S4, E12 The debt and climate change precipice: How can the global majority cope?

'The debt and climate change precipice: How can the global majority cope?'

Speakers: 

• Jayati Ghosh, Amherst
• Ndongo Samba Sylla, International Development Economics Associates
• Kevin Watkins, LSE

Chair: James Putzel, LSE

What is Cutting Edge Issues in Development Thinking & Practice?

These podcasts are recordings from the Cutting Edge Issues in Development Thinking & Practice lecture series 2023/24, 2022/23, 2021/22 and 2020/21, a visiting lecture series coordinated by Professor of Development Studies, Professor James Putzel and Dr Laura Mann.

The Cutting Edge series provides students and guests with fascinating insights into the practical world of international development. Renowned guest lecturers share their expertise and invite discussion on an exciting range of issues, from climate change policy, to pressing humanitarian crises. In 2020, the series took place online, enabling us to host fantastic speakers from around the world and to stream the lectures on YouTube, opening them up to a global audience. Now we are back in person but still recording the sessions to share with our global audience.

Okay, well welcome everybody to the first. Live streamed cutting edge discussion this year we're a little out of practice having done this all through the pandemic We're coming back because the Zoom sessions that we're having.

Over the next this week and the next 2 weeks after this are allow us to tap into fabulous scholars and practitioners from around the world.

And therefore, today we have a. A really interesting. Panel discussion.

Talking about the debt and climate change precipice. How can the global majority cope? And I have to say that this even the title of this session.

As well as the content that we're now going to speak to was really collaboratively devised by the speakers we've invited.

So I like this when it happens. And so we're joined by Jayatsi Gosh, who's a very famous development economist, has really contributed enormously to our our discipline.

She's a professor of economics at Amherst, in Massachusetts. For part of the year she's speaking to us from Delhi.

The land of her origin and we are very grateful that you're joining us gyati so late in the evening.

And we're also joined by Andongo. In don't go, who is from the International Development Economics Associate.

Based in Takar in Senegal. And, You add, Praiseia, Setup, P.

Messy

And, and finally we have Kevin Watkins here. Who is joining us from my office. Sitting next to me.

And Kevin is a professor. Visiting professor. At the Fiori Africa Center at the school. And he is former director of Save the Children Fund of the Overseas Development Institute.

And when I knew him way back when when he was a very young man, He was doing very important cutting edge research on the common agricultural policy in Europe and has never stopped since then engaging.

And really important policy oriented research. So we're delighted to have all 3 of you. The speakers will speak for 20 min each.

Now that we're on Zoom, I can mute you after your 20 min is up. And then we'll go into the QA.

We are expecting that the students sitting in the room. Will ask questions and you you'll be able to come up to the microphone near the machine.

Maybe form a cube if you want to ask questions from there. And of course, please. Raise your hand or even better type into the chat if you're if you're signed in.

Online. To tell us that you have a question and then You can put on your camera and your mic and ask your question.

I hope that's all clear. The session is being recorded. So everybody knows.

And I think and we're also live streaming to YouTube. There'll be a recording available afterwards, a blog post, and, as well a podcast, I think.

Of this session. So without further ado, We're, we're gonna begin with Kevin.

Thank you. James. Okay, we wanna share the screen. So, we do that right here.

If we go back to. Zoom.

Chair screen. This one. Share and we'll put on full screen like that.

Okay, take it away, Kevin. Great. Thank you, James. And it's really great to be here with all of you.

And to be sharing this platform with JRT and and I do think the issue that we're discussing.

Today, you know, of all the many issues in international development that really matter. This one to me really stands out.

And it stands out for a couple of reasons. Actually, when I first met James, which I think we were both younger then James in mid-.

One of the big issues on the agenda at that time was the debt crisis in Latin America and the day crisis.

In Africa. And here we are. 35 years later. Yes, the same type of problems in the context of a world that is failing to address, address what is Probably the greatest challenge facing humanity.

No, probably, but the greatest challenge in humanity. Which is that of climate change. I think it was Marx who coined the phrase that history repeats itself.

First, as tragedy. And then as fast, we had the tragedy in the 19 eighties and the 1990, s the fast.

With traffic consequences will be if we can't resolve the debt crisis. That we're facing now.

James, how, how do I? Just do.

So, I wanted to start with, a bunch of propositions which I really want you to hold in mind.

No, I, relevant for all of what I'm going to say. And I suspect we'll have some relevance to watch, in a long go.

Say the first point is an obvious one. Not all that is bad. And sustainable debt is actually a critical Souls of Development Finance.

Sustainable day is what built the sewer system in London. Sustainable debt is what has created infrastructure across many countries.

In the world. It's also the case that there is no resolution. To the climate crisis that does not involve.

The mobilization of sustainable and affordable debt. Public and private debt. The International Energy Agency's estimation of the finance gap.

For making a green transition consistent with the Paris agenda. Is around 3 trillion US dollars by 2030.

That mobilization will not happen. Without properly functioning. Debt markets. A third proposition is that don't markets if you look at them historically.

I'm prone to crisis. To we governance and to delayed response. I'm when crises strike.

Inevitably it's creditor interests that take precedence over the public good. And in the way that that problems are addressed when they emerge.

Power matters. And power is one of the things that I think is going to figure quite prominently.

In this discussion. Fifth point. Delayed action on that relief.

Has devastating consequences for development, consequences that cut. Across many generations. And in some ways I'll come back to this point.

We are today living with the consequences of delayed action on debt. In the 1980. And the 19 nineties.

6 point. There is no question and I set the evidence out on this in a moment. We are in another debt.

Crisis and and I'm going to explain the I mentioned to that crisis shortly. And finally, failure.

So, out quickly and decisively. On this crisis will. The Paris Agreement with devastating consequences for people.

Planet. I put a quote on the left hand side. Of this first slide. Which was actually from a speech has nothing at all to do with climate change but with civil rights.

In the United States from Martin Luther King. Well, he said we are confronted with a fierce urgency of now.

In this unfolding conundrum of life and history, there is such a thing as being too late.

This is no time to apathy or complacency. This is a time for vigorous and positive.

Action. That could be a statement on climate change. I want to illustrate the historical points I made by reference to 2 that episodes.

What what I call a 2 part horrible history of death. The first from Africa. To set the scene.

Some of you will be familiar with the speech that Julius Nyeri made in London in 1986.

Where he addressed the credit to community. And he asked what was a very simple question. Must we starve our children?

To pay our debts. And the answer he got back. Was a resounding yes from the creditor community.

The background to that crisis. I'm not going into details here but I want to set the tone.

Because I think it's relevant to our current situation. Was an increase in borrowing in Africa in the 1970.

Especially from the credit agencies of bilateral donors in G 7 countries in particular. And commercial credit guarantees followed by a rise in interest rates in the late 1970.

Seventies deteriorating terms of trade, which led to the debt crisis that Niriri was responding to.

Now what was the response to this? Well, we had 20 years. Of what was described as flow rescheduling.

That is to say the debt problem was treated as a liquidity crisis. And the way to deal with the liquidity crisis.

Was to just stretch out the repayment. Of the debts, including arrears to roll a rars on that into the principle and to push that forward.

And to ensure that governments were able to repay. Creditors essentially through structural adjustment programs. These were programs that squeeze the domestic economies of Africa.

In order to transfer resources to the creditor. Community. In other words, the leveraging of the IMF and the World Bank.

In order to secure creditor interest to remind you but the point I made about power. The the effect of those.

Maybe 20 initial years, but that's indicators progressively worsened. Health budgets were cut.

Africa. Suffered some of the biggest reversals in education in history. And a 25% reduction.

In per capita. Incomes with the income level of 1980 per capita. Wasn't actually restored until 2,002.

We had the heavily indebted poor countries initiative in 2 parts. The first in 1996 the second which really brought the curtain down on that phase of the debt crisis in 2,006.

The the key point I'm making here. Is that the time lag between the identification of the problem and its consequences for ordinary people?

And action was around a quarter of a century. That's the first point. Second episode of the horrible, there has to be a good publication in this idea of the horrible history of debt actually.

Now I think that this is the horrible history of debt. Part 2, for that in America.

Now, again, really to give. A very shorthand version of the background to the crisis.

This was initiated by the recycling of petrods with the oil price increases of the 1970.

Through US banks. In 1982 which was the year Mexico defaulted. The Latin American debt stood at 327 billion US dollars.

That was up from a hundred 59 billion just 4 years earlier. If you took the 9 largest US banks, Latin American debt.

Amounted to around a hundred 76% of their capital. So this was a direct threat to the banking system of the United States.

And it was really triggered by the Volker. Plan in the US, which was about squeezing inflation out of the US economy through higher interest rates.

So that was the backdrop to the decor. What was the response? We first had the Baker plan.

Which was a sort of version, if you like, of those liquidity plans in Africa that I mentioned.

Which was based on additional lending for the liquidity to secure repayments. Allied to structural adjustment programs.

