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Abstract
Public banks are banks located within the public sphere of a state. They are pervasive, with more than 900 institutions worldwide, and powerful, will tens of trillions in assets. Public banks are neither essentially good nor bad. Rather, they are dynamic institutions, made and remade by contentious social forces. As the first single-authored book on public banks, this timely intervention examines how these institutions can confront the crisis of climate finance and catalyse a green and just transition. The author explores six case studies across the globe, demonstrating that public banks have acquired the representative structures, financial capacity, institutional knowledge, collaborative networks, and geographical reach to tackle decarbonisation, definancialisation, and democratisation. These institutions are not without contradictions, torn as they are between contending public and private interests in class-divided society. Ultimately, social forces and struggles shape how and if public banks serve the public good.
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Regional development banks (RDB) have become increasingly important in the world economy, but have also been relatively under-researched to date. This timely volume addresses this lack of attention by providing a comprehensive, comparative, and empirically informed analysis of their origins, evolution, and contemporary role in the world economy through to the second decade of the twenty-first century. The editors provide an analytical framework that includes a revised categorization of RDB by geographic operation and function. In part one, the chapter authors offer detailed analyses of the origins, evolution, and contemporary role of the major RDB, including the Inter-American Development Bank, the African Development Bank, the Asian Development Bank, the European Investment Bank, the Central American Bank, the Andean Development Corporation, the European Bank for Reconstruction and Development, and the Asian Infrastructure Investment Bank. In part two, the authors engage in comparative analyses of key topics on RDB, examining their initial design and their changing business models, their shifting role in promoting policies supported by the United States as hegemon and the private sector. The volume ends with a critical reflection on the role played by RDB to date and a strong defence of the need for these banks in an increasingly complex world economy.
This paper is structured in five sections. Part 1 introduces the many recent innovations in Southern-led development finance and their potential benefits, tempered with a reminder of lessons learned about the support these new institutions will need in the future. Part 2 charts the new landscape of development finance, identifying Southern-led and global mechanisms and resources that now potentially offer trillions of dollars' worth of support through foreign reserves, national development banks and sovereign wealth funds, southern regional banks and funds, plus the global multilateral World Bank and regional banks. It shows that the centre of gravity of development finance has moved firmly southwards. Part 3 assesses the extent to which the changes in bank ownership, mandates and governance means Southern-led banks are 'doing things differently', with respect to conditionality, scale and speed of loans. Amid these potentially positive developments, Part 4 warns that some things are not that different after all-including long-standing regional imbalances, the continued power of Credit Rating Agencies, and concerns about concessional lending. Part 5 concludes by suggesting how the development community can better support the new and expanded southern banks and funds, to build on their strengths and address their limitations.
In the context of protracted low levels of investment following the 2008 Great Recession and, with the launch of the European Commission’s “Investment Plan for Europe,” scholars have argued a new dimension of European integration may be emerging: a “hidden investment state.” Interlocking institutions through European-level policy making, and increased and innovative loans, are interpreted as a means of setting up a multilevel infrastructure for further investment. This chapter investigates how Spain and its state-owned bank, the Instituto de Crédito Oficial (ICO), has navigated—and responded to—this changing scenario. We map evolving networks, portray ICO’s institutional trajectory, compile financial information on borrowing and loans, and categorize the financial instruments deployed, in order to assess whether ICO is becoming part of this investment state. We find that, whilst the ICO reacted vigorously to the Great Recession, since then, its activities have largely returned to pre-crisis normality. We conclude that developments around a hidden investment state in Spain are modest to date.
Public banks are pervasive, with more than 900 worldwide, and powerful, having assets nearing $49 trillion. Yet they are too often perceived as static financial institutions, based on economic theories that begin from fixed notions of what it is to be a ‘publicly-owned’ bank. This has given rise to polarized debate wherein public banks are characterized as being either essentially good or bad. This is unrealistic and unhelpful as we seek ways to confront the crises of finance and of climate finance. We need instead to rethink public banks as dynamic and contested institutions within the public spheres of states. In this view, public ownership itself predetermines nothing but it does open up a particular public realm of possibilities. Change becomes possible and is a result of social forces making it so, if within the structural confines of gendered, racialised, and class-divided capitalist society. A dynamic theory of public banks provides a novel theoretical alternative and a practical pathway towards financing green and just transitions in the public interest.
Review of Political Economy Online publication link:
https://www.tandfonline.com/doi/full/10.1080/09538259.2021.1898110
An in-depth account of public bank responses to the socio-economic crises resulting from Covid-19. Written by experts from around the world, the book offers a critical assessment of programs rolled out in different locations and asks how these actions could be improved in the future.
