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Towards a Lasting Solution to Sovereign

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Towards a Lasting Solution to Sovereign Editors Note EVEN as US stock markets continue to exhibit resorting to depreciating their currencies to boost their considerable exuberance, with some registering record exports. This appears to have triggered off a currency highs, there is legitimate cause for concern about the war, a dangerous development which contributed to the health of the global economy. Great Depression of the 1930s. While the US economy appears to have shrugged There have also been a number of other worrisome off the worst effects of the 2007-08 Great Recession, developments which clearly reveal that the lessons of the truth is that its growth prospects are now handicapped the 2007-08 financial crisis have not been fully learnt. by a strong dollar. More critically, as US Federal Reserve One of these is the phenomenal growth of debt, a chief Janet Yellen noted in her recent testimony to the development which increases the risk of global financial US Senate, Foreign economic developments could instability. According to a recent McKinsey Global pose risks to the outlook for US economic growth. Her Institute report, since 2007, global debt has grown by primary concern here was presumably the economic $57 trillion, and no major economy has since decreased uncertainty gripping the eurozone. its debt-to-GDP ratio. Developing economies account Much of this uncertainty has centred on fears of a for roughly half of the growth in debt. Greek exit from the eurozone. Although Greece has Surprisingly, Chinas debts have grown managed to secure a four-month financial reprieve with exponentially so that today its total debt in relation to its its bailout plan, this has not eased concerns about a population is larger than that of the US. The same report subsequent unravelling of the eurozone. That bailout plan reveals that, fuelled by an overheated real estate market was only approved subject to strong reservations by two and an unregulated shadow banking system, Chinas total of the three institutions (the IMF and the European debt has quadrupled, rising from $7 trillion in 2007 to Central Bank) whose imprimatur, along with that of the $28 trillion by mid-2014. Much of the local government European Union, is essential for a deal. debt, says the report, is likely unsustainable. Quite aside from the Greek crisis, the fact is that While China may well have the capacity to manage the eurozone has never fully recovered from its debt crisis any potential crisis, the same cannot be said of the other which grew out of the 2007-08 Great Recession developing countries. For this reason, the rising volume originating from the US. The austerity regime which it of private debt both corporate and household in a adopted as a panacea has only prolonged the crisis, which number of Asian countries is particularly disturbing. has now morphed into a deflationary slide. In the absence Bank credit appears to be a key component in this of a change of economic policies, such deflationary splurge, which raises the spectre of a financial crisis if tendencies will be as much a threat to the global economy there is a surge of defaults by borrowers. This is a real as any crisis associated with Greece. possibility as much of the cheap credit available in Japan has been grappling, largely unsuccessfully, emerging markets is the result of transnational financial with the problem of deflation for the past 20 years. What flows. makes such a threat a global one is that the Chinese The policy of quantitative easing adopted by the economy is now facing similar risks. A recent article in US to stimulate its economy saturated the US financial the Chinese central banks official newspaper, Finance markets with cheap monies. In their quest for higher News, has warned that deflationary risks are higher than returns, US financiers have made these monies available many thought. overseas on attractive terms in the form of short-term The collapse in the price of oil has been hailed as a loans. While the US Federal Reserve has already tapered major boost to the world economy. However, while it its quantitative easing programme without market certainly will provide a fillip to economic growth by turbulence, a credit crunch can still result if there is a releasing more money for spending in oil-importing sudden reversal of financial flows when the Fed begins countries, any such stimulus to global demand will be to raise domestic interest rates and US creditors pull back counteracted by depressed consumption by the big their loans at short notice. spenders in oil-producing countries. Moreover, the Clearly, the prospects for the global economy are plunge in oil prices may not be an unmixed blessing for not as rosy or as sanguine as many commentators portray countries