back under the direction of their finance ministries?

Has the World Bank abandoned its recent efforts to seek additional infrastructure financing from private capital markets through the and instead begun promoting the reestablishment of public development banks for infrastructure financing? After decades of advising the privatization or commercialization of public health and education services, are the IMF and World Bank really now suddenly promoting publicly financed and provided healthcare and education services with universal access? Are the institutions today calling for the of the public services and utilities they once insisted be privatized?

And at the broadest level, are the Bretton Woods institutions actually now rethinking the need for developing economies to 鈥渋ntegrate into the global economy鈥� first, and worry about national economic development later? Are they instead now encouraging such countries to focus first on building up their national economies through long-term national economic development strategies to build up the domestic manufacturing sector, and worry about global integration later?

Since the answer to all of these questions is 鈥減resumedly not,鈥� it is safe to say that not a whole has changed yet.

While it’s easy to be swayed by the institutions鈥� fashionable new lingo on gender, inequality, green investment and Covid stimulus, we would do better to look at the institutions鈥� full body of current policy advice on development strategy and the actual loan conditions to see how the nuts and bolts of the Washington Consensus remain quite intact.

is an Adjunct Professorial Lecturer in the School of International Service at American University in Washington DC. Photo: by Carol M. Highsmith /Library of Congress

We鈥檝e witnessed a revival of debates about the Washington Consensus and the future of neoliberalism in recent months. Recent increases in public spending have led to conclude, or , that decades of neoliberal consensus have been shattered. Much of this debate is misguided, rooted in a mistaken dichotomy between 鈥榮tates鈥� and 鈥榤arkets鈥�, and a corresponding conception of neoliberalism as primarily involving a reduction in the role of the former. Efforts to rehabilitate the Washington Consensus, meanwhile, rely on flimsy and heavily ideological counterfactuals.

In this post, I want to take up another angle on this question, asking: what is 鈥榯he market鈥� in practice? In particular, I take a closer look at the emergence of the idea that 鈥榠nterest rates should be market-determined鈥�. This was a core tenet of the 鈥榃ashington Consensus鈥� in John Williamson鈥檚 . It was also, historically, a key argument of neoliberal economists. From the early 1970s, several influential pieces (e.g. McKinnon 1973; Shaw 1973) urged the deregulation of interest rates, arguing that while usury caps were intended to assist small farmers, they wound up forcing banks to concentrate on relatively low-risk loans to government or large-scale industry.

In practice, though, the relatively simple proposition that 鈥榠nterest rates should be left to the market鈥� invited a whole range of difficult questions and political challenges.

In a recent article in tracing the history of World Bank agricultural credit programmes (Bernards 2021), I show how neoliberal approaches to development have never really involved 鈥榮hrinking the state鈥� and unleashing markets so much as fraught and failure-prone efforts to figure out who and what should be governed by, and how to construct, markets.

Agricultural credit at the World Bank

Agricultural credit projects were loans made by the World Bank for on-lending to farmers, whether through state-owned development banks or more complex structures of intermediation meant to involve commercial banks. By the mid-1970s, agricultural credit took up more than half of the Bank鈥檚 lending for agricultural projects and merited extended discussion in the landmark Assault on World Poverty report (World Bank 1975).

The Bank understood credit as a key component of agricultural 鈥榤odernization鈥� (see ) — the adoption of new technologies, the marketization of input and output sales, and the commercialization of farming — as far back as the 1950s. The general unwillingness of commercial banks to lend for agricultural production, especially with respect to longer-term loans for capital investment, was thus seen as a significant obstacle to agricultural modernization. Agricultural credit projects, in essence, sought to resolve this impasse.

Initially the Bank鈥檚 agricultural credit programmes focused on lending for large, capital-intensive farms. In the 1970s, as the Bank under Robert McNamara increasingly emphasized poverty reduction, there was an increased emphasis on lending to smallholders. The Bank鈥檚 landmark Assault on World Poverty report framed access to agricultural credit as a key means of alleviating rural poverty by building effective markets for agricultural goods: 鈥榗redit facilities are鈥� an integral part of the commercialisation of the rural economy鈥�.

Fixing interest rates

In practice, the Bank鈥檚 approach to building financial markets changed very slowly. Interest rates were a particular point of difficulty. Until the mid-1970s, the vast majority of projects included interest rates for final borrowers that were fixed in project documents. Frequently the Bank, concerned mainly about the financial viability of project partners, did push project partners to increase rates for farmers. But fixed rates remained the norm, and debates during project negotiations about interest rates largely focused on where rates should be fixed.

This started to change as the results of earlier projects showed a recurrent problem with fixed interest rates that turned out to be negative in real terms because of high inflation in project countries. This was a growing concern for Bank officials insofar as a number of projects seriously strained the finances of project participants, agricultural development banks which were generally meant to be self-financing. In Gujarat, India, for instance, a project evaluation concluded that, because the rate of inflation exceeded the rate of interest on project loans, the project had enabled borrowers to gain access to very cheap credit, while decapitalizing the project partner — the latter had 鈥榯hus subsidized them, at the expense of its own balance sheet鈥�. A major review of agricultural credit projects completed in 1976 concluded that in most projects 鈥榯he structure of interest rates imposed by the program and by the financial system in which it operates not only subsidizes the farmer but threatens the viability of the channel and forces it to act in a manner contradictory to the purposes of the project鈥�. The review, notably, was explicit in emphasizing, not so much the effect of subsidies on borrowers, 鈥榖ut the effect the interest rate and cost structure has on the participating institutions鈥�.

Projects in the latter part of the 1970s initially sought to resolve this issue in one of two ways: by setting minimum interest rates, or by trying to predict inflation rates over the term of the project and set rates accordingly. In practice, neither route worked out very well. Simply raising fixed rates based on predictions of inflation was difficult because these projections often turned out wrong in unstable macroeconomic conditions. Interest rate floors didn鈥檛 work much better. Without specific criteria for when or how rates should be raised, resistance to raising rates from governments worried about the potential backlash often prevented credit prices being raised above the floors set in project documents.

Within a few years, the Bank thus started to insist much more strongly on 鈥榤arket鈥� based interest rates. In practice, this typically involved indexing the rates paid by farmers either to inflation or to average cost of funds in the commercial financial sector. While this shift to market-based means of pricing credit undoubtedly reflected the preferences of neoliberal economists, the Bank鈥檚 move towards these mechanisms was driven as much by pragmatic concerns as by any ideological preference for 鈥榤arket鈥� rates. In the first instance, then, the turn to 鈥榤arket鈥�-like forms of credit pricing — while it took place alongside the broader period of structural adjustment — was tentative, contested, and driven by longstanding practical concerns as much as any broader ideological shift.

Moreover, by the late 1980s, the pre-occupation of the Bank with interest rates itself started to come in for criticism in internal project evaluations. In Thailand, the evaluation of a 1980 project noted that the Bank鈥檚 strong emphasis on raising rates as a way of ensuring the financial sustainability and expanded lending capacity of the partner bank had 鈥榬educed any incentives鈥� to either government on the Thai Bank for Agriculture and Agricultural Credit 鈥榯o encourage growth in domestic deposits鈥� as well as inhibiting wider financial sector reforms.