Hello, several years later in the late 1980, s by the Brady plan. Which essentially work from a secondary.

Market for Latin American. Bonds to where the the Fed essentially forced US banks to accept a discount. A discount by the way after they had property very handsomely.

From the structural adjustment programs which had transferred resources to the shareholders of American banks. What were the effects?

That this period is often described as a lost decade for Latin America. It wasn't a lost decade, it was a lost quarter century.

And poverty rates went from 40 to 48%. Of the population in just a decade. And again, per capita incomes.

Didn't return to 1980 levels until 2,004. The time lag in this case.

For action on debt was shorter around 12 years. But the consequences of the crisis lasted much longer.

As I said, the century. Now Where are we now with the current? That crisis. And One level.

We're back where we started with both of these crisis. We've had a period of rising real interest rates, which came with the unwinding of COVID.

Measures. The longer term backdrop. It was being a shift in the debt profile of low income and low income countries in particular with the rise of sovereign bond debt and Chinese debt.

Prompted in turn by chronic shortage of development. Finance in many cases as well by week and opaque.

That management, I put the indicators here which I'm not going to go into which does tell you something about how the debt crisis has hit economies.

I the the either eligible countries the poorest countries Now have that suggest over one trillion double the level.

In 2012

Sorry, I got 5 min left. 5 min, yeah. Okay. The, these slides again, I'm not going to go into the detail here, but if you look at the top slide and you look at the green slice of the top slide.

That's the emergence of Europe on debt. The this is a graph of sub-Saharan Africa.

It's for debt servicing. And it gives you a sense of the way in which the servicing of Europe on debt that is sovereign debt owed by governments is now dominating debt proof debt profiles.

The lower graph gives you a profile of Chinese that I think we're going to come back to this in discussion, James.

I'm not going to go into it in detail. The Chinese there is a complicated beast. It ranges from highly concessional to non concessional but this is the sort of mix of debt which is at the heart of the current prices.

What's the critical point about those debt numbers is not what the IMF and the World Bank tend to focus on, which is the debt to GDP ratio or even the debt to export ratio is the way in which that servicing is crowding out.

Investments in other areas. In education and in health. You can see that very clearly. In the top graph, where debt servicing is now overtaken health expenditure and is approaching education levels.

And this crowding out point is actually critical for Christ for climate finance because if you look at the investment needs for Africa in particular or adaptation financing.

You're talking around 50 billion a year minimum. By 2,030. If you look at the wider requirements for green transition, you're talking around a hundred 80 billion annually by 2,030.

Those investments cannot happen with a current debt profiles of sub-Saharan African countries. What is the response look like this time?

I wish I had a little bit longer here. These are really quick points to summarize. We first of all had during the COVID period what was called the debt service suspension initiative.

Yeah, I'm happy to give you 5 of my minutes, so please carry on. I think it's important.

Yeah. Yeah.

That's super kind, but that's a level of redistribution. I won't take that.

Yeah.

I really don't want to eat into your into your The the debt service suspension initiative was not that really initiative it was essentially a deferral.

Of that repayments. Of around 13 billion US dollars. But the these are payments that have now just been rolled into principle and will still be repaid.

The common framework as it's called. Which is the mechanism. For providing that relief on the country by country basis, only 4 countries have so far applied.

Only one of those countries has actually received any form of that relief. And which is Chad and the relief that was provided was negligible.

There are 3 problems with this approach. The the first is a collective action problem. So you have different groups, you have bond holders who refuse to participate.

And then you have arguments between bond holders. China and various groups of commercial creditors over who should take the hit.

So that's block progress. I've mentioned the I've named some of the big commercial bond holders here.

A second critical point. Is that if governments choose to seek? That relieve under the common framework. They pay a high price.

I put a quote here where President William Ruto of Kenya made an appeal. During a spring meeting.

For a debt relief architecture and the immediate effect like within hours. Was at the basis points on Kenya's bond.

When's up to the highest level in 4 months. So in other words, if you see, don't relieve, you will pay a price in markets.

Now what do we do? About the problem. This is the last slide. The, the, I put this as a bit of a challenge to everyone.

In the, the verb that we use in the title of the, for this series is cope.

How should the majority cope? Well, the answer is we shouldn't be talking about coping.

We should be advocating. And campaigning. The change or as Bob Marley would have put it.

Get up. Stand up. And I think there are several parts of this. First of all, it needs mobilization.

The HIPPIC initiative didn't happen out of the kindness of the creditor community. Or the insights of the IMF and the World Bank.

It happened because of the mass global. Campaign linked to strong evidence. Second, we need new movements that are making the link from that.

To climate change linking climate activists in the global south. To shareholder activists link to the the holders of the bonds.

That a fantastic organization called Make My Money Matter, I'd really recommend you go and look at their website.

Which is about making links between pension funds and the market managers who are making the investments in climate change and holding to ransom the indebted countries I mentioned.

Earlier. Fourth point. We need to name the actors a lot of you in the lecture theater are going to be too young to remember this but the picture there on the left is Do you know who that has changed?

Just one. Yeah, I'll give you a clue. Paul, Paul Newman and Robert Redford.

It's the last scene in Butch Cassidy and the Sundance Kid where they're about to be shot down by a group of people who have been hunting them for ages and they can't work out who these people are.

And the last line of Paul Newman in the film is who are these guys? Well, these guys are black rock, Goldman Sachs, JP Morgan, Pimco, they have names, they have organizations, they have shareholders, we need to name them and campaign.

Against them. Last 2 points, there is no substitute. For that architecture that covers all groups.

Of creditors and forces all groups of creditors to accept lower claims in order to restore. That sustainability.

And we need to look beyond, you know, what is this new fad for what are called debt for climate swaps.

Which typically mobilize very small amounts of money. I'm very, I'm not particularly advantageous terms.

While failing to tackle the systemic debt crisis. What we need is a systemic debt crisis resolved.

In order to free up the fiscal space that governments need to tackle the climate crisis. Thank you very much.

Kevin, thank you very much for that. I'm going to just stop sharing that. And I think really that historical perspective is invaluable.

As we go on to talk about the situation we face today and you've already shown that by already outlining some of the elements for action.

In Dongo, can I call on you now too? Turn on your camera and If you have slides, you can share the screen.

Yes, let me share.

Okay.

Okay.

Very good. And if you click on the full on the. The little single down on the bottom there to make it a full screen presentation.

That's such great.

Okay. So, thank you very much for the invitation. I'm really happy to be here.

And to have a pleasure to share this panel with. Daddy and Kevin and to tackle a very important topic.

My intervention will be about African external depth problem. I will try to share, some thinking about it.

3 type of questions first what we can learn from the president depth crisis in africa during the 90 eighties and 19 nineties I think this has been covered by, by, by Kevin in his presentation.

What happened afterwards during this pay out of Africa rising. I will try to show that, well, the way the African depth crisis was handled.

At the end of the 1980, s created the current depth crisis to some extent and I'll try to show that with the case of Zambia.

One aspect is the critical role played by Frontec investment. And when we talk about foreign tech investment is productive investment.

Not financial investment but investors that buy companies create new companies. Create a new equipments etcetera and in the case of Africa the fried deck investment have been playing a role that went unnoticed.

And my this is that for most African countries which are resource rich commodity reach. The origin of the depth crisis lies in the behavior of the Frienddeck investment.

Pass for index investment is the main source. Of export income and generally the export income have been heavily biased to us for a decade investment.

And it is sad that when we talk about depth crisis, generally speaking in Africa, we are not highlighting this aspect.

I'll try to do that. And I will finish with some implications. Regarding the needed reform of the international financial economic and financial system.

This graph. Derives from the World Bank, on blue you have the real GDP growth.

And in orange you have the external depth a DDP ratio so the external that is that eliminated in a foreign currency Yeah, very interesting things here that highlight the structural character of African inductiveness.

We could summarize it quickly We have. I mean, 2 first decades were. You have high growth for example between 90 60 and 90 seventys that was also the case between 2,02010 you have high growth because you have good terms of trade when the terms of trade decline governments will want to maintain economic growth so they grow more more money and they will grow in foreign currency and so they

will export themselves. And when you have first I decline in terms of trade. And the cost of international finance increases.

You have a depth crisis and that's what happened at the end of the 90 seventys and you had 2 decades of suitable adjustment plans.

90 82 90 and 90 90 is to 2,000. And you could see in this graph that this period of so-called structural adjustment plants What a pay as well a GDP, real GDP growth was the lowest.

1.2 in the 90 80 decades. And 2.1 between 90 90 and 2,000. And you could see that also during this period, the X and L depth stock.

Did not decrease in fact it was just stabilized This shows that the goal of supermarket assessment plans is not to diminish, you know, the frying depth, etc.

It's not to create economic growth, it's to kill economic growth to kill development. Because the depth of the external depth tdp ratio declined only during the 2 thousands and this was due to 2 main factors.

The first was that the depth was can sell to some extent. I mean the official depth. Kevin talked about the H IPC and also the METLATTLE LIKE initiative that help a diminish the, that help, diminish the.