This publication and its separate chapters are licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 (CC BY-NC-ND 4.0). You may copy and distribute the document, in its entirety or separate full chapters, as long as they are attributed to the authors and the publishing organisations, cite the original source for the publication, and use the contents for non-commercial, educational or public policy purposes. 2020.
Given the urgency of climate change and the short time frames, it is necessary that our society make a transition toward a green and low-carbon economy. One way to do so is through finance markets that are tailored to fund low-carbon and climate-friendly projects. Such climate finance markets can prove to be an important factor in how fast and how incentivized our society is to make the transition. An important tool in measuring the recent impact of climate change on financial markets has been the green bond. As its name suggests, a green bond allows various issuer types — whether countries or organizations — to mobilise traditional debt investments into projects or assets that can help society adapt or mitigate climate change impacts. Furthermore, it allows investors to fulfill their environmental, social and governance (ESG) concerns and mandates by allowing for climate-aligned investments. This “bonus” moral or green factor is what currently sets the
market apart from its traditional counterparts. The popularity of the green bond market and its impact are explored in this paper, which also addresses the growth of the market in the national as well as international context. The paper introduces the green bond market
by highlighting its ability to tackle risk and serve as an opportunity for the financial
sector. It then addresses the growth in various international and national contexts, with a
brief overview of the Canadian market. The paper highlights the ongoing challenges in
the market, especially given its exponential growth in recent years. Finally, it speaks to the environmental performance of the green bond and showcases the need for standardization and regulation around the market. The paper ends with policy recommendations for various key stakeholders including regulators, governments and issuers and concludes by addressing ongoing standardization efforts by other market players.
Green bonds are one of the most prominent innovations in the area of sustainable finance over the past decade. However, to date there have only been a few academic studies on green bonds, and these have tended to focus on what impact green labels have on bond yields. Our analysis is one of the first empirical studies designed to address the broader questions of what attracts investors and issuers to the green bond market, the role of green bonds in shifting capital to more sustainable economic activity, and how green bonds impact the way organisations work with sustainability. Using Sweden as a case study, this paper provides insights into the rapid growth of the green bond market and how green bonds affect market participants’ engagement with sustainability that are easily missed if one focuses only on how green bonds are marketed.
Degrowth refers to a radical politico-economic reorganisation that leads to smaller and more equitable social metabolisms. Degrowth posits that such a transition is indispensable but also desirable. However, the conditions of its realisation require more research. This article argues that critical agrarian studies (CAS) and degrowth can enrich each other. The Agrarian Question and the Growth Question should be addressed in concert. While degrowth should not fall into the ‘agrarian myth', CAS should not embrace the ‘myth of growth', even when green and socialist. Ideas of one philosopher and four agrarian economists are presented, with illustrations from Bhutan, Cuba and North America, hoping to offer a preliminary research agenda for ‘agrarian degrowth’.
After years of placing faith in the markets, we are seeing a revival of interest in statist economic policy across the world, particularly with regards to finance. How much policy space do previously liberalized developing countries still have to renationalize their financial sectors by exerting direct control over the process of credit allocation, despite the constraints posed by economic globalization? Under what conditions do they actually use this policy space? Bolivia is an especially important case because it is one of the few peripheral countries that implemented strongly interventionist financial reform in the 2010s. Using Bolivia as a least likely case, I argue that two factors, increased availability of external financing sources, and domestic popular mobilization, create favorable conditions for developmentalist financial reform because these make it possible to reduce external conditionalities and overcome opposition by the domestic financial sector. Popular mobilizations paved the way for reform by bringing developmentalist policymakers to power and exerting pressure on them to 1. Maximize policy space by diversifying into newly available alternative sources of foreign borrowing to reduce external conditionalities, and 2. Mitigate the importance of disinvestment threats by domestic economic elites by incrementally increasing public ownership and control of the economy.
What is urgently required is strategy and action on a green and just transition for all. Democratized finance will be key. Low-carbon infrastructure needs constructing, local jobs protecting, fossil fuels need to remain in the ground, the planet needs cooling, and social equity needs action. Yet there is no hope of this type of green and just transition without financial institutions that can be democratically commanded to function in the public interest.
It is for this reason that we propose the creation of a democratized US Green Investment Bank (GIB). A democratized GIB has the potential to catalyze a transition to a socially just and environmentally sustainable future that is otherwise impossible under the short-term, high-return regime of private financiers (regardless of the extent of their financial resources).