In short, the move to more explicitly 鈥榤arket-based鈥� rates — whether negotiated between lenders and borrowers or indexed to inflation or cost of funds — reflected as much these operational concerns as it did an ideological preference for markets. It was not always consistently followed through in practice by governments with competing political imperatives, which contributed to the Bank鈥檚 growing emphasis through the decade on wider 鈥榮tructural鈥� reforms, and increasingly reforms to governance into the 1990s.

Equally, neoliberal development in practice rarely involved shrinking the state and growing the market so much as trying — at times with considerable difficulty — to coax the private sector into doing developmentally desirable things (like lending to small farmers) or to make public institutions operate on a more expressly commercial basis.

Why does this matter?

Placing the Bank鈥檚 halting, troublesome experiments with agricultural credit alongside the rise of the Washington Consensus shows how even institutions at the heart of the neoliberal project were decidedly ambivalent about how to actually carry out that project in practice. Marketizing development often did not involve shrinking the state, as many contemporary takes on the 鈥榚nd鈥� of neoliberalism seem to assume, so much as changing how state institutions work in an effort to conjure markets. The Bank sought, by trial and error, to sort out how credit should be delivered to support marketized, commodified agricultural systems. Could state-backed agricultural banks be reformed to operate on commercial terms? If not, could commercial banks be coaxed into lending to small farmers? In practice, the answer was 鈥榥o鈥�, or 鈥榥ot without considerable difficulty鈥�.

The central contradiction reflected here is a deep-rooted problem for neoliberal approaches to development, one which is clearly reflected in contemporary approaches to development as well. In short, mobilizing private capital, or 鈥榖uilding markets鈥�, to deliver development outcomes involves trying to coax capital into doing things that are risky and unlikely to prove profitable. We can read recent efforts to 鈥榙e-risk鈥� or 鈥榚scort鈥� capital into the global south (; ), and indeed the shifting role of the state as 鈥榩romoter, supervisor and owner鈥� of capital in global development () as responding to much the same problem.

The Washington Consensus was always in no small part a fantasy. Behind a simple-seeming proposition like 鈥榠nterest rates should be market-determined鈥� lay a whole range of fraught and failure-prone attempts to actually conjure those markets in practice, or at least to approximate them. Our efforts to make sense of the contemporary direction of neoliberalism would benefit from taking seriously the deep-rooted contradictions with which neoliberal development strategies have historically grappled with.

References

Alami, I., A.D. Dixon, E. Mawdsley (2021) 鈥楽tate capitalism and the new D/development regime鈥�, Antipode, DOI: .

Bernards, N. (2021) 鈥楾he World Bank, agricultural credit, and the rise of neoliberalism in global development鈥�, New Political Economy, DOI: 10.1080/13563467.2021.1926955.

Bernstein, H. (1990) 鈥楢gricultural 鈥渕odernisation鈥� and the era of structural adjustment: Observations on sub-Saharan Africa鈥�, Journal of Peasant Studies 18 (1): 3-35.

Gabor, D. (2021) 鈥楾he Wall Street consensus鈥�, Development and Change, DOI: .

McKinnon, R.I. (1973) Money and capital in economic development, Washington: Brookings Institute.

Shaw, E.S. (1973) Financial deepening in economic development, Oxford: Oxford University Press.

Tan, C. (2021) 鈥楢udit as accountability: Technical authority and expertise in the governance of private financing for development鈥�, Social and Legal Studies, DOI: .

World Bank (1975) The assault on world poverty, Washington: World Bank Group.

Nick Bernards is an Assistant Professor in Global Sustainable Development at the University of Warwick. He tweets at .

By Benjamin Selwyn and

The recent period of globalisation 鈥� following the collapse of the Eastern bloc and the integration of China into the world economy 鈥� is in essence the period of global value chains (GVCs). From low to high-tech, basic consumer goods to heavy capital equipment, food to services, goods are now produced across many countries, integrated through GVCs.

The big question in development studies is whether this globalised reconfiguration of production is contributing to, or detracting from, real human development? Is it establishing a more equal, less exploitative, less poverty-ridden world? To understand these complex dynamics, scholars rely on economic theories. These theories must be relevant to the GVC-world and equipped to tackle these pertinent questions.

In 2020 the World Bank published its World Development Report (WDR2020, or 鈥榯he Report鈥�) to address these questions. It confidently proclaimed that 鈥楪VCs boost incomes, create better jobs and reduce poverty鈥� (: 3). Given the World Bank鈥檚 promotion of neoliberal globalisation, this conclusion is unsurprising.

However, before accepting the Report鈥檚 claims at face value, we should reflect on the findings of Robert Wade (: 220). These annual World Bank reports serve as “both a research-based document and a political document鈥�. the Bank鈥檚 flagship message must reflect back the ideological preference of key constituencies and not offend them too much, but the message must also be backed by empirical evidence and made to look technical”.

When globalisation is booming it may be possible for the report鈥檚 liberal bias to appear to complement its data. However, the GVC world has generated such inequalities that the dissonance between the report鈥檚 liberal bias and its own data is stretched to breaking point.

Drawing on our , this blog post uses the Report鈥檚 own data to undermine its core claims. It shows that the GVC world enhances the dominance of transnational corporations (TNCs), concentrates wealth, represses the incomes of supplier firms in developing countries, and creates many bad jobs 鈥� with deleterious outcomes for workers.

Comparative Advantage vs Monopoly Capital?

A rich body of dedicated theories has been developed by academics to explain the growth of GVCs and understand how their uneven power-relations affect development. The Report ignores them, selecting only the elements consistent with its ideological position and remoulding these into its favoured theoretical perspective.

It doubles down on its long-held commitment to comparative advantage trade theory to insist that GVC-led development generates mutual gains for both lead firms (concentrated in developed countries) and supplier firms (concentrated in developing countries), thus benefiting workers in both rich and poor countries alike:

“GVCs allow countries to benefit from the efficiency gained from a much finer international division of labor. GVCs exploit the fact that countries have different comparative advantages not only in different sectors, but also in different stages of production within sectors” (: 69, emphasis added).

The theory of comparative advantage dates back to David Ricardo鈥檚 classical argument that countries can benefit from trade even if they do not have an absolute advantage in producing any good, so long as they specialise in goods in which they have relatively higher productivity. If countries pursue this comparative advantage, then trade generates win-win outcomes whereby every country maximises its income and enjoys cheaper goods.

Remarkably, however, the reality of the GVC world undermines the core assumptions of comparative advantage theory. The theory assumes that trade takes place between anonymous parties with equal bargaining power. In reality, exchanges within the GVC world occur between connected firms of unequal power (e.g. lead firms and suppliers). Some lead firms have larger GDP鈥檚 than national economies.

Given this dissonance, it should be no surprise that the empirical evidence from GVC trade differs starkly from the predictions derived from liberal models of comparative advantage trade theory.