But the thing is also there had been a supper community cycle that started from the mid 2,000. That's what explain, this drop in the external depth GDP ratio between the 2,000. 2,010.

But after the supper commodity cycle was started to be over. The government started to increase their friend indictedness and in this case as we'll see they relate more on international financial markets.

So that means that due to the economic specialization of African countries they have been strongly dependent on their patterns of economic growth from, commodity prices.

And one quantity prices are low. Generally they try to sustained growth by increasing their free inductiveness.

And when you have a global environment characterized by high cost of finance high interest rates, you will have debt crisis.

And that was the scenario. So that means that a COVID-19 itself does did not create a depth distress.

The debt distress was inscribed in the economic pattern of. Accumulation of African countries and we will see that.

You could see here for example that between. 2,010 and 2019. All the external solvent indicators for sub-Saharan Africa was declining for example the external depth stops to export ratio went from 79% to 165 and after it increased a bit.

Same thing for the depth service to export ratio from 5% to 17. That means it, increase threefold.

And the external reserves to depth stocks also decrease 48% to 22%. So that means even before the pandemic.

We were seeing that African countries were on a path of increased inductiveness and also lower capacity to repay the depth.

So what they needed only to be in depth distress is a change in the global environment, lower prices for the commodities and this has been the first effect.

Of the COVID-19 on Africa and after increases in prices and global inflation, and accessing to international capital markets.

Here you could see the evolution of the public and publicly guaranteed external desktop in Africa, TPG depth.

So you could see that it mostly tripled. 2010 and 2022. It went for 169 billion US dollar in 2,010.

To 471 20 and 22 for sub. Africa. And you will see that the composition of this find depth change a lot.

Before let's say in 2010 something around 2 thirds of the depth the frame depth stuck was official multilateral and bilateral.

But by 2019, one third of the depth. Was held. By phone holders, that means investors who bought the Eurobonds, the Euro obligations, issued by African governments.

The share of the commercial banks and others has stayed more or less the same the share of commercial banks have been higher let's say during the 90 seventies, etc.

So as Kevin said, it has been very difficult to, restructure, the depth in this.

Do, to the behavior of your, your upon holders. And African governments. Generally they, issued these Europeans.

Because, at that time also it was the aftermath of the, pet financial crisis.

And so there were a lot of liquidity and so-called emerging markets were destinations that were promising for investors they could have access to through yields to returns that they could not obtain in the Global Knows.

At the same time for African governments, it was a way of financing themselves without the conditionalities you would find with the IMF World Bank or sometimes some countries.

And so there was also this context of commodity. That also created this, this, euphoria, about the, And you could see that during this period, the depth service also increase a lot.

It went from 10 billion US dollar annually. To 41 billion in 2,019 and 43% 43 billion in 2022.

The thing is when you issued that in a foreign currency, when you issue, you know, bonds, generally you are subject to market conditions and when interest rates are low it could be interesting it depends but whatever the case the thing is African countries generally they suffer from what has been called the African premium in the sense that their governments often pay an extra unjustified cost.

And this had been estimated at 2.9% by 2 economists, Michael, O and our SEN in there.

Paper, serving one issues, 2 African countries pay more to borrow. And for the pay at 2,008 to 2014 they said that this African premium implied 2.2 billion US dollars for African governments and you have same results with the paper by, Ep.

There have been a recent U NDP report, showing how the cost of finance in Africa is increased by the by credit rating agencies.

And they say that the full cost of credit rating itiosyncrasies for 16 African countries that issued Europeans is estimated to be 75 billion in excess interest and foregone funding for the countries.

This amount is nearly 12% more than all of Africa's net official development assistant in 2,020.

And they added that this amount represented 80% of Africa's annual infrastructure investment needs. So that means that the cost of finance is waking heavily on African.

But this is not the only aspect. Another aspect, I would like to insist. Is the profit and dividend repatriations by forensic investment.

Those who buy African euro bones they they are paid interest payments but interest payments are different from the, profit and dividend repatriated.

By companies installed in African countries. For example, companies that exploit oil, gas, uranium, etc.

And sometimes they support markets, etc. So here we see in this graph, we have 3 indicators.

We have the primary income on API that is the returns on FDI to profit and dividend repatriation.

Mostly you have the total interest payments on all external depths private and public and you have the public and public guarantee tap service.

And you could see that from 2,006 with the commodity boom we saw a huge increase of primary income on FDI.

It's started from 2,007. Until let's say 2018 and you could see throughout this period.

The primary income the returns on FBI have been higher than total interest payments on external debt and between 2,007 and 2017.

The primary income has been systematically higher than the external depth service. And this graph, you know, is derived from the World Bank data and it, concerned, 30 African countries, representing something like more than 75% of African GDB.

This is huge and for me this explained partly. Why African countries are into that distress because if all these are you know flows of profit and dividend repatriate abroad will, in, invest it in Africa.

For example, in agriculture, in the industry, for, food, self-sufficiency for, for initialization, African countries would not need to issue that in foreign currency because generally you need to issue that in foreign currency because you want to have access to real goods to for for your own development.

But that has not been the case and generally people when they talk about the depth in Africa they do not factor in this aspect and it's really important.

And the case I generally, give as an example is Zambia because Zambia in 2,000, and 20 was the first country that defaulted.

On a 42.1 B and coupon payment on one B and you're once muttering in 2024.

And the Zambian case is interesting because the Q and design and depth crisis for me, is an outcome of the way it's preceding that crisis at the end of the 19 nineties was handled by the IMF and the World Bank.

Between 2,026, our 2,006, the external public and public anti-depth stock of Zambia declined from 4.4,000,000,128% of gross national income.

To 0 point 8 6 billion. So that means 7.4% of GNI. So that was a decrease of the external public and public guaranteed of 80%.

But this restructuring by the IMF, World Bank and so on was conditional on the privatization of the copper sector for the benefit of Canada and mining companies that also enjoyed favorable tax and legal terms.

With the community boom, the FDI income skyrocketed, deteriorating first the primary income account.

And so we could see that the cumulative FBI income flows from 2,000 to 2,005 stood at 1 billion.

Compared to 5.5 billion for the payout 2,006 2010 between the 2,021 cumulative FD income flows reach 10.5 billion.

West is 2.7 billion for interest payments on the XNL, public and public. And 5.5 B.

N for the PPG X and LD. As for the PPG depth stuck, it was relatively low until 2012 12% of TNI.

But between 2013 and 2019 it increased free food in absolute terms from 3 billion to 99 billion.

So that means that during this period, despite the copper boom, Zambia has not been accumulating foreign assets because it's Zambia had accumulated throwing asset Zambia would have been would less need to issue a Eurobonds or depth in for currencies.

And the thing also when they took the depth the depth was not used in a way that would itself create fit for in income.

And this is only part of the story because another story is illicit financial flows because the transfer of dividends of any profits is also associated with is it financial flows and I call it real resource theft and we have some estimate.

But when you compare this estimate since 90 70 to now, you could see that what has been stolen to these countries is higher than the external depth stock for example of of Zambia in 2021 for example so that means that there are many countries who are, you know, underdeveloped to our community rich.

But they should never be in depth crisis if they were managing well the export income if they had very let's say fair tax agreements, etc, they would not need to issue so much depth in info and currency.

And Zambia is a perfect case of that. And the IM of any one of his latest report on Zambia said this.

Zambia Bounce of Payments has historically been characterized by large leakages in the form of sizeable private sector as it held abroad.

These outflows average about one third of copper exports over the last 5 years. And have been as high as 20% of GDP in 25 and 2,014.

These outflows have likely offset the significant FPI inflows of the early 20 tenths and contributed to the gradual depletion of reserves before the 2,021 SEI allocation.

And the report added that 50 to 90% of copper export in point between 20 to 2020 21 were not repatriated.

So Zambi is countries like Zambia should have never been in depth distress if they have control over the export sector.

And also control over the exp or income. So I will conclude by saying that for the time being. The only way African countries can avoid the frame depth, in the current circumstances, that means being a commodity producer and facing the international payment problem, what I call internal payment problem is that you need to have access to US dollar to buy imports you need.

And unfair tax agreements. Is I'm among others to have higher fiscal and technical control over the export sectors continuing to export their fossil fuels and as active commodities for half fully their own benefit.

Because it's not that you are a commodity dependent that you should be in depth distressed or poor.

Countries like, you know, like I cut a linear at 1 point or Libya they did not have any significant foreign depth because they had a national control over their oil sector.

But that's not the case of most African countries. So clearly the current international financial system is not working for developing countries, especially the commodity dependent ones.

So for them it would be economically suicidal. To abandon the executive industries without significant resource transfers because they would be in depth distress.

So in other words, contributing to first, a global crime at this press is the main option out of depth distress that the current global system offers to the commodity rich countries so we can find in Africa.

The thing is the global law of countries as a whole could afford to cancel the external public and publicity depth.