The Paris Agreement will greatly benefit from the past experience with international market mechanisms for greenhouse gas (GHG) emissions reductions and related regulatory systems, which have gone through four periods with specific challenges. The first period 1997–2004 operationalized the mechanisms defined in the Kyoto Protocol, the Clean Development Mechanism (CDM) and Joint Implementation (JI). Pilot activities in different sectors were undertaken by the public sector, and the first baseline and monitoring methodologies officially approved. Between 2005 and 2011, the carbon markets expanded massively. The EU emission trading scheme (EU ETS) was linked to the Kyoto mechanisms, creating demand for carbon credits from the private sector. During this “gold rush” period criticism emerged with regarding the uneven geographical distribution of projects, as well as environmental integrity problems related to baselines and additionality. The next period saw a collapse in carbon prices between 2012 and 2014, limiting the development of new projects. The quantitative limits on the use of offsets in the EU ETS were reached and the failure to agree on a new international regime resulted in a drying up of demand from governments. The 2015–2018 period is characterized by a gradual stabilization of the international climate regime. The Paris Agreement adopted in 2015 increases complexity through global participation in mitigation. Future carbon markets will therefore face both old challenges—supply–demand balance, environmental integrity, transaction costs—and new ones—interactions with other policies and national targets, and sectoral/policy baselines and additionality checks preventing hot air proliferation.
This article is categorized under: The Carbon Economy and Climate Mitigation > Policies, Instruments, Lifestyles, Behavior
Applying the new economics of organization and relational theories of the firm to the problem of understanding cross‐national variation in the political economy, this volume elaborates a new understanding of the institutional differences that characterize the ‘varieties of capitalism’ found among the developed economies. Building on a distinction between ‘liberal market economies’ and ‘coordinated market economies’, it explores the impact of these variations on economic performance and many spheres of policy‐making, including macroeconomic policy, social policy, vocational training, legal decision‐making, and international economic negotiations. The volume examines the institutional complementarities across spheres of the political economy, including labour markets, markets for corporate finance, the system of skill formation, and inter‐firm collaboration on research and development that reinforce national equilibria and give rise to comparative institutional advantages, notably in the sphere of innovation where LMEs are better placed to sponsor radical innovation and CMEs to sponsor incremental innovation. By linking managerial strategy to national institutions, the volume builds a firm‐centred comparative political economy that can be used to assess the response of firms and governments to the pressures associated with globalization. Its new perspectives on the welfare state emphasize the role of business interests and of economic systems built on general or specific skills in the development of social policy. It explores the relationship between national legal systems, as well as systems of standards setting, and the political economy. The analysis has many implications for economic policy‐making, at national and international levels, in the global age.
Lukes’ Power: A Radical View is a milestone in the debate on power. First, it criticises the narrow conceptions of political sociology, which reduces power to merely interpersonal relations. Second, it suggests an enlarged ontology of power capable of dealing with social coercion and collective action. Lukes, however, seeks the causes of power in politics and society by abstracting from the economic sphere. This detaches power from exploitation and confuses the essential with the only contingent forms of power of capitalism. The economics debate is predicated on this error because mainstream economics rules out the exploitative nature of capitalist production and introduces power later only as a residual category, which might develop only out of competition. The result is a mystified conception in which social coercion is no longer visible and competition appears as power-free. My ‘Marxist view’ on power is founded on a simple idea: exploitation in the economy imposes particular forms of power and coercion in society. Therefore, in the same way as the capitalist mode of production is essentially based on exploitation so it is also based on power and coercion. The economy is not merely one of the many possible sources of power, but the sphere in which the essential forms of capitalist power are generated. Competition is not the antithesis of power but the vehicle through which exploitation imposes the essential power relations of capitalism.
Understanding the nature of state financialisation is crucial to ensure de-financialisation efforts are successful. Therefore, this article provides a structured overview of the emerging literature on financialisation and the state. We define financialisation of the state broadly as the changed relationship between the state, understood as sovereign with duties and accountable towards its citizens, and financial markets and practices, in ways that can diminish those duties and reduce accountability. We then argue that there are four ways in which financialisation works in and through public institutions and policies: adoption of financial logics, advancing financial innovation, embracing financial accumulation strategies and directly financialising the lives of their citizens. Organising our review around the two main policy fields of fiscal and monetary policy, four definitions of financialisation in the context of public policy and institutions emerge. When dealing with public expenditure on social provisions, financialisation most often refers to the transformation of public services into the basis for actively traded financial assets. In the context of public revenue, financialisation describes the process of creating and deepening secondary markets for public debt, with the state turning into a financial market player. Finally, in the realm of monetary policy, financial deregulation is perceived to have paved the way for financialisation, while inflation targeting and the encouragement, or outright pursuit, of market-based short-term liquidity management among financial institutions constitute financialised policies.