The concept of monopoly capital offers a more relevant approach. It theorises capitalism鈥檚 inner tendencies towards the growing size (concentration) and increasing dominance (centralisation) of a few firms within each sector, and links this to adverse outcomes for suppliers and workers. As John Bellamy Foster et al, argue 鈥榓s the internationalisation of monopoly capital grows鈥he result is a worldwide heightening of the rate of exploitation (and of the degree of monopoly)鈥� (: 12).

Workers鈥� collective action is an essential component of any attempt to resist such tendencies.

The Report鈥檚 Evidence:

The executive overview and conclusions of the Report promote the developmental benefits of GVC participation for supplier firms in developing countries. This is as far as most policy-makers may read. But if you read the evidence presented within the body of the report, the contradictions are astounding.

Regarding the power of giant lead firms, the Report acknowledges that 鈥榌L]arge corporations that outsource parts and tasks to developing countries have seen rising markups and profits鈥� (: 3). In contrast, when supplier firms integrate into GVCs they experience an income squeeze:

“The implications of GVCs for the emergence of [lead] firms huge in scale, high in market power, and large in profit rates are exacerbated by the disproportionate bargaining power that these large lead firms may have over their suppliers 鈥� Although buyer firms in developed countries are seeing higher profits, supplier firms in developing countries are getting squeezed” (: 85)

While the report argues that GVCs boost incomes and create better jobs, it acknowledges that:  

“In 63 developed and developing economies, GVC integration as well as other domestic within-industry forces, such as technology or markups, contributed significantly to the reallocation of value added from labor to capital within countries between 1995 and 2011″ (: 86 emphasis added).

Regarding workers, the Report claims that GVC participation enhances their incomes and livelihoods. Its opening lines wax lyrical about Vietnam鈥檚 successful integration into electronics GVCs, recounting how 鈥楽amsung makes its mobile phones with parts from 2,500 suppliers across the globe. One country鈥擵ietnam鈥攑roduces more than a third of those phones, and it has reaped the benefits鈥�.  (: xi)

The Report ignores findings by UN inspectors who, in 2018 found widespread maltreatment of Samsung鈥檚 mainly female workforce in Vietnam:

“Researchers reported testimonies of dizziness or fainting at work from all study participants and high noise levels that violated legal limits. Miscarriages were reported to be common and workers reported pain in their bones, joints, and legs which they attributed to standing at work for 70 to 80 hours a week” ( 2018).

The Report credits lead firms for improving the conditions of workers in their supply chains, but wilfully ignores the efforts of workers themselves. For example, it congratulates clothes brands for improving working conditions in Bangladeshi factories. Empirically however, militant strike action was instrumental in securing permanent pay rises (see ).

Beyond WDR2020

Trading for Development in the Age of Global Value Chains鈥� political bias disables serious analysis of the anti-developmental dynamics generated by and through GVCs. However, it provides empirical evidence that contradicts the confident predictions derived from its ideological position. In a way, WDR2020 makes it easier to argue what many critical GVC theorists have been asserting for the last two decades 鈥� that the GVC world concentrates wealth, represses supplier firm incomes, and creates many bad jobs. 

References:

Foster, J. B., McChesney, R. W., & Jonna, R. J. (2011). . Monthly Review 63(2): 1.

Selwyn, B and D, Leyden (2021). . Competition and Change.

UNHR (2018) .

Wade, R. H. (2002). . Review of international Political Economy 9(2): 215-243.

World Bank. (2019). . Washington DC. The World Bank.

Benjamin Selwyn is Professor of International Relations and International Development at the University of Sussex. His most recent book is .

is a doctoral student in the School of Business and Management, Queen Mary, University of London. He is researching dynamics of social upgrading in the Thai electronics industry. He tweets at .

By Ilias Alami, Adam Dixon and

In a recent , Martin Sandbu of the Financial Times argues that 鈥渢he conversion by the IMF and World Bank to support the activist state would put Saul of Tarsus to shame.鈥� According to him, we may be witnessing the rise of a new Washington Consensus, which embraces deficit spending (by rich countries), 鈥渢emporary solidarity surtaxes鈥� on the rich and businesses, green public investment, and other forms of government intervention. This is not only to address the short-term effects of the pandemic, but also to stimulate demand across the world economy. Sandbu finds evidence of this new consensus in the benign view that the IMF has taken on Biden鈥檚 鈥渞escue package鈥�, and claims that 鈥渢he new Washington consensus could prove as politically powerful as the old one.鈥� In another in October 2020,

Sandbu characterised this new consensus as follows:

鈥淎fter 1945, the guiding assumption was, first, that the state knew best, then that the private sector was best. We are about to transcend both, in favour of an economic worldview based on finding ways in which government intervention can guide the private sector to perform better. In that sense, economic planning and the activist state are back.鈥�

It is indeed striking that the IMF, the World Bank, the OECD, the G20, and other multilaterals, have adapted their discourse on the role and place of the state in development. This predates the COVID-19 pandemic. In an recently published in Antipode, we document the emergence of this new vision of the state in development and outline its key features. Since the early 2010s, these institutions have produced a remarkable wealth of material explicitly concerned with old and new forms of state ownership and intervention. Witness, for instance, this November 2020 EBRD Transition titled The State Strikes Back, or this dedicated to state-owned enterprises in the IMF 2020 Fiscal Monitor. Our analysis of such policy documents and others suggests that we are witnessing a gradual yet fundamental reorientation of official agendas and discourses about the state. This emerging vision embraces a fuller role of the state in development (than the post-Washington Consensus), including as promoter, supervisor, and owner of capital. Our analysis expounds the material context in which this vision is emerging. Two interrelated transformations are particularly important.

First, there is the current rise of , which we understand as a world-historical phenomenon rooted in the development and geographical remaking of capitalism. Five capitalist transformations are particularly noteworthy: (1) the accelerating unfolding of the second-wave since the early 2000s; (2) technological modernisation and industrial upgrading culminating in the Fourth Industrial Revolution; (3) an historically unprecedented ; (4) a secular shift in the of the global economy from the North Atlantic to the Pacific Rim, and the massive needs this requires, such as a dense to integrate distant territories and to facilitate the flow of capital; and (5) the extension of . The political mediation of this process of capitalist restructuring by the state (at multiple scales and across the global North/South divide) has resulted in the uneven and combined development of more muscular forms of statism and the expansion of various forms of state-owned capital (sovereign wealth funds, state enterprises, and so on).

Second, the rapid development of China, and the intensification of competition between traditional powers and emerging contenders, have increasingly politicised the rise of state capitalism and escalated geopolitical tensions. Combined, these two global transformations have partially fractured the global geographies of production, development finance, infrastructure, and policymaking (cf Figure 1), prompting traditional development actors such as multilaterals to react to this new 鈥溾��.

Figure 1: 锘縏he rise of state capitalism in development geographies. .