So stock of African countries. I would even go first by saying that all the country is the 133 countries.

Ranked by the world bank as low in minor income countries if you exclude china india and Russia their external depth stuck in 2022 was lower than the external and then then the depth, stock the public desktop of Germany.

So that means that the Global North Country is good effort to provide significant depth relief so the issue is not whether they could afford it financially the issue is whether they have the political will and so far they did not show any political will And I think the point is to share that.

Thank you very much.

No, thank you very much. For that, which gives us a view, really quite a comprehensive view.

Of how debt has emerged and increased and stymie. Development and action on climate. In sub-Saharan Africa.

Jayati, over to you.

Thank you. Very much, James. And what a pleasure it is to come after Kevin and Dongo because they've said everything that needs to be said and so you know I have much less to actually talk about but I want to actually bring the focus specifically on to climate finance.

And to do that, I'm going to just show you a couple of slides to begin with just to give you a sense, but not spent too long on these I really want to get into just talking about it really So how do I get into slide show?

From the beginning, there we go. Yeah, so just this is just to give you a sense about mind you I hate actually thinking about everything in terms of GDP because that's not the point there will be people dying there will be children starving and all kinds of other things happening.

But What's worth of note is that the countries that are really responsible for most of the problem the carbon, emissions that we have for today.

Which is Western Europe, North America. I'm not going to be so badly affected. They're relatively less affected and it is this country we've already been talking about in sub-Saharan Africa and Latin America and South Asia, Southeast Asia that are the much more dramatically affected.

If you do this in terms of UNICEFs estimate of the estimated child deaths, it's even more stock.

It really does come up, either sort of. Very clear north-south divide. Here's another way of looking at it.

This is from the carbon inequality report brought up by the Paris World Inequality Lab. And, this is something that Oh my goodness, what's happening?

I'm so sorry. Some. Yeah, so this this is really talking about the the rich and the poor globally.

Robert than just within countries because remember we have rich people also in China and India and Brazil and South Africa and so on and so forth less but we still have them.

But if you look at the bottom 50% of the global population They have been responsible for 3% of the carbon emissions or they currently are responsible for 3% of the carbon emissions.

However, they will bear 75% of the relative losses. And they have very little capacity to finance.

They have Only 2% capacity to finance who has all the capacity to finance the top 10%. They can they have 76% of the capacity to finance their responsible for almost half of the emissions.

And the relative losses are negligible. Okay, they hardly do anything. The middle is predictably in the middle.

But again, they have been much more responsible for emissions than the bottom half of the global population. Just another expression of the extreme inequality that is expressed also in climate terms today and all reflects what Gavin was talking about in the beginning, the relative power.

But just in terms of climate finance, you know, we're always told about how countries are going to finally end up giving the 100 billion dollars they promised.

I don't know if you all remember, but the rich countries, the had been promising that they would give a hundred 1 billion dollars in climate finance.

Do the rest of the world. And this still hasn't been met. The latest number they're claiming is 86.

1 billion dollars. But in fact, even this is a massive overestimate. Why? Because we don't have a definition of climate finance.

There is actually no globally accepted definition of climate finance. And that's quite ridiculous because you have a cop every year, right?

And in these cops you talk about everything that relates to climate finance, but we still don't get an agreement to define it.

And why can't we get that agreement? Well, look at the kinds of things that are passing for climate finance.

This is a Reuters investigation. It only gives a subsidy for a company to open chocolate stores and gelato stores across Asia.

Now, I don't know, is that adaptation? Maybe you can go put the heat when you get to eat ice cream.

US actually does go still hotel expansion in Haiti. Which is extremely affected by rising sea levels. So to do coastal hotels there is already a bit crazy but they're claiming that these hotels are going to be more, well, you know, impervious to rising sea levels.

Belgium decided that it could actually have a film about a couple in an Argentine rainforest and rainforest, right?

What's not to like? That's very pro-climate and therefore that's part of climate finance.

Japan actually finances a new coal plant, the dirtiest form of fossil fuel. In Bangladesh and says, well, you know, this is going to be a greener version of gold production than the existing version.

It also finances airport expansion in Egypt. So on the grounds, remember, this is another major source of fossil fuel burning and the fact that we're proliferating airports is really a problem in terms of dealing with the mitigation.

So. Basically anything goes. You can use green technology, you can claim you're using green technology, again not clearly defined.

And if it is, then that's climate finance. Even when it comes in the form of very expensive loans.

So that's the other aspect of this 86 billion that was supposed to be getting right now that a lot of it is actually loans more than half of it is loans rather than straightforward grants.

And I think in Don Go has already told you how that can be a problem. I just want to come back to debt a little bit and talk about one aspect of this inequality which both can and don't go mentioned but it's just you know it's so, Kevin and Dongo mentioned, but it's just, you know, it's so stark what happened during So here is

the general government growth debt as a percentage of GDP. During just before during and after the pandemic, okay.

The rich countries have very large volumes of government debt to GDP, above 100%. It goes up massively in the pandemic year to 123%.

Comes down a little bit but still stays well above 100%. The middle income countries have a much more.

Moderate thing. This goes up a little bit, but it's still 66% only in the pandemic year and it goes up slightly after that to 68%.

The low income countries have a really low. That to GDP ratio. Now remember these are the countries in debt stress.

The low income countries half of them are already in debt to stress. Despite having these really low debt to GDP ratios, which barely go up during the pandemic and then stay flat there often.

And what did that mean? It means they're spending less. Let me give you just a quick comparison so you realize what that means.

During the period between January, 2020 and March, 2,021, the United States government spent an additional $30,000 per person.

As stimulus. And the additional $30,000 per person. Okay, that's what they spent.

The low income countries all together as a group. What did they spend? They spent $2 additional per person.

Which means obviously they couldn't do proper health spending, they couldn't do real social protection, they couldn't do anything, they couldn't even do the kind of spending you need to make the economies revive.

And that's very telling. Now why did they do this? Because they're terrified of the capital markets because they have these born markets and their bond prices will collapse and the spreads will rise.

If they do anything that is seen as misbehaving, so they're all terrorized and they all behave themselves.

Does that behavior pay off? Well, look at the right hand side. These are the spreads on sovereign debt over the US Federate.

The advanced economies have a spread of less than 0 point 1%. I'm not joking.

It's a spread of less than 0 point 1%. Basis points and it does not go up through this period.

But the middle and low income countries, the ones that have been so well behaved, look at what's happening to their spreads.

They go up to first 500 basis points, 700 basis points. And it's not because they are being so called bad, right?

It's because risk perceptions mount whenever there are global problems. The risk is pound off onto the poorer countries.

Therefore they automatically end up having to have higher spreads, pay more on the on their loans. So that their debt will go up or their interest burden will go up even when they haven't taken on new debt even when they haven't spent more.

Some of the highly engaging countries, their spreads went up to 1,100 basis points in this period. So these are the kinds of inequalities.

That are worth Bearing in mind in this. In this discussion, which I think has already come out very clearly.

In what Kevin and Don Go have been saying. Now, what? Does this tell us in terms of how you now deal with this problem?

What's the way the world is dealing with it now and how do how we getting climate finance? Are there any schemes?

The big thing, the very fashionable thing that is talked about a lot is debt for nature swaps or dead for climate swaps.

And they sound good, right? What's not to like after all it'll help but nature, it'll help the climate, it'll have the planet.

And it will reduce debt. So developing countries that have various debt issues, they suppose the the creditor countries are supposed to relieve them of some of that debt to reduce some of that debt, take a take a heck that in return for some measure like let's say reforestation or you know carbon capture through other or some other thing that would benefit the climate.

And in return, then they will get this this benefit. It turns out that these are so small, so relevant that they do nothing, the monitoring is worse than useless.

There are many other methods now blended finance, jet peas, etc. None of these are working.

None of these are anywhere near the quantities of money and finance that we need, which Kevin already identified.

The problem is that all of these proposals really involve taking on more debt. And as in Dongo has identified, you know, it's not necessarily a great thing for you to take on more debt.

Because you will be periodically caught in these deck cycles and these crashes and it will be devastating for your people and it will also be bad.

For nature and the planet in your own country. So what do we have to do? Well, first I would argue that basically there are 3 things that the global majority countries can do to cope with what we know is an unequal world order which is not getting suddenly more equal anytime soon.

First of all, we have to create conditions for combining and cooperation from data countries from low income countries on different issues.

Like taxation as well. Why is that? Because you know, unless your system, systemically important.

The creditor community is not going to bother. They will let you fester for years and years and years as Kevin showed you, you know, didn't go on for more than a decade.

If they think you're systemically important, they can do this over a weekend. They can do it overnight as they did with Silicon Valley Bank and Syndicate Valley Bank in the US, they can break all their own rules and they can, you know, stop at nothing to make sure that that's a, as they did with Credit Suisse in Switzerland.

So basically you have to be system systemically important. These countries on their own are not. But together they are above of course, not just in terms of the volume of debt, but in terms of the kinds of resources.