The Great Financial Crisis ushered unorthodox financial policies that would have been unfathomable before 2008. Perhaps unexpectedly, some of the boldest measures on this unorthodox spectrum were adopted in semi-peripheral and therefore theoretically vulnerable countries such as some of the European Union’s new member states from East-Central Europe. Why did policy makers in some of these countries (Hungary, Romania) embarked on rolling back financialization and resort to financial repression in ways that targeted foreign banks in contexts in which this seemed a very risky strategy? Why did such bold moves generally re-established state-finance relations in some countries (Hungary) while comparably milder ones left them generally unaltered in others (Romania)? Finally, why have some countries refrained altogether from such forms of financial unorthodoxy (Latvia)? The paper explains the varieties of policy responses in these countries, with three factors: the role of finance in the national growth model, the capacity of the state to protect itself against adverse bond market reactions and international constraints and opportunities.
While national inequality has made headlines in recent years, income is far more unequally distributed globally than it is within any state. It is striking that global economic inequality has garnered so little attention in International Political Economy (IPE), given the field’s longstanding interest in the distribution of resources and the structure of the global economy. This paper argues that IPE should regard the unequal global distribution of wealth and income as a central research concern and outlines a research agenda for doing so. Drawing on recent work by economists, it argues that global inequality is distinctively political in cause and consequence and sufficiently different from both global poverty and national inequality to constitute a unique object of inquiry. IPE has the theoretical and conceptual tools to study global inequality, but doing so will require bridging divisions between those who consider distributional consequences, though primarily in a national perspective, and those concerned with global hierarchies, but with less regard to national agency and economic policymaking. The effort is worth it, however, given the rich substantive agenda that foregrounding global inequality opens up on a series of topics that have not all (to date) been recognized as the core of the field.
Informal institutions are often labeled as inefficient or “second-best” compared to formal property rights. Yet, the experience in developing and allegedly “developed” contexts alike demonstrates that informality can perform critical functions without detracting from their performance in socio-economic, political, cultural, and environmental terms. This special issue challenges conventional assumptions on the form of institutions by positing that informal arrangements as they have endogenously emerged and persist are functional and thus credible. To achieve this, the collection validates a double prediction of the Credibility Thesis: i) divergent institutions may perform identically to the same extent that identical institutions perform differently; and ii) institutions do not converge but diverge over the course of development. In accordance with the first prediction, the contributions examine the performance of formal arrangements such as lease, ownership, and strata rights as opposed to informal slums, “urban villages”, and self-governed commons. Following the second prediction, the contributions question the prevalence of formal arrangements in the Global North (such as the United Kingdom, Greece, and Israel) to the same extent as they ascertain the credibility of informal arrangements in the Global South (such as in China, South Africa, and Serbia).
This article presents the findings of a survey among 18 central banks from the Asia-Pacific region regarding their views on approaches to scale up sustainable finance and develop policies to address climate and environmental risks. It also reviews recent developments in selected Asia-Pacific countries to illustrate actions monetary and financial authorities have already taken to address climate and environmental risk, and in scaling up sustainable finance. The survey results show that this is a topic of increasing importance and relevance to monetary authorities in the region. The vast majority of survey respondents believe that they should be playing a key role in promoting green finance and sustainable funding options, either through amending the regulatory framework, encouraging green loans and products or by introducing climate change considerations in their monetary and financial policy operations.
This book explains how an ideology of corporate resource allocation known as “maximizing shareholder value” (MSV), that emerged in the 1980s and came to dominate strategic thinking in business schools and corporate boardrooms, undermined the social foundations of sustainable prosperity, resulting in employment instability, income inequity, and slow productivity growth. In explaining what happened to sustainable prosperity in the United States, it focuses on the growing imbalance between value creation and value extraction that reached to the extent of “predatory value extraction.” Based on “The Theory of Innovative Enterprise,” the book analyzes the value extracting mechanism by “value-extracting insiders,” i.e. corporate executives, “value-extracting enablers,” i.e. institutional investors, and “value-extracting outsiders,” i.e. hedge-fund activists. It concludes with policy suggestions to rebuild the U.S. corporate-governance regime for combating predatory value extraction and restoring sustainable prosperity.