Our key contention is that such reaction has taken the form of a strategic discursive and ideological adjustment, involving a certain re-legitimation of the state in development, and a limited embrace of 锘� state-owned capital (including state enterprises, sovereign wealth funds, and state-owned banks), 锘縪ne which nonetheless remains resolutely within the liberal ambit. We show in the paper that this adjustment has been buttressed by a deep liberal anxiety concerning the direction in which the political form of global capital accumulation may be heading: multilaterals are concerned that the unchecked proliferation of statism and non-market conforming state-capital hybrids may blunt competitive value-disciplines, trigger a certain move away from liberal (western-dominated) market-centric governance, politicise economic relations, and intensify geopolitical and geoeconomic tensions between nation-states, which may in turn erect drastic barriers to the circulation of capital as a whole.

Our argument has implications for debates on the nature of contemporary state capitalism, notably the various forms of ideological transformations currently at play. Indeed, preserving and further enshrining the centrality of market regulation in development in an age of rising state capitalism and turbulent geopolitical reordering requires heavy ideological work, especially with respect to what is considered the appropriate scope of state intervention as well as the normal separation between the economic and the political. We highlight a particularly interesting aspect of this ideological adjustment in the paper: the partial embrace of state-owned capital by multilaterals is not so much a relaxation of the liberal stance on state ownership (even less so a move away from it) as a mutation of it, one that allows preserving and reaffirming a clear-cut separation between the economic and the political under a new guise, and one that simultaneously (supposedly) establishes a clear distinction between liberal and illiberal forms of state ownership. By presenting certain types of state鈥恈apital hybrids as post鈥恑deological, depoliticized creatures, the vision can delineate a liberal role for the state as owner of capital in development, legitimating some uses and forms of state鈥恈apital hybrids, while delegitimating others (such as China鈥檚) and negating their role in development.

锘縊ur argument also has implications for how we understand ongoing transformations in the global development regime. We would argue that such transformations are neither simply a product of the current pandemic, nor of the (neoliberal) failures to deal with previous crises. These transformations, particularly concerning the role of the state, must be located within global dynamics of capital accumulation and geopolitical forcefields, 锘縜nd the contradictions, struggles, and crises that accompany them.

As a final comment and word of caution, and returning to Martin Sandbu鈥檚 new Washington Consensus discussed earlier, it is crucial that we remain aware of gaps that may exist between discourse and practice. For instance, as Daniel Munevar and Farwa Sial have powerfully argued ( and ), a double standard is fast emerging: at the very same time as the IMF is preaching for expanding fiscal space as a means of stimulating demand in rich countries, it is asking for 鈥渇iscal consolidation鈥� (a euphemism for austerity) in heavily indebted developing countries. In sum, the strategic adjustment concerning the role of the state that we have identified may well reproduce deeply entrenched inequalities and power asymmetries across the world economy, notably concerning what the state can and should do.

is a postdoctoral researcher at Maastricht University. He tweets at .

is Associate Professor of Globalization and Development at Maastricht University. He tweets at .

is Reader in Human Geography at Cambridge University. She tweets at .

By Carolina Alves, Daniela Gabor and Ingrid Harvold Kvangraven

Decades of research have documented the devastating impacts of the Washington Consensus in the developing world. Yet revisionist accounts of this story have emerged in recent years. Remarkable amongst these, a recent blog post by the Peterson Institute for International Economics –  鈥溾�� – draws on research that is jaw-droppingly ideological and flawed. 

The revenge of the synthetic counterfactual

For decades,  mainstream and heterodox economists broadly agreed that the Washington Consensus failed (, , ). Debt-crisis ridden developing countries that implemented the reforms associated with privatization, liberalisation and deregulation in the 1980s and 1990s tended to see an increase in poverty along with worsening health and educational outcomes. This led to the 1980s and 1990s being dubbed the 鈥榣ost decades鈥� of development () and ultimately paved the way for the the post-Washington Consensus and pro-poor policies ().

But this is about to change. New methods that 鈥榩roduce credible counterfactuals in case studies鈥�, turn the conventional wisdom of the Washington Consensus failure on its head (, , ). Essentially, the counterfactual approach involves first creating fictitious or synthetic countries, whose policy makers chose the opposite policy trajectory, and then testing whether the Washington Consensus package works better than the alternative. The results, the PIIE blog informs us, stack up for the Washington Consensus: countries adopting WC policies are to () be better off in GDP per capita terms. In contrast, left-wing populists – of the Latin American pedigree – hurt their economies by the Washington Consensus policies out with the neoliberal bathwater. 

The counterfactual revenge against the many critics of Washington Consensus reinforces an emerging revisionist literature (e.g. , ). It may offer tempting opportunities to rescue the memory of John Williamson, the PIIE fellow that coined the term 鈥溾�� thirty years ago. But if one unpacks its mechanics carefully, the counterfactual approach turns out to be a thinly-veiled ideological attempt to whitewash the Washington Consensus, to resurrect its key tenets: that minimising the footprint of the state is the right policy choice in health or education, that macroeconomic policy should mean inflation targeting by central banks not active fiscal policy by elected politicians, that state-owned companies are all white elephants in urgent need of privatization, that trade unions harm labour markets. 

To understand the politics of the Washington Counterfactual, it is instructive to examine Nicaragua, one of the countries would have done much better under Washington Consensus than its left-wing populist leader Daniel Ortega, at least during the Sandinista Revolution of 1979-1990. 

Unpacking the 鈥榗ounterfactual鈥�: synthetic Nicaragua

The PIIE blog uses the findings of to argue that 鈥渓eft-wing populism made Venezuela, Nicaragua, and Bolivia 20 percent poorer relative to a plausible counterfactual. These countries did not experience reduced inequality or improved health outcomes that might have justified such a large sacrifice of income.鈥�&苍产蝉辫;

The paper elaborates the following history of the Sandinista Revolution: having defeated the Somoza dictatorship in 1979, Sandinistas under Daniel Ortega embraced 鈥榓nti-market鈥� policies: nationalized banks, mining and fishing, and 20% of arable land that had been held by Somoza family and its supporters. Sandinistas also proved reluctant to enforce land property rights (a cardinal sin in the Washington Consensus world). Having initially flirted with anti-democratic politics, Ortega won the 1984 elections and oversaw a new Constitution in 1987. His time in office ended in 1990, when he lost elections.

In that same section, the paper compares Nicaragua under Ortega with a synthetic Nicaragua that would have followed the Washington Consensus prescriptions. It provides a stark picture of the economic costs of Ortega鈥檚 鈥榮trong state鈥� policy choices: by 1990, the average citizen of synthetic Nicaragua would have enjoyed a (roughly) 8.200 USD GDP/capita. In the real world, the GDP/capita under Ortega fell to around USD 3.000 USD. Even starker, 15 infants per each 1000 live births would have stayed alive in synthetic Nicaragua, or conversely, were killed by Ortega鈥檚 deviations from the Washington Consensus. 

For anyone familiar with Latin American politics, the ideological machinations behind this narrative are apparent on two levels. 