experiencing deflation, as it may well amplify it. such tendencies. Our cover story for this issue spotlights these Likewise, the drop in the prices of commodities potential threats facing the global economy. A number other than oil will, apart from bringing economic distress of articles highlight the deflationary impulses in the global to many developing countries, contribute to further economy, the falling commodity prices and the depressing global demand. vulnerability of the global financial system. Included also The situation is made worse by the fact that the are a couple of articles on the eurozone crisis which has Chinese economy has been slowing down in recent years been contributing to the general economic uncertainty. and cannot provide the ballast for counteracting deflationary tendencies, still less drive the world economy. Perhaps it is symptomatic of the economic The Editors stagnation that is setting in that countries are now Visit the Third World Network website at: www.twn.my THIRD WORLD RESURGENCE No 293/294 Third World RESURGENCE www.twn.my No 293/294 Jan/Feb 15 ISSN 0128-357X 33 Global FDI flows fell by 8% last year Kanaga Raja 36 Wall Street reform aims to bring back the wild old days Danny Schechter 38 It pays to be a banker Pete Dolack WORLD AFFAIRS 40 The golden age of black ops Nick Turse 45 Local versus global in the fight against Boko Haram Liesl Louw-Vaudran 47 The tragedy of Borno State Michael Baca 49 The dark side of Cambodias The uncertain outlook for the eurozone (picture shows people lining development Tom up outside a job centre in Athens) is just one of the many challenges Fawthrop confronting the world economy. 12 52 Martelly steadfast in his denial of Haitian democracy ECOLOGY 16 South increasingly vulner- Kevin Edmonds able in unstable global 54 Five years after Citizens 2 More than half of Africas financial system Yilmaz United, democracy is for arable land too damaged for Akyuz sale Brendan Fischer food production Busani 18 Bracing for another storm in Bafana HUMAN RIGHTS emerging markets Kevin ECONOMICS Gallagher 56 US may soon stand alone 20 Asias craving for debt CP opposing childrens treaty 4 Rising inequality a major Chandrasekhar Thalif Deen global challenge Mah-Hui 22 The ECB has shaken the Lim eurozones utopian founda- WOMEN 8 The corporate takeover of tions Ann Pettifor Ukrainian agriculture 58 Myanmar: Brides for bach- Frederic Mousseau 24 End of the euro is nigh 10 Towards a lasting solution to without radical EU-wide elors Brennan O Connor sovereign debt problems reforms Chris Rogers 26 Grexit and yuan devalua- VIEWPOINT COVER tion could put significant 60 Waiting for Chilcot Jeremy pressure on Asian currency Seabrook The global economy: Turbulence pegs Will Hickey ahead? 62 No, were not all Charlie 28 Falling commodity prices a Hebdo, nor should we be 12 Uncertain times ahead for bane for developing coun- Ben Hayes the global economy Jayati tries Chee Yoke Heong Ghosh 30 The economic consequences POETRY 14 Currency wars on the hori- of global oil deflation Jack zon Ram Garikipati Rasmus 64 Evening Mohan Singh THIRD WORLD RESURGENCE is pub- THIRD WORLD RESURGENCE is pub- Publisher and Chief Editor: S.M. lished by the Third World Network, an in- lished monthly by Third World Network, 131 Mohamed Idris; Managing Editor: Chee ternational network of groups and individu- Jalan Macalister, 10400 Penang, Malaysia. Yoke Ling; Editors: T Rajamoorthy, Lean als involved in efforts to bring about a Tel: 60-4-2266728 Fax: 60-4-2264505. Ka-Min, Evelyne Hong; Contributing Edi- greater articulation of the needs and rights Email: [email protected] tors: Roberto Bissio (Uruguay), Charles of peoples in the Third World; a fair distri- Printed by Jutaprint, No. 2, Solok Sungai Abugre (Ghana); Staff: Linda Ooi (Design), bution of world resources; and forms of de- Pinang 3, 11600 Penang, Malaysia. velopment which are ecologically sustain- Cover Design: Lim Jee Yuan Lim Jee Yuan (Art Consultant), Lim Beng able and fulfil human needs. Copyright © Third World Network Tuan (Marketing), Yap Bing Nyi (Editorial) E C O L O G Y More than half of Africas arable land too damaged for food production The critical problem of soil health has come to the fore in Africas development agenda with the release of a new report that says about 65% of the continents arable land is too damaged to sustain viable food production. Busani Bafana highlights the issues at stake. A REPORT published in December by the Montpellier Panel an eminent group of agri- culture, ecology and trade experts from Africa and Europe says about 65% of Africas arable land is too damaged to sustain viable food pro- duction. The report, No Or- dinary Matter: conserv- ing, restoring and en- hancing Africas soil, notes that Africa suffers from the triple threat of land degradation, poor yields and a growing population.
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