This paper investigates whether the lending activity of European development banks is affected by opportunistic political behavior, by looking at the change in loans extended by these entities in election years. The empirical analysis leverages on a unique manually collected dataset that includes all the development banks headquartered in Europe, for the period 2002–2015.
A comparison with the rest of the European banking system reveals that while the political view of development banks cannot be supported as a general rule, it finds empirical evidence in flawed democracies, where large development banks actually tend to increase their lending activity in election years.
China has become a significant player in the green bond market globally after the issuance of the first green bond in China in 2015. Given the nascency of the green bond market in China, there are still two main questions that remain under-researched in the relevant scholarship. The first question relates to whether the multiple definitions of green bonds and its eligible use of proceeds under the Chinese regulations are consistent with the international standards. The second question centres on the degree of divergence of the transparency requirements under the Chinese regulations themselves. Using doctrinal and comparative analysis, this article discovers that, despite the generally consistent definitions of green bond under the Chinese regulations, there are still some slight differences in terms of eligible uses of proceeds and information disclosure. Potentially these differences may affect the lender’s investment assessment and their decision-making of whether to provide financing to the issuer.
The U.S. banking system differs from many countries both in the range of services supplied and the complexity of operations. Meanwhile, the U.S. financial markets have become the attraction of worldwide investors. This book explains the three key aspects of the industry: the laws governing the banking institutions, the regulations thereof, and their economics and financial statements in a manner not covered by any competitive publications, of interest to both professionals and scholars who want to better grasp this industry. Auditing a bank and/or liquidating a bank require a set of rules not always well understood. The book provides such an overview.
Felix I. Lessambo is an Associate Professor at Central Connecticut State University’s School of Business where he teaches Financial Statements Analysis and Global Financial Reporting. He has practiced international tax, transfer pricing, and alternative investment management groups where he structured and advised on hedge funds and private equity cross-border transactions. He is the author of several books in finance, including The International Banking System, The International Corporate Governance System, International Financial Institutions and Their Challenges, International Aspects of the US Taxation System, Audit-Assurance Services & Forensics, and Financial Statements: Analysis and Reporting.
“Lessambo provides an outstanding examination of the broad forces that buffer the US banking system. The book envisions the near-future impact financial technology and electronic forms of currency may have on the banking system and begins an astute examination of the tensions that are developing between the speed at complex financial innovations are arriving to market, and the legacy processes of regulatory agencies that are tasked with assuring the safety, and soundness of the overall financial system. As any good book does, this book also takes care to examine in varying degrees of detail relevant core topics on bank risk monitoring. I found the book easy-to-read and easy to understand.”
—Nicos A Scordis, Professor, The John R. Cox/ACE Limited Chair of Risk and Insurance, St. John's University, USA; and Editor, Review of Business: Interdisciplinary Journal on Risk and Society
This chapter argues that Germany’s national development bank, KfW, derives its legitimacy as an important policy actor through three characteristics: (i) it acts on the financial market with the government’s backing to pursue economic—rather than purely commercial—objectives; (ii) as a government agency, it has privileged access to officials and regulators; and (iii) it has extensive in-house technical and engineering expertise. As such, KfW can profoundly impact how these policies are implemented at five stages of the policy process: agenda setting, negotiation, implementation, monitoring, and enforcement. This conceptualization is applied to two illustrative case studies: facilitating Germany’s shift towards a green economy (the Energiewende) and coping with challenges of the 2008 global financial crisis.
This article analyzes the Canadian government’s promotion of blended finance, a policy “innovation” that aims to use official development assistance to leverage private finance to meet the United Nation’s 2030 Sustainable Development Goals (SDGs). It argues that blended finance is not a new idea but rather an old strategy that attempts to resolve the contradictions of neoliberal development by introducing more neoliberal policies. Rather than meeting the SDGs, this mode of financing development shifts investment away from the poorest countries and the services the poor need the most (e.g. health, education, water, and sanitation) and towards more profitable investment in finance, energy, and industry in middle-income countries. Suggestions for alternative development policies based on a propublic agenda—public financing, public-public partnerships, and global financial and tax reform—are provided.
Group lending is useful in channelling credit to the self-employed poor in developing countries, to whom banks usually prefer not to lend, and formation of self-help groups (SHGs) helps facilitate this. In India, SHGs can access credit through private microfinance organisations or can approach banks through a state-led bank-linkage programme. Scholars argue that transaction costs are high while borrowing from banks despite relatively lower interest rates, making this uneconomical. This article uses a field survey to estimate transaction costs, presents other social benefits of the programme, and finds empirical justifications for strengthening the bank-linkage programme.