First, take the treatment of 鈥榬eal鈥� Nicaragua. The paper is silent on a well-known historical reality: the Ortega administration had to contend with a civil war waged by the Contras paramilitaries throughout the 1980s, with direct support from the and the US under the Reagan Administration.  Why not examine instead Ortega’s return to power in 2007, far more consistent with the paper’s definition of 鈥榩opulism鈥�? Could it be because the second Ortega regime has had a Washington Consensus, pro-market disposition in economic policies, despite rhetoric to the contrary, and does not fit easily the 鈥榣eft populist鈥� narrative, civil war aside?

Instead, the authors, US-based economists and political scientists, abstract from the US-sponsored civil war in the discussion of Nicaragua鈥檚 economic policy outcomes, although the – the US Administration selling arms to Iran in order to finance the Contras –  exploded into one of the most serious political scandals of the second Reagan Administration. After all, Ronald Reagan in 1985 that he would stop pursuing regime change in Nicaragua 鈥渋f the present government would turn around and say 鈥� all right 鈥� if they鈥檇 say 鈥榰ncle鈥欌�︹�� . Could it be that the Sandinista Revolution was distracted from growth outcomes by Ronald Reagan bombing them for refusing to say 鈥榶es uncle, mi patria tu patio鈥�? 

Second, how does one empirically create a fictitious country? The synthetic control method predicts a  ‘no Ortega’ growth/infant mortality path by creating a pool of  鈥榙onor鈥� countries and calibrating their relative contribution to a synthetic Nicaragua such that the pre-Ortega growth or infant mortality path is close to actual Nicaragua. The Washington Counterfactual thus creates a  synthetic Nicaragua composed of 23% Chile, 54% Honduras, 9% Mexico, 8% Norway, and 7% the US. 

Or, to bring a historical touch to the method, synthetic Nicaragua, like a neoliberal Frankenstein, consist of 7% country bombing Nicaragua (US), 54% country used by the CIA/US to bomb Nicaragua (Honduras),  23% country where Washington Consensus was being implemented by Chicago Boys and a military dictatorship (Chile), 8% country never analytically paired with the Washington Consensus (Norway), and Mexico. It is this synthetic Nicaragua where per capita GDP would have been 5.000 USD dollars higher, a Nicaragua that the US empire does not bomb.

Poor scholarship? Poor method? It is tempting to answer yes to both. But in a discipline that is obsessed with objectivity and neutrality, the ideological intent is clear: the Washington Counterfactual produces fictitious countries in an attempt to restore the credibility of the Washington Consensus policies as 鈥榞ood policies鈥�. 

Not much has changed since the 1950s, it seems. Then, Gunnary Myrdal () noted that economists often smuggle in values from the beginning of their analysis, but that these only show up explicitly later on in the form of policy recommendations. To better understand the impacts of policies associated with the Washington Consensus, and to have open and meaningful debates about how these can be understood, we need research that is explicit about its ideological underpinnings and assumptions from the get-go. 

Beyond History: Why the Revisionist Account Matters

This is not just a debate about the past. Indeed, recent research demonstrates that the IMF has been actively conditioning its loans on the Washington Consensus staple policy of austerity over the past two decades ().

At a moment when are again turning to the IMF, forced by  COVID-induced economic crises, how we understand the impact of policies associated with the Washington Consensus matters. Policy-based 鈥榚vidence鈥� that the Washington Consensus works may allow the IMF to diffuse increasingly vocal that it abandons austerity and avoids 鈥榣ost decade鈥� of development. 

More broadly, revisionist accounts of the Washington Consensus matter because the pandemic has revived around the role that the state should play in the economy. Countries at risk of debt distress may be more willing to accept the Washington Consensus prescriptions when research tells them that short-term pain is worth the long-term gain. That long-term gain, it is argued at the of the World Bank and the IMF that are taking place this week, is the low-carbon transition without a large green developmental state. The World Bank鈥檚 new Climate Action Plan for a Green, Resilient and Inclusive Development () suggests that global finance can deliver where the fiscally-constrained state cannot, as long as concessional lending and scarce fiscal resources are directed to  private finance for development by de-risking development assets. Such plans retain Washington Consensus logic at its core, but go further in terms of actively promoting global private finance as the solution to financing gaps and development risks – the so-called Wall Street Consensus ().  

It should perhaps not be a surprise that authors from the Free Market Institute and the RAND Corporation will go to unusual, evidently ideological, lengths to produce 鈥榚vidence鈥� that left-wing governments produce less successful economic outcomes than neoliberal ones. But we would find it easier to swallow this classic example of academic gaslighting if  economists were not always insisting on the strong standards of objectivity in the discipline. If anything, this is a powerful reminder that all economics is political, however much some hide it behind new or 鈥榮ophisticated鈥� econometric techniques. 

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Carolina Alves is a Joan Robinson Research Fellow in Heterodox Economics at University of Cambridge, the U.K. She tweets at

Daniela Gabor is Professor of Economics and Macro-Finance at the University of the West of England, Bristol. She tweets at .

Ingrid Harvold Kvangraven听is a Lecturer in International Development at the University of York.听She tweets at .

Photo: Frankenstein by .

COVID-19 exposes the deadly dominance of neoclassical economics in Africa.

On February 24, 2021 Ghana received a vaccine shipment (600,000 doses), the first to sub-Saharan Africa under the COVAX facility. It amounted to a tiny fraction of the hundreds of millions needed on a continent increasingly ravaged by the pandemic. Contrast this to the tens of millions already vaccinated in the UK and US. The optimism that Africa would be spared by 鈥渆arly lockdown鈥�, 鈥渓ess dense population, 鈥渢he effect of ultraviolet鈥�, 鈥渁 climate that meant people spent more time outside鈥� and 鈥淎frica鈥檚 youthful population鈥� has rapidly faded. Officially there are now more than 100,000 deaths on the continent, but the real numbers are much higher due to the paucity of testing and the lack of capacity to accurately track and evaluate causes of mortality.

The shortage of tests and vaccines are exacerbated by the West鈥檚 hyper-nationalism restricting the import of these two vital tools to combat the pandemic. The same forces have also generated a scarcity of personal protective equipment (PPE), the lack of monoclonal antibody and other treatments, and terrible shortages of medical oxygen so vital to keeping people alive. How is it possible, 60 years after independence, for African countries to be so highly dependent on the goodwill of the outside world for basic health goods? A good deal of the answer lies in the pathology of economics and related policies, which have spread like a pandemic globally and have come to dominate both the West and the continent of Africa. How did this come about? How does it relate to the strategies that have undermined African capacities to mitigate the effects of the pandemic on the health and welfare of its people? And what should be done?

Following independence, higher education was a key part of the national development project and was aimed at training Africans to take on vital new roles as doctors, teachers, lawyers, civil servants, and economists. Economic curriculum in universities theorized about the nature of Africa鈥檚 integration into the global economy and the domestic policies needed to enhance development. Debates on the government strategies drew on diverse theoretical traditions such as institutional and structural economics. There was a general consensus on the need for African countries to use government tools to build an industrial base.

Beginning in the early 1980s, donors shifted from supporting state planning and import-substitution industrialization toward imposing structural adjustment. They were resisted by local economists not inclined toward the neo-classical model that provided the theoretical basis of neoliberal policies. Donors even ghost wrote reports, pretended they were written locally and then praised them for their thoughtful insights. The World Bank and other donors realized that opposition could be demobilized, and 鈥渙wnership鈥� generated by incorporating the economics profession into the Western economic model.