That exist in their own territories. And so the combination is something that can be very important if they actually do get together.

We also need cooperation on taxing. Because, Dongo was identifying the royalty payments and the, and the tax payments and so on.

But essentially, The taxation of multinationals. Because of the crazy global system we have, which is the, you know, created a hundred years ago when there were no multinationals.

This enables a huge amount of tax avoidance by multinationals. Perfectly legal tax avoidance.

You've shipped all your profits to a relatively low tax jurisdiction. You say that, oh, all the intellectual properties held there, everything's held there, so all those profits really belong in Ireland or the Seychelles or Lichtenstein or some all Delaware in the US.

And you know I may be making a lot of sales. In your country or I may be extracting a lot of minerals and other things from your country.

But the profits are all made there. So I don't have to pay much tax here. This can be changed by having a system of unitary taxation where you treat the multinational company as one.

And you say I'm gonna tax you my share of your global profits depending on your sales, employment and production that you have in my country.

It's a very simple idea. It can be done. That's the system they implement in the US because the states all have taxing rights as well.

But of course the rich countries which are pushed by their own multinational companies have tended to walk the down these.

Once again, this can be done if a whole bunch of developing countries get together. And therefore, I think uniting, definitely we need major social movements and political mobilization in the north of right thinking people because this benefits no one except these big companies.

But we also need this combination of data countries and people in better countries. For taxing rights for a better deal on debt.

And broadly, I would say we also have to learn to avoid getting into external debt situations unless it's absolutely necessary unless it's for an exchange that you simply cannot earn any other way.

I would argue that also our direct investment as in Dongo has very graphically shown you. Has to be looked at with many buckets of salt.

In terms of what are the net gains for that economy. And it's only under those conditions that you should get into it because otherwise you're just asking for getting out of one trap.

To walk into another one. Okay, let me stop here. Thank you.

Yeah, thanks very much. And I think that was a really good way to bring together. All 3 talks.

Now, we want to start our QA and I'd love to start with students in the room.

Michael. Can you encourage people to come down and ask a question?

So if you need to ask a question, move today to you and just queue up and then you've come to the.

You can do it.

Yeah, yeah, sure.

Hi, he, Simi, will you hear me? Okay, so my question is about the relevance of the dependency theory in that crisis we're talking about.

And weather industrial upgrading would be the solution and also I understand that when it comes to that there's a huge climate, environmental concern as well.

We've seen like you know manufacturing industry how that is very sort of polluted i'm just wondering like how do we So the problem if dependency theory matters and industrial upgrading matters.

Thank you. Okay.

Maybe we can take a few questions.

Is there anybody online who has a question to ask?

I see you, Hello?

Okay.

Hello, yes. So I wanted to ask, so. How do you think that the increase in inclusion of common people in financial investments is gonna affect future efforts to create a common framework for that restructuring.

Doing that new instruments such as the passive mutual funds are making it cheaper and easier for common people to invest.

How do you think it's gonna affect any further attempts?

Okay, maybe one more question if we have it. Let's see. Anybody posted in the chat?

No, in the room.

On the screen. Okay, while you think of your further questions, why don't we? First address these 2.

And who would like to go first talking about the relevance of dependency theory?

Yeah, you know, I think that was a really smart question. I mean, I think all 3 of us have kind of suggested the dependency theory is very very relevant right even in the current context but then is the solution as very very relevant right even in the current context but then is the solution as you were saying is the solution as you were saying is the solution then to do your own industrialisation.

Well yes, sure, that is a goal. There is no question about it that moving up the value added chain is what development is all about.

It could be through modern industry, it could be through other, you know, high value added activities and so on.

The problem is that these are less and less employment generating. So the old path, the old path where you moved from agriculture to industry to services and you shifted people along with you know production.

That path is no longer quite the same. I believe industrialization is still essential and. Manufacturing is still essential because it has major synergies.

It has, it involves learning, it, you know, it's critical. You can't skip that phase.

I mean, India tried it and look where we ended up. We're in bad shape as a result.

But, it's not enough. For employment generation and especially if you have dualistic economies with large numbers of people in very low value added activities.

You can't hope to do that through industrialization. You have to do other things. And I believe that all that you have to have a strategy that at one level, yes, emphasizes upgrading and also Emphasizes getting the fair value for whatever you are exporting because remember many critical minerals.

The past critical minerals as well as the new ones and now. The most current arena for grabbing right and so you have to make sure that you're getting the best possible deal out of those.

Indonesia with nickel is a kind of interesting example where they demanded that it would have to be processed within the country.

And that they banned the export of raw nickel and so on. But in addition, you have to invest in the care and creative industries.

Because it gives you a better quality of life, but also because it generates employment. And it these are not activities that will be these are not activities that are so badly affected by new technologies that they don't generate employment they will always require people.

And that's, I think, therefore it requires a new development strategy, not the one that we've been used to talking about the whole of the twentieth century.

And I think that. What? That means is that to avoid dependency, you have to avoid listening to both the international financial institutions and the Babos crowd, etc, who are asking you to follow that earlier route.

Because that route isn't available anymore. I mean let's face it China has kind of more or less been there done that and cornered that market.

So you have to think of ways of doing this. Which are feasible. In relatively small countries or in regions.

That will involve upgrading but also involve employment generation. Okay, on the issue of people being invested in pension funds, yeah, it's a critical one.

I don't know. Kevin, you might have a better. Way of addressing that.

Just before Kevin, in Gongo, would you like to come? On this question.

Yeah, I agree with all work, Jatty said. I would just add maybe a provocative note in the sense that Well, could we have green, for the whole world?

I'm not sure. I think that if you want to go to a green world, we need you know a kind of a I know the concept is polymical etc. but there should be some ways that the Global Knows will reduce.

It's a consumption of, you know, of material, I think. If you want to go towards a farewell.

Because the i mean ways of life i mean it's not about individuals the households But the way the, productive systems, you know, are designed.

Too intensive in terms of resource use and obviously if that pattern of production was to continue I mean, well, maybe, how, the life expectancy of the planet.

While will be very short. So that means that we need other kind of I mean global systematic change in the way production is organized and this is beyond, a, in some different places.

Kevin. Thank you, James. Well, look, the thing with both, great questions and, actually, it's tough to do justice to both of them.

On the first point Look, I, I think we need to rethink dependency theory. But I think it remains profoundly relevant.

And if you think of the green transition, the global green transition. You know, what's the basic story that's going on at the moment?

And the basic story that's going on. Is the international climate finance. Is increasingly concentrated in rich countries and China to to some degree.

Yeah, this is where the new solar industries are emerging, the new hydrogen industries. You know, the big, turbine developments and so on.

And where are the resources coming? That those industries rely on. The cobalt principally from Africa.

The lithium principally from the Andean. Countries. Nicola as Giotti has already mentioned from from in Indonesia.

So, though, you know, I think there is a danger that we drive a green transition in rich countries.

By extracting and transferring value from poor countries and not building the industries. That could could be. Developed.

And personally I I don't think this is a de-growth story. I mean, we, it's, it's a longer.

Debate. I think it depends on what we mean by growth. You know, if we measure growth by conventional GDP.

Indicators. Yes, we need lessons. Of that. But what we don't need less of is some of the advantages that can come with improved productivity.

That I thought the question on mutual funds was really fantastic. You know, because I, if I could just set a personal anecdote.

I remember actually this was around the time I first met James and neither of us had white hair at the time.

But I, you know, I remember trying to get on top. Of the that issue. Just so that I could understand it well.

And, you know, distinct remember going to Washington and sitting in an office in the IMF.

And having it explained to me by somebody called Anthony Boot who was the IMF head of debt at the time.

You know, just how the thing worked. And he sat there with a straight face and he said to me well you know basically happen what happens is we give countries money and the World Bank.

Then transfers the resources through Ida. So that they can repay us. And. You know, and like the entire setup.

With so crazy and dehumanized. The one you ask basic questions like you know, but how comes this transfers more money out of the country?

Then it's able to spend immunising its children. Or educating people. Or building an infrastructure.

Self-reliant growth and they would look at you blankly as though you just dropped in from planet miles and didn't understand the complexity of financial engineering.

No, I think what the question arouse. Both to the heart of this, right? Because these guys who are buying the bombs, the Lazards, You Goldman Sachs.

A black rock especially They're using our pension for or they're using people's pension funds.

This is your money. You know, it's the majority's money. And I think in the same way.

That in the earlier campaign we were able to turn debt. Into a human issue. Yeah, that wasn't just about the debt to GDP ratios and that sort of stuff.

It was a human issue. We need to turn this that story. Into a climate issue. In a way that I don't think we've managed to do.

At the moment. So I think there's a huge opportunity there, you know, it's a longer discussion.

I know, but there there are big opportunities. You know, in the worst cases, in the in the late 1980 s and going into the ninetys that the debt burden was so crippling on states that that some would argue that it contributed very much to the breakdown, the collapse of states.

