UNCTAD’s Richard Kozul-Wright: Time for a global new deal to break vicious cycle of austerity economics
Geneva: Austerity policies that continue to rule the roost in many countries have reinforced “rentier capitalism”, says Richard Kozul-Wright, lead author of the Trade and Development Report 2017.
TDR, which has become a flagship report of the United Nations Conference on Trade and Development (UNCTAD) over the years, is treated as a barometer for assessing the global economic climate. Indeed, UNCTAD’s trade and development reports since the late 90s have warned of impending economic crises triggered by hyper-globalization coupled with financialization in industrialized countries.
“This year’s TDR,” Kozul-Wright says, “examines three evident sources of exclusion”. They include (i) the automation of production, in particular robotization, and the threat of this causing a “hollowing out” of the human workforce, (ii) the segmentation of labour markets, particularly in terms of the gender dimension which threatens to endanger “a race to the bottom”, and (iii) corporate strategies to concentrate control over markets, by non-financial corporations, combined with growing “rent extraction”.
The austerity policy regime—cutting down public expenditure and aggressive privatization along with rampant trade and financial liberalization—has wrecked the global economy since the 2008 financial crisis. “The rise of financial rents and the proliferation of rent-seeking activities reinforced by austerity economic policies in country after country have led to capture of political processes and continued economic stagnation and rising inequality,” says Kozul-Wright.
The time has come for “shifting the debate from trade versus technology (adjustment) to market power, rentiers and politics, where winner takes all,” he says. “Unproductive corporate rent-seeking and restrictive business practices have also soared over recent years in non-financial sectors, as a new normal of corporate investment strategies that drive rent-seeking,” he says.
Further, growing market concentration as witnessed in many leading industrialized countries and “regulatory failures to rein in burgeoning corporate power, including for so-called superstar firms, have created conditions for growing inequality and exclusion of a sizeable section of the population from major economic activities”.
The “continued aggressive use of patent rights to defend and increase market power rather than innovation, large-scale privatization of public services, public subsidies to large corporations across non-financial sectors without clear economic or efficiency justification, tax avoidance by multinational enterprises through base erosion and profit-shifting practices and stock market manipulation to boost CEO compensation” are all features of rampant rentier capitalism, Kozul-Wright says.
To break this vicious cycle of austerity economics, he says, the “time has come for embarking on a global new deal”. The elements of such a new deal include “inclusive recovery for replacing austerity with full and decent employment and enhancing public investment with a strong caring dimension”, as well as “expanding fiscal space through progressive taxes”, he says.
Other elements of the proposed global new deal are “regulating rentier capitalism through a financial system that supports capital formation (specialized public banks, regulating shadow banking and sovereign debt restricting)” and “redistribution policies”.
It must ensure “policy space for national governments” to decide “where the boundaries are drawn between the state, private and social sectors, (allow) developing countries to catch up with those higher up the development ladder, (and give them the freedom) to choose their own pattern of development”.
Governments must build on “initiatives such as the SDGs (Sustainable Development Goals) and Paris climate agreement” and “unlock the creative impulses of markets, but control their more destructive tendencies”, he says.