The crisis of African universities, including the extreme decline of academic wages partly generated by the structural adjustment project of the World Bank in the 1980s, created the opportunity. Donors provided stipends to retrain old faculty, provided the demand for these local 鈥渟kills鈥� in aid packages and supported a new generation of students in neoclassical economics through organizations like the African Economic Research Consortium (AERC), formed in 1988 with the support of the World Bank and other agencies. The AERC set out to revamp higher education by training graduate students and by providing financial support to economics departments in African countries to organize graduate coursework and research along Western lines. The AERC flow of tens of millions of dollars from donors to African universities was a huge inducement for African economics departments to participate in the programs. Today, economics departments throughout Africa look no different than their Western counterparts. By the AERCs own count there are thousands of their graduates in African ministries and central banks, think tanks, NGOs, and academic institutions. Empowering this 鈥渆pistemic community鈥� of local economists created trusted purveyors of the international agenda and helped facilitate the institutionalization of neoliberal policies on the continent.

At the heart of adjustment were neoliberal policies of deregulation, privatization, macro-stabilization, and user fees in health and education, which were supposed to lead to static efficiency gains. Unfortunately, the results were very different. Public expenditure cuts and the privatization of social services in health care and education put African countries in worse health and on the wrong trajectory to combat any pandemic.

Neoliberalism loosened restrictions on capital flows, privatized state enterprises, and liberalized trade undermining local manufacturing capacity leading to more reliance on imports of manufacturing goods including pharmaceuticals and other health commodities. Increasingly African countries became more dependent on exporting unprocessed raw materials for foreign exchange. Hence, adjustment led to the deindustrialization of the continent and returned Africa to its colonial style extraction economy with its problematic boom and bust commodity cycles. Manufacturing fell from 18% of GDP in 1980 to only 7%-9% after 2000.

The tools of mainstream economics are limited in their ability to conceptualize the structural and institutional exigencies of development, which have become even more challenging with African countries at the lower end of the of global supply chain. Recent studies have indicated that Africa鈥檚 exports after 2000 have increased without a comparable rise in domestic value added. Yet, orthodox economists see liberalized Africa as naturally following its comparative advantage. Hence, we have prima facie evidence of a discipline that accepts a pathological condition as normal with all of the problematic incapacities to deal with the COVID-19 pandemic.

African policy makers need to draw on the wealth of accumulated knowledge in multiple theoretical paradigms to design strategies to diversify and structurally transform economies in a value chain world. None of this is easily conceptualized in the neoclassical paradigm that currently dominates the discipline in Africa; one that narrowly focuses on a world of marginal changes, retracted states, and trade between countries based on static comparative advantage.

Howard Stein is Professor of Afroamerican and African Studies and Epidemiology at the University of Michigan.

A more detailed elaboration of some of the arguments here can be found in H. Stein, 鈥溾��&苍产蝉辫;Economy and Society Volume 50, No.1, Feb. 2021.

This blog post was originally published on . Photo by .

By Susan Engel and

Most people interested in development know about the World Bank and probably some of the bigger regional development banks, like the Asian Development Bank. But few people realise there is a system of 30 functioning multilateral development banks (MDBs). Indeed, we did not initially realise there were quite so many because there was no comprehensive tally or an academic study analysing them all. We set out to explore whether the MDBs work as a system and what role they play in promoting both debt and development so here is a short summary of some of our key finding on these three issues.

The MDBs as a System

The idea for the MDBs evolved out of the increasing complexity of the international finance system and the emergence of international monetary and financial cooperation well over a century ago. Key factors were inter-American financial cooperation from the 1880s onwards, international financial cooperation in the years between the two World Wars, and financial chaos during the 1930s. While most accounts of the World Bank attribute the idea of MDBs to proposals from American, Harry Dexter White, and Briton, John Maynard Keynes, we argue that the direct predecessors were, first, the establishment of export-import banks or export credit agencies beginning with America in 1934 and, second, a Mexican addition to a long-discussed proposal for an inter-American financial institution in 1939. Eduardo Villase帽or, then Mexico鈥檚 Undersecretary of the Ministry of Finance and Public Credit, proposed that the inter-American financial institution also be used to invest funds for economic development in the Americas.

Still, the first MDB only came to fruition with the 1944 Bretton Woods negotiations and the agreement to create an International Bank for Reconstruction and Development, which became known as the World Bank. And, remarkably, the 30 subsequent MDBs 鈥� of which only 29 are still functional 鈥� have followed the mandate, structures, and governance it laid out. Even the most recent additions to the MDB system 鈥� the BRICS-led New Development Bank (2014) and the China-led Asian Infrastructure Investment Bank (2015) 鈥� conform to the original blueprint. This supports the arguments that the BRICS and the new MDBs do not fundamentally challenge the neoliberal system of global governance and finance. See table 1 below for an overview of all MDBs.

The bulk of the MDBs were created during the post-Second World War Keynesian-modernisation-welfare era (circa 1946 to 1979) and followed the Keynesian formula of promoting balanced investment and economic development. But they expanded that agenda to include regional, sub-regional, and specialised development programs as with the Arab Bank for Economic Development in Africa (1974) and the OPEC Fund for International Development (1976). We use this framework of regional, sub-regional, and specialised banks to broadly categorise the MDBs.

Following the rise of neoliberalism during the 1980s, the first neoliberal MDB emerged in 1991: the European Bank for Reconstruction and Development. While the other nine MDBs that emerged since the 1980s were not overtly neoliberal in their design, we know that the World Bank and other leading banks became partners in the neoliberal paradigm. Less is known about the smaller MDBs, but many had to admit new shareholders to accommodate the changing exigencies of the neoliberal global financial system. Overall, we think that the MDBs can be usefully understood as a system, though there are some differences and quirks between them.

The MDBs and Debt

The MDBs came out of expanding international financial cooperation that followed a series of crises in the nineteenth and twentieth centuries culminating in the 1929 Great Depression. They were designed to ensure that states received sufficient investment flows to promote employment and development. Still, in setting up the World Bank as a bank, White and Keynes created an organisation that was beholden to private capital and hence could not overcome 鈥榯he somewhat violent and not too enlightened motives of capital,鈥� as White once said. Further, the MDBs operate in a global system that lacks an orderly default mechanism for nation-states and they provide loans directly 鈥� and facilitate private lending for 鈥� what the Committee for the Abolition of Illegitimate Debts calls illegitimate, odious, and unsustainable debts. That is to say, the MDBs lend to regimes simply because they control a territory; they loan regardless of a regime鈥檚 legitimacy, respect for human rights, or whether the loan benefits the local population.