And and the violence that That was seen and and don't go perhaps you might want to comment on whether or not you see the possibilities of that recurring.

As as the stress grows deeper and more extensive. Not to mention the stress that's added. On states because of climate change.

With drought displayment of people. It's better. Do we have questions in the in the room before anybody tries to answer me?

Yes, you have 3 people waiting to ask questions.

I. Very good. So please ask your questions.

Hi.

Hi, James. I want to provoke a bit because. When we talk about debt forgiveness, We seem to forget some sometimes that actually under hip, there was a huge forgiveness.

It was not only rescheduling in my view. And somehow this does not Change Boeing behavior plus forgiveness, right?

So there's a huge incentive problem as well that the you will lead campaign for example did not address and The question I was.

How do we actually see how can we spur changes in incentive behavior? And I'm not only talking about unaccountable government, but this also includes the donor and in itself, where, where actually you feel like that the whole industry in itself is benefiting from the structure how it is.

Now, I'm not saying the people on the ground. And so related to this, the argument Kevin made about we need to change the The the idea from human to climate now I don't I don't know it was human under UBLA and it didn't change anything so I don't know if climate going to change.

Something unless we're gonna We address the whole you know, maybe don't a development lending system in itself.

Henry, thank you. Good question. Next question from the room, please.

Hello, I have 2 questions. So the first one is that we already discussed a lot about the debt and the need to that relief.

However, a lot of discussions are now going into the whole idea of carbon taxation that will impact primarily developing countries and their products.

So while that relief is one side of the story, you're gonna also tax a lot of those products that kind of result in much more impact on the developing countries.

Very good. Yeah, go ahead.

So what's your take on that? And the second, second thing. Which is I think and one of the graphs that and Dango has mentioned is that how like during that time's gross would go but then like later on growth was better.

So while only taking the bad side of that, did that in any point result in better growth opportunities for developing countries.

Another question.

Very good. Yes. One more in this round.

Yeah. Yeah, that would be to come back, on, what and don't talk about, regarding like the outflows of, of value towards like foreign private investors.

So, my question was, does the, so the national physical and technical control over export that you recommend for Africa being able to retain.

The value, it extract from its resources. Does that mean a nationalization of export industries because for example in the case of Cooper in Zambia is nationalization the main option to stop these massive value outflows towards foreign private investors because right after the independence we've seen attends of nationalizing those export sectors and most of them especially for example peanut industry in Senegal or, cobalt industry

in DRC. Most of those attempts failed to sustain growth. So that was my question.

Yeah, thank you. So. Who would like to go first?

Okay, thank you for this all these questions. Well, for me, the, the current depth crisis is different.

From let's say the one that started after the end of 90 70 is why because in the case of Africa as was humaned by someone from the from the public.

Most of these countries they was they were granted that for forgiveness and in the case of Zambia we saw that this is was this was really significant.

Not only that, they had also a supper commodity cycle. That means that it was favorable for them.

They should have accumulated for an exchange. And not only that they also issued your bones, etc.

Heavy amounts of depth in foreign currency. But in a matter of years, Some of them went into depth distress.

This is not a scenario of the 90 seventys, not at all. So what happened? What happened is that during the commodity boom, They did not accumulate for an exchange.

Partly to to plug the holes if I could say like this. They issued your bones, but your bones at very high interest rates.

You see, but the depth in itself is not bad. But if he is the debt was not invested, into activities, into projects that could have generated the foreign exchange that mean the US dollars.

For example, in many countries, including mine, however, governments they issue eurobones. But these, they use it to pay pass to your bonds, you know, service.

And they also use it to finance PPP project, public private partnership project in infrastructure. The thing is this project might be highly profitable in domestic currency but they do not generate the US dollars.

So that means that, to service the depth, the firm depth associated with this project, you have to rely on your traditional sources of foreign income.

If you have a shock on your traditional sources of income, you are in depth distress. That's how you could explain what happened in many countries in Africa.

That they have very favorable conditions. But the first shock coming, they were not resent because they did not commit in a for an exchange and the depth they took was not invested in project that would have generated the US dollars.

That's why it's different from what happened, at the end of the, 1970.

So for me, the referring depth is not bad at all. And as Gary said, most of the rich countries, they are heavily indicted but in their own foreign currency.

And they have very low interest rates and sometimes Their depth is held by their own central bank. That's the case of Japan.

That's the case of Sweden. Something like 40% of all the Frank that is controlled by the central bank.

It is micro sovereignty. But when you have that in find currency, this is dangerous.

So you have to make sure that this depth could service itself in the sense that it could be invested into activities that will generate not domestic currency but had currency.

Otherwise you expose yourself, you know, to to depth distress. And that has been the pattern in most African countries.

Good.

So nationalization, why not? The thing is for example in Libya, I like this example because Libya is an oil producing country like Angola and others.

Libya I have no doubt at all because Libya, accumulated in our foreign exchange.

And how we, how to see, whatever we might think of him, he, used to convert his US dollar assets into gold because he, one, he's, you know, he's, used to convert his US dollar assets into gold because he did one, he's, you know, he's, for, in exchange to be says, US, US dollar for instance to be safe or converted

into gold but you have angular I'm, you know, is Yeah, have been going through many difficult problems and most of its depth is, you know, is held by China, etc.

You see, so that means that if these countries use well, their resources. For me, nationalization does not necessarily mean Appropriation, but that means that even having technical control in French, speaking countries, for example, in Central Africa, like Gabon, like Congo, Konga Republic.

You know the French oil company It's a public company declared the volume decay at the quality, declare the prices etc.

And with no, no control whatsoever. From the national government because they don't have the capacity. And there were a huge, you know, oil fast.

Okay, organized by these companies. So if you have a better control on that technical control and also under the Fiscal side, you could also control on that.

This will increase your capacity to finance your imports that you need for your own development and this will lessen the need to issue that.

In fact, that's that's my point. But I'm not saying that the friend depth is bad if you could use it to invest in project that we generate US dollars.

I suppose we also have to consider the international system that forces countries to issue debt in foreign currency rather than their own currency on the one hand and also about international.

But. But you, but you see.

Banking system. Which is getting no returns when after the financial crisis from from sovereign debt in the rich countries being perfectly willing.

To, you know, to, to lend helter skelter. Just sub-Saharan African countries.

So, I mean, I'm, I'm not opposing what you're saying about responsibility for a developmental action on the part of developing country.

Governments, but nevertheless, you know, we should consider that.

I agree but the thing is the difference sometimes between that in domestic currency and foreign currency. Is not that relevant.

For example, if you have, you know, you have liberalized capital controls. And you allow investors to buy that you know government bombs it's just an investment that means that at 1 point you'll have to have the foreign exchange to allow you know the capital to exit recently I was discussing with a central banker in Ghana they told me well if you have 1 $1 that is investing in

your economy to buy the government bonds you have at least to provision for $2. And that's what they have been doing.

So it's not necessarily a good deal.

Yeah.

Yeah, I completely agree with what Nongo just said, you know, I mean, I think part of the whole problem is that is that you look at what the IFI responses are.

If whatever death relief is provided is only to get into more debt. Without any kind of perception of what is the final game plan.

At the same time, this is an international architecture that doesn't allow basic taxation. So developing countries are losing 200 billion 7,370 billion dollars a year through all of this illicit financial flows.

Which are enabled by the system. And by institutions in the rich countries. So, you know, if the question asked about dependency theory, right?

I mean, this is what what mode you want in terms of evidence of that kind of dependency. But you know, I have to say I'm so impressed at the quality of these questions.

They're so thoughtful. I think it was Henry, right? Who said, look, that relief doesn't eliminate the problem.

Yeah, it doesn't eliminate the problem. But on the other hand, not doing it is a massive, I mean, it actually condemns that it doesn't get rid of you because you could be back in a debt cycle but not doing it means really condemning to as Kevin was saying several decades of loss which involves human tragedies on a fairly significant scale because we're talking about relatively poor countries.

So what do you have to do? You have to do a debt relief that is real and then not immediately use that say to say oh now you can go back and enter capital markets.

As if that's the way to proceed. You know, I mean, Argentina has a classic example when it had managed to, somehow address all that huge problem and get significant write-offs.

It was there was one holdout creditor who prevented it from accessing the capital markets. That is a period in Argentina did really well.

It actually had low unemployment, fairly rapid growth. It was operating on its current account receipts. And it did rather well and it had much greater autonomy and a policy space.

Then you get Marquis coming in who does a deal with that predator and then once again gets into huge debt and they're back into the rabbit hole so it's you know I mean there is this pattern that the IMF, etc, don't seem to see is what they are encouraging.

Oh, they probably see it, but they don't want to do it. There was a wonderful question on the carbon tax.

I have to say I fight with so many people who are green progressives or whatever. The carbon tax sucks.

It's a protectionist device that does nothing for actually making a genuine just green transition possible. It's really a way of ensuring that the rich countries capture the technologies.