The MDBs facilitated financialisation in the 1970s thanks to their promotion of lending to the Global South and, once the 1982 Debt Crisis hit, the World Bank became a major debt collector for the Global North. Notably, financialised capitalism has not proved particularly efficient, and it is prone to crisis, with major debt crises in 1997 and 2008. As a World Bank paper recently detailed, 2010 to 2020 saw the 鈥榣argest, fastest and most broad-based increase鈥� in emerging market and developing economy debt of the past fifty years (Kose et al. 2020, 111). This has occurred along with low interest rates and the growth of new financial 鈥榠nnovations鈥�, which were present in the previous three debt crises. As the saying goes, we have seen this film before, and we know how it ends 鈥� with another debt crisis.

The development banks are entwined with debt networks and they play a pivotal role in this system as direct lenders, signallers, facilitators, creators of 鈥榗ommon sense鈥� policy frameworks, financial innovators, de-riskers, and more. Contemporary development discourse from the World Bank and major donors has been about getting 鈥楤eyond Aid鈥� and increasing the level of debt for development. Many Majority World countries are again in dangerous territory when it comes to debt levels.

The MDBs and Development Discourse

While most of the MDBs reached their majority during the Keynesian-modernisation-welfare era, their banking DNA meant that they tended to focus on modernisation, or, more specifically, on bankable projects that demonstrated returns to the market. This drive did not disappear even with greater lending for basic needs during the 1970s or with the emergence of the Washington Consensus in the 1980s. When the human cost of neoliberalism became too high, the post-Washington Consensus arrived circa 1998 to renew the palatability of market austerity.

There was a brief and somewhat progressive interlude to the neoliberal agenda during the 2000s and early-2010s with the Millennium and Sustainable Development Goals targeting poverty alleviation and human development. But the penny-pinching returned with the Beyond Aid agenda. Murray and Overton (2016) coined the term retroliberal to describe current directions; an old-school focus on infrastructure as facilitating economic growth, increased emphasis on state sovereignty, and the concurrent dismantling of human rights-based approaches to development.

The two new MDBs led by the BRICS and China not only replicated the MDB model, but they also opted for a donor-recipient blueprint, which is less development-friendly than the member-owned, financial cooperation agenda envisaged by some of the World Bank鈥檚 founders. Still, member-led MDBs remain and there are examples of innovative, growing banks in the Global South, most notably the Development Bank of Latin America (CAF). Whether these innovators can reframe development discourse and practice towards a more progressive agenda remains to be seen.

You can get a copy of our book and a 20% discount if you enter the code FLY21 at the checkout.

Susan Engel is an Associate Professor at the University of Wollongong, Australia. She tweets at .

is a Lecturer in the School of Business, UNSW Canberra, Australia. He tweets at .

Photo: World Bank / Grant Ellis

Table 1: Overview of Multilateral Development Banks

By Matthew Barlow,听 and

By May 2020, every African nation had registered cases of COVID-19. By late July, cases had . A key factor in Africa鈥檚 struggle to mount a response to the pandemic (although not the only one) is that years of debt servicing have eroded states鈥� capacities to build strong health systems.

Research on crisis and pandemics in different parts of the world, particularly in sub-Saharan Africa (SSA), shows that countries will respond to COVID-19 in two phases 鈥� the fiscal expansion phase, which involves a series of stimulus packages, and the fiscal contraction phase, which is characterised by austerity. In the case of COVID-19, these phases will require significant levels of financing. In a region with predominantly , debt and donor aid have become an alternative way for governments to finance state obligations. Currently is below the 60% (danger) threshold, which is way below the crisis levels of the 1980s and 1990s.

However, due to low credit ratings translating into poor interest rates. By 2018, 18 SSA countries were at of debt distress and governments made austerity cuts to public services to service their debt obligations. In 2018, 46 low-income countries 鈥� most of which are in SSA鈥� were spending more on debt servicing than on healthcare. Annually, SSA countries were spending an average of $70 per capita on (supplemented with $10 external assistance), in contrast to $442 in China and an average of in the EU.

Sub-Saharan African debt mountains hurt women more

However, the 鈥榙ebt mountains鈥� that generate weak health systems in SSA affect groups differently. Women have been more adversely affected by policy responses to pandemics. To meet the demands of the 2014 West African Ebola outbreak, financing that was previously earmarked for other health services was . Other reports estimated that over 70,000 malaria cases went untreated, with disproportionately reduced.

This suspension of services became more deadly for women than the virus itself. In Sierra Leone, 3,589 people succumbed to the Ebola virus, whereas between approximately 3,593 to 4,936 new mothers and babies who would normally have survived.

Meanwhile, women are already bearing additional burdens of unpaid care work, running households and higher unemployment, because they are in the informal sector and industries decimated by lockdowns. The same trends were seen in post-Ebola Liberia where (from 18.8%), with women making up the largest proportion.

The redirection of resources away from already weak health systems in response to COVID-19 in SSA will generate feedback effects that will hurt women鈥檚 health and their access to health services. Early indicators suggest that the cutbacks in maternal care during the current pandemic could claim the lives of up to . For instance, donor organisations including the EU are working with NGOs to existing development funds that would otherwise have been spent on education towards the COVID-19 response. NGOs emphasise that available finance is inadequate in addressing the scale of the problem, and .

Very few international NGOs supporting SSA countries are receiving new financial support from international donors, even though the region is recognised as one of the critical areas that needs extra support. With less aid, debt will become the primary option to fund the pandemic response. By May 2020, African finance ministers had already $100bn in debt to finance the COVID-19 response.

In the initial aftermath of the COVID-19 outbreak in SSA, there has been a raft of different financing responses by different types of organisations. Although women are recognised as being a vulnerable group, financing policies are unlikely to adequately match the rhetoric. The and the have increased lending capacity and have offered moratoriums on debt liabilities which were due this year. However, private creditors have not followed suit and debt write-offs are not part of this relief package. Current pathways only offer deferrals and more debt. So far, creditors such as the G20 have been increasingly to extend debt relief to SSA countries 鈥� and consequently it is estimated that $11.3bn of IMF aid earmarked for pandemic response has been to debt servicing by 28 countries across the Global South.

When healthcare is cut, women suffer

Previous responses to pandemics and crises have recognised that debt is a significant barrier to recovery. For example, were redesigned to be more flexible to favour developing countries, e.g. through reduced . Yet governments still cut spending on healthcare. In response to COVID-19, the IMF has also approved debt relief for several SSA countries (e.g. ). But generating stronger health systems without compromising women鈥檚 health requires debt repayment options that avoid disproportionately placing this burden on women. This does not mean, though, that debt relief through write-offs should be discounted from COVID-19 responses.

The pandemic will probably reverse progress towards the UN鈥檚 Sustainable Development Goals. Increasing national debt levels now and imposing austerity measures later will exacerbate inequalities and poverty, and further reduce SSA countries鈥� capacity to support women鈥檚 health. This means that COVID-19 responses which use debt as a tool have to show they recognise how debt relief and austerity measures affect women and other marginalised groups. As the African Union argues, all responses must adopt a 鈥榞endered lens at every step of the way. Countries and processes that meaningfully engage women and girls in responding to these issues are more relevant, effective and sustainable鈥�.

By Patrick Bigger and Sophie Webber

Cities across the world are facing a double-barreled existential problem: how to adapt to climate change and how to pay for it. Over the next thirty years, more than听听owing to sea level rise and more intense storms, while as many as听. Other looming crises include soaring urban temperatures, the urgent need to transition away from fossil-fueled energy and transport systems, and plummeting rates of local biodiversity.

Responding to these problems will, international bodies project,, from hardened municipal water and sewage systems, to urban afforestation, to renewable energy systems. This massive infrastructural program coincides with global economic conditions marked by the lingering ideological stranglehold of austerity, unprecedented levels of capital concentration, and now, myriad uncertainties produced by COVID-19. Cities across the world are facing a double-barreled existential problem: how to adapt to climate change and how to pay for it. Over the next thirty years, more than owing to sea level rise and more intense storms, while as many as . Other looming crises include soaring urban temperatures, the urgent need to transition away from fossil-fueled energy and transport systems, and plummeting rates of local biodiversity.

In response to the twin problems of resilient infrastructure needs and public fiscal constraints, the World Bank and an array of partner institutions from the to USAID have been ramping up programs to facilitate private investment in urban resilience. From a baseline of $10 billion across 77 cities in 2016, the World Bank aims to 鈥榗atalyze鈥� investment of more than $500 billion into urban resilience projects across 500 cities by 2025.听

But the vast majority of this money is not being distributed in the form of grants, as would befit a just adaptation regime respecting the loss and damage that will be borne by people least responsible for climate change. Nor is it 鈥榲anilla鈥� , where states borrow from the World Bank for approved projects while receiving 鈥榗apacity building鈥� for administering the project. Instead, this resilience funding is targeted at reformatting municipal governments to enable them to execute urban resilience projects through private-sector oriented pathways. These initiatives are focused on cultivating cities that can plan investor-friendly infrastructure projects, then access global debt markets to finance infrastructure that is meant to achieve resilience.听

We call the process through which vulnerable cities of the Global South are being rendered investable in response to climate change .

We use the term Green Structural Adjustment to signal connections between 20th Century and contemporary World Bank urban-climate programming. Structural Adjustment formally ended in 2002, after the Bank, along with the International Monetary Fund, administered more than in almost 100 countries in the 1980s and 1990s. While the language of structural adjustment was phased out in favor of the more gentle sounding 鈥榙evelopment policy lending鈥� in 2004, the underlying faith in the power of markets to create desirable change, a commitment to technocracy, and mistrust in Southern states to pursue the 鈥榬ight鈥� objectives through the 鈥榬ight鈥� governance mechanisms, persists. But there are important twists from the 20th Century formula: the unit of policy intervention is the city, rather than the nation-state; the aim is to create access to debt, rather than fixing sovereign balance of payments crises and overwhelming debt; and, the primary objective is climate resilience to secure development, a departure, at least rhetorically, from .

While 20th Century Structural Adjustment Plans were often violently imposed- and still are- the violence of Green Structural Adjustment is less direct. The Bank is , bearing the message that if city governments are not reformed in investment-friendly ways, those cities will continue to be cut off from more than swirling on global capital markets. This is a modern, environmentally-inflected version of ; as , 鈥減ublic investment alone, even when combined with [official development aid] is inadequate鈥� to remake cities that can protect residents from environmental change; only financiers have the power to pay for resilient infrastructure at the scale necessary. So the criteria of investors, such as balanced municipal budgets, a regional or internationally recognized credit rating, and a pipeline of investable projects planned with accepted forms of environmental data must be achieved if cities are to gain access to these vast pools of capital.听听

The second connection between the Structural Adjustment Plans and the Green Structural Adjustment is causal; Structural Adjustment contributed to many of the problems that Green Structural Adjustment aims to counter. For example, Structural Adjustment Plans-induced agricultural 鈥榬ationalization鈥� contributed to , driving urban growth, rates of informality, and associated vulnerability to environmental change. Trade liberalization facilitated hydrocarbon and raw material extraction and export, turbocharging rich world consumption and associated greenhouse gas emissions and degrading local environmental conditions. Meanwhile, spectacular levels of global inequality has led to .

It is precisely this concentrated wealth that Green Structural Adjustment aims to channel into urban resilience, in line with the broader World Bank project of 鈥�鈥�. Green Structural Adjustment offers a path to climate-proofed infrastructure provision operationalized in line with the 鈥�Wall Street Consensus鈥�, an austerity-drenched logic of, and set of tools for, using . In turn, these investments are to be channeled into familiar financial mechanisms, including public-private partnerships, municipal borrowing through labeled green bonds, or land-value capture, but using the World Bank balance sheet and expertise 鈥�鈥�.听

Our paper looks at examples from ), , and , but these processes are playing out in cities in virtually every corner of the Global South. And the scope of these interventions is growing: if Bank spending gets close to the $25 billion per year it aims to leverage by 2025, Green Structural Adjustment-aligned investments would .听听

While Green Structural Adjustment operates at the interface of global institutions and the city, its practices have structural ramifications. Overaccumulated northern capital has been desperately seeking profitable investment in a high liquidity, low yield world. Green Structural Adjustment, through its technical assistance and derisking activities, aims to produce a pipeline of investable frontiers. As more cities gain access to debt markets and their needs for adaptation grow, Green Structural Adjustment offers a multi-sited : physically fixing Northern capital in Southern infrastructure and staving off crises of overaccumulation, producing new geographies of accumulation and the ability to absorb the ravages of a changing climate.

听It remains to be seen how much private investment in public infrastructure Green Structural Adjustment ultimately will generate; to this point, Green Structural Adjustment is still much more about beginning to restructure city governance than tracking trillions in Global North investment into Southern built environments and the . As a World Bank staffer told us, 鈥渞ight now less than 2% [of investable private capital] gets invested in urban infrastructure. So, these are pension funds, sovereign wealth funds, mutual funds, and they鈥檙e out there, they鈥檙e looking for reasonable returns, in a very low return market right now. So, we think there鈥檚 an opportunity to tap some of that鈥�. This sums up Green Structural Adjustment as it empowers technocrats and financiers to shape what kinds of infrastructure are realized and how it is financed, producing cities and infrastructure as investable enclaves while rents flow to investors.听

Ultimately, we reject the reframing of 鈥榗limate debts鈥� enabled by Green Structural Adjustment that produce uneven climate risks into a technocratic syntax that heaps financial debt onto vulnerable cities in the Global South. There is much scope for (geographical) political economists to envision other modes for producing future-ready infrastructure, and the institutions to facilitate those futures. The move toward are welcome, but insufficient. Instead, our next steps are to figure out how the highly concentrated finance that the Green Structural Adjustment mobilizes .听听

Patrick Bigger is a Lecturer in Economic Geography in the Lancaster Environment Centre, Lancaster University, UK. His research spans an array of environmental, financial, and political entanglements across world regions, currently focused on infrastructure and adaptation. He tweets at .

is a Lecturer in the School of Geosciences at the University of Sydney. Sophie is an economic geographer studying the political economies of climate change adaptation and resilience, with a focus on Southeast Asia and Pacific regions. She tweets at .

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