For green production even as they continue to exploit the developing countries for the elements that would go into those technologies.

Nationalization is not a solution. Yeah, this is, you know, this goes this takes me back to Kenneth Calendar.

You remember famously he said, Kevin, you will remember that the only thing worse than being exploited by a multinational is not being exploited by a multinational.

And that and that has to do with the fact that global markets are stacked against you. Or let me put it this way, they used to be stacked against you.

I think the nice thing about this century is actually that all this is changing. That there are so many the the fragmentation that so worries the IMF, the geopolitical, the solution, creates many different opportunities.

I mean, look at the way Russia has managed to evade the Western sanctions. It's, you know, basically the very strict order that was imposed by the core capitalist countries.

That's no longer valid. So it's no longer the case that if you nationalize you will be punished in external markets because there are many different kinds of markets now.

And there you go. Well, look, just to repeat what I'm Diet and and Dongo said, these are Really such good questions and.

Hmm.

You know, it's a really big thank you to all the students for raising them. And I think it's great actually that Thomas started by asking a tough.

Question because you know to a lot of people it's not self-evident. That that relief is a good idea.

And you know, you often hear in dialogue. The people will say, well, you know, It's it's only 2,006 that we had HIPPIC.

You know, where we wrote off a hundred 10 billion. Dollars worth of debt. And here we are again.

And so, you know, don't tell us that relief is a solution to the problem. And that's an argument.

You very commonly here. And my response to it. Would be this, which is First of all, the hippoc.

Maybe a huge difference. I mean, if you look at the levels of investment. That went into health and education.

After hippoc. You know it was a really fundamental change. I mean just to give you one example.

You can, when it got hippy, like literally the month they got hippoc. It abolished user fees in education.

It used the savings from HIPPY. To abolish charges for primary education. So you know I mean that relief on its own is clearly not a sufficient condition to get on a on the right development trajectory.

But I would say Unsustainable debt is a condition that will prevent that trajectory. From happening on what happened after HIPPIC.

You know, I broadly agree with Andongo. So, you know, essentially what governments were doing, we're taking on hard currency liabilities.

But let you know, let's speak bluntly in many cases a completely crazy interest rates. 8%, 9% for Senegal and other countries.

And there was a huge risk that if, you know, if the super cycle tanked as it was going to at some point.

It was going to lead to another death crisis and that's what's happened. But you know, why did governments go to Europe on markets?

And the answer that to that is partly because there wasn't sufficient financing. On the right terms in the multilateral system.

To make those investments. Affordable. So, you know, we had a dysfunctional multinational development bank system, which is being addressed to some degree now.

Which contributed, I would say, to the, to the, the, to the deck. Crisis.

So you I think you know you really can't you really can't separate these things out. And Carbon tax, take, you know, I, see, is already, may refer to the carbon taxation issue, so I'm, I'm not going to cover that.

That I will make one final point. Take a country like Ghana. Which as a condition for getting any sort of support from the IMF in this recent program.

Was required to restructure. Domestic day. It's still sitting on this huge Europe on debt. So the IMF is now pumping money into Ghana.

Where does anybody think that money is going? Right. I mean, do you think this is going into, you know, a potentially viable solar?

Industry in Ghana. No. That money is coming straight back out of Ghana. Into Black Rock and the other actors that I mentioned.

So effectively you've got international public finance. Which is transferring resources to private money. Markets and you know this is a classic story of capitalism right Like these guys love to talk about virtues of the free market.

Until it comes to their own self interest. When they want to socialize the risk of the free market.

And that's precisely what's happening right now.

Yes, we have 2.

Thank you, Kevin. Do we have more questions from the room? Yeah, okay, just before I turn to you, Michael.

3.

Hold on. We have one question from Pepa Patel. Which I think is and we haven't 2 questions in the chat.

One is. What is China's role in the energy transition in Africa and could this be a solution?

Perhaps thinking about Canada's own role. In lending to Africa. And then we have a second question from Naima Kane.

Do you want to read out your question.

Sure, I'd be happy to. So my question was, what are your thoughts on the emerging concept of sustainable or green industrialization, sort of piggybacking off of the last question on industrialization as sort of a way to leapfrog.

It sort of proposes a new development model where you promote reconciling industrial goals with domestic job creation, through targeting green sectors that can innovate local decarbonization methods and environmental resilience opportunities in developing countries.

Good question, something I'm going to be lecturing on in a few weeks. From the room, please.

Okay.

Hi. So you kind of touched upon this, Kevin, in your answers, but in your presentation you said we needed to name and identify the big actors such as JP Morgan or Black Rock and so on who buy sovereign bonds or Glencore and I was wondering how can we incentivize them to change their actions and behaviors.

So, I mean, Jayette, you kind of relatedly talked about a unitary taxation system, but I was wondering if you could go more into this unitary taxation system, but I was wondering if you could go more into this and ultimately I'm just wondering if you could go more into this and ultimately I'm just wondering what role could these huge financial actors who we tend to demonize in development studies play in a

newly structured debt system. Thank you.

Thank you very much. Can we have the other questions from the room just so that students have a chance to ask them and then the speakers can answer which ones they would like.

How's that?

Hello, thank you so much. This discussion. I just wanted to ask like what role could a potential lessened damage fund play and, how we can sort of galvanize support for climate reparations more broadly.

Thank you. Okay, so we have one more question. And I also have a question. So if you let me ask it.

Very good. Okay. Yes, okay, 2 more from the room. Go ahead.

Hello, thank you very much. I have 2 questions but before I would like to break a spear as we say in Spanish.

He, he big, the quality of the policies didn't really improve after it. So I think it was a very good contribution to point it out and to understand that that belief is not sufficient although it might be very much needed.

Have 2 question. One is about non-resorts rich countries. What about them in the story?

And second, and it's been asked and and kind of answered, but what about industrial policy and green industries and the role that China plays in all of that.

Particularly through channeling FDI. Thank you.

Thank you, Pablo. And Michael.

Okay, so, my question is, I mean, picks up on some of the points that were made by Jati and Kevin.

I think towards your conclusions you you made this very strong proposition of developing countries coming together and mobilizing around and advocating for restructuring of the dead system.

But on the other hand, I think Kevin did mention that, you know, for instance, Rutos submission during the Paris I think parry climate summit in a sense triggered a kind of, you know, this reaction from the credit rating organizations in a sense of pushing their basis points up So the question is, I mean, if this organizations have this enormous holding power to really discipline developing countries.

In terms of, you know, mobilizing collectively to, you know, to advocate for structuring of, of the debt system.

I mean, how possible then is there, I mean, what capacity do they really have to come together?

In in the face of this you know the capacity to actually get punished if this for example Make propositions that run counter to a system which has been established obviously too.

Sustained as we have established here. You know a structure that Pacilitates continuous extraction of value from developing countries.

Very good. Thank you. Whether challenging's had a question, start turning to my speakers. Don't go, would you like to go first?

Okay, I think yeah, these are really challenging questions. I might talk about the question regarding industrial policy, financial policy.

About the role of China I'm not sure because I have not done any investigation yet on it.

But, the recent trends had been that China has been lending less to African countries due to the depth distress and I think this is also normal behavior given that they have been over exposed to companies or governments that might be that my like solvency the push towards green industrial policies.

Have come forward with the conflict opposing Russia and Ukraine. Germany has tried to say that well I would like to dealing from Russian facial fools and we need to have access to green energy.

The type of green energy they elected is what they call green idol chain. That means hydrogen being produced using renewable, renewable sources of energy.

And I have been following that with Daniel A and there is a country in Africa, Namibia.

Which offers the most they are condition. For the production of green energy. What is, interesting, economically speaking is not the green energy in itself, but they've products like ammonia that could be shipped to Europe, etc.

But the thing is This type of green and sale policy coming from Germany, etc. And being somehow cooperating, which is former colony Namibia.

It's a new form of colonialism. The sense that it happens within a framework. Of monetary dominance.

That means that the state should ties its hands It could span only for the benefit of foreign capital, private foreign capital.

And that means that this countries will go into foreign depth. For example, they created an investment vehicle and Namibia one, but for the government to participate they have to take huge depth.

But everything will be controlled by the German companies and the German government in the sense that the investment choice is everything.

And then maybe I will only be a kind of a producer of a, green commodity.

But everything will be controlled. Bye, bye, bye, by the German companies. And at the center, you have more depth.

And you are under the framework of a fiscal conservative monetary dominance. That's what we call, Derris King, developmentism, because supper officially it's about industrial policy, it's about development for you know creating green industries etcetera but the countries will end up just being green exporters of green commodities.

And they will be also a critical allocative choices that remind us of colonialism in the sense that they will allocate huge amount of land.

Huge amounts of water. Just to, you know, create, you know, a green idol again.

While the energy could have used for their own domestic purpose, then land could have used for example, the energy could have used for their own domestic purpose, the land could have used for example for their own agricultural production, etc.

So this is the type of emerging pattern you could see in Namibia. You could also see in Morocco and in North Africa.

Some of ourcomers they talk about energy colonialism and that has been what we have been seeing.

So from the perspective of countries like Germany, it's green and cell policy, but from the perspective of a global South, it's green colonialism.

But, it's up to countries of a Glasgow to try to organize differently in a way that they could, I mean, have in the cell policies that would be beneficial to them.

And that will not involve. Land grabs or water grabs, etc.

Kevin. Thank you, you know, I've actually decided to sign up for this, master's course because, the students are asking such super interesting questions.

Look, I'm gonna to see rapid fire on a couple of points, James. So first of all, on the proposition that policies didn't improve.

After hippoc. I just think this is wrong. You know, look, I mean, if you look at the history of World Bank structural adjustment policies in Africa.

From the early 80 s through the period up to hippoc. They were a disaster. They were a disaster for growth.

They were a disaster for human development. They were driven by whatever neoliberal fads. We're doing the rounds at the time.

You know, 1 min it was to set up green marketing boards. Next minute it was a liberalized grain marketing boards.

1 min it was to promote. Industries. Next minute it was to open capital accounts and liberalize. And you know, I, so I think it's not right to say the policy environment was better and actually even if you look at IMF regional reports on Africa.

They systematically argue that fiscal policy improved dramatically. After HIPAA. I mean, we've now had this new that crisis which has created new stresses.

And strains. But, you know, I don't think that proposition is right. Second point on leapfrogging.

So actually the World Bank Did, J, you might remember this. One of their world development reports on technology.

Where the bank presented is what they thought was a novel idea. Of the idea of leap problem, the poor countries could embrace the technologies of wealthy act.

Countries implant them and they were going to take off. And actually it wasn't an original idea at all.

Because Trotsky actually set out precisely the same argument. In a book called 19. 5.

Where he explained that Russia was attempting to import. French and German technologies. And implant them in a feudal infrastructure and it was doomed.

To failure. Now, there's limits to that. Another. But I think the the simple idea of leapfrogging If you divorce it from the political economy of how do you absorb and adapt and innovate the technologies that are being adopted which does require a green industrial policy.

I think as an non starter. On the subject of green industrialization There's an organization called the Global Energy Alliance for People and Planet.

Which is doing really interesting work. On the adaptation. Battery technologies and solar technologies. Grid level, solar technologies to low-income.

Countries and I think this is the sort of approach which If it's embedded in national industrial policy.

Has the the potential to to you know to generate results. And the final point. I think it was Michael that raised this point.

So look, the the role of these credit agencies really needs to be looked at. When the DSSI was was set up.

Fitch, which is the I think the second biggest credit rating agency. Put out a statement saying any country The asks for DSSI treatment.

Can anticipate automatically. Being put on a triple C rating. Like this is just by virtue of asking for a temporary suspension.

Okay. Now, you know, if that's the ethos of the credit rating system. It does close off policy options and in Africa.

The the final point I want to make And I mean, this is maybe a controversial note to end on.

Default. Is not always such a bad idea. Like, you know, you get this constant argument, you default the money markets are going to punish you.

Well, if the money markets are going to are offering you 10% interest. On bonds. Why why not default?

I mean, Argentina has defaulted 9 times since 2,000. It doesn't stop. One holders going back.

To Argentina. So, you know, I would encourage African governments whether individually or collectively. To seriously consider default.

As a viable part of of a debt reduction strategy. How you, Kevin, I like your radical note for me.

Jayat, you get to have the last word here.

Oh my goodness, you know, I agree with so much of everything that has been said and yay, default.

No, I mean, I say, I think, Kevin is absolutely right. You look at the countries that have defaulted many of them have actually done much better in the period when they were excluded from capital.

This whole notion that the capital market is what you have to have in order to develop, industrialize, etc, etc, is very flawed and the trouble is that, you know, it's one of those emperor has no clothes situations.

That there's the too many powerful people who need to keep repeating that that is the only way to do it.

And so yeah, I just wanted, I mean, everything has been said really, fabulous questions and you guys have given fabulous answers so that that's all very convenient.

I want to pick up on the loss and damage fund. You know, all these global funds, let's face it, I mean, everyone's response to anything is to say let's have a global fund.

Global funds work when there is a modicum of trust and legitimacy in the global system.

And let's not pretend that they is because there isn't. I mean, I've spent a lot 3 years you know beating my head against the wall about effective multilateralism there was a UN board that I was on we were supposed to give ideas for making it effective and so on.

It's the current geopolitics is frankly not susceptible to. That kind of a fund.

Because let's face it G 7 and the rich countries in general have exposed themselves so badly during the COVID.

19 pandemic during the Ukraine war and now in Gaza. That there is very little. Faith and trust in the rest of the world.

In anything that they would suggest. It is so evident that they are operating not just entirely on their in their own interest but often in a very racist kind of expression of their own interest that very few of the global majority countries, even the ones who cozy up to them and have big handshakes, and so on like my own dear leader.

Etc. Very few of them actually trust them. And without that you cannot really have a global fund who's going to administer it who's going to decide how much who gets what so and finally none of them gets any money really.

Look, we've had the poverty and growth reduction trust. We've had the risk. What was it?

Something in sustainability RSD. The one that was set up after the SDS, you know, to use the SDS for green transition, resilience and sustainability trust.

Yes.

We have the global fund for AIDS. None of them gets any money. I mean the rich countries got 420 billion dollars of SDS.

They gave 26 billion for the RST. So, so you know, I don't think, I mean, yes, it's good.

The idea of the loss and damage fund is very good. I don't think it's going to really be large enough to make any impact and the governance of it is always grabbed by the IFIs, right?

The World Bank is controlling the loss and damage. And we all know where that's going to go.

It's going to do public private partnerships and blended finance with this money. So I think.

We have to think of other roots. I mean, you know, these are these are the solutions that were possible and maybe even sensible at the time when the world was slightly different.

A global political economy was a bit different. Now if you need something like this, I would say just go with IMFSGS that instead of having a big issue and that everybody gets according to their quota, you have selective issues and there are clear criteria.

You've had a climate shock, you've had a terms of trade shock, you've had an interest rate shock.

Or you are under threat of one of these shocks. You get some SDS.

And nobody sitting there asking you what are you going to do with it and how much interest are you going to pay and all of that kind of thing.

It just comes and you deal with it. So let's say Pakistan has a flat, it loses 30 billion dollars worth in the in the flood.

Which we know it did. At least 10 billion in SDRs it should get instead of which it has been for 3 years begging pleading and working with the IMF to get 2.5 billion dollars in return for which it has to impose electricity tariffs on the poorest people in Pakistan.

So I think, you know, we have to think of different ways now of dealing with these problems instead of relying on the things that everybody immediately thinks to.

The UN system loves funds, right? They're always, okay, now there's a social protection fund.

There is something else fund. And you've got a problem, create a fund. And then if you just lie there, there will be a whole bureaucracy associated with it. And that's it.

It doesn't go anywhere. So we have to be much more creative in terms of the solutions we suggest now.

I think. A final point on green industry and China's role. You know, I don't think we should forget that it is entirely due to China's very, very proactive.

Subsidizing of renewable energy that it is now competitive with the fossil fuels.

I mean, globally the world has benefited from China doing that. And I think we can continue to benefit apparently now that developing batteries that don't even need lithium and based on thaline water or something.

Great I say. Go ahead and do it and everybody if these technologies are developed, I think, you know, why should Africa have to?

Go through all of that pain. I today there's a news article. I forget which country has banned the import of any cars that are not electric.

Great. I mean, we can actually think of a development pattern that doesn't have to go through that same stages of extremely polluting congesting and you know carbon emitting.

Strategies, but we can't be forced into it through these carbon taxes. It has to come through the possibility.

I mean, look, decentralized renewable energy is the best option for Africa. And it did now affordable.

But somebody has to go up there and make those investments. Because it's a lot of upfront investment required.

After that there is it really pays for itself. At the moment everybody is relying on the international financial system to do it and they won't.

Because, you know, that's not the kind of thing that private finance does. So this is the clear case for public finance.

This is the clear case for a regional development bank to just say what the hell we're going to go out there and do solar.

You know energy for everywhere that we can find in Africa. So I think solutions are possible. I think it's not, you know, impossible.

I think technology is changing very rapidly. Every country is seduced by green hydrogen. That's only relevant for very large-scale capital intensive production.

There's no reason why every country in the world has to produce green hydrogen. So let's think of the ways in which technology has evolved that will actually provide options.

For many, many different countries. And I do think that really, ultimately because of China's role, a lot of those relative prices are changing in ways that create a lot of potential.

Thank you. Thank you to all our speakers in Dongo, Jayati, Kevin. I think it is a very strong message that Solutions are going to happen in politics and in the political realm.

In order to to push something some change. Private sector alone won't do it. It would be nice if this understanding of development could inform the international environment.

Movements. More deeply. But as always, I want to thank you very much for joining and staying up so late, Thanks, everybody online and in the room.