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Thirteen years ago the largest-ever gathering of world leaders took place on 8 September 2000 at the United Nations (UN) General Assembly in New York, where the UN Millennium Declaration was made. The Declaration was the most supported, ambitious and specific list of global development goals agreed upon to date, and established a list of commitments to reduce extreme poverty by 2015 which became known as the Millennium Development Goals (MDGs).
The Millennium Development Goals set in 2000
Source: United Nations
The MDGs were significant for global development cooperation due to their ability to stimulate global support, specifically financial resources. Many aid agencies and donors used them to direct their funding projects, and several governments also largely founded their health strategies upon them to receive external funding, which could comprise over 50 per cent of the state’s health budget. The MDGs thereby created a specific global development agenda, which some critics however now argue was not entirely in tune with the real needs of development of low- and middle-income countries. For example, proponents of a greater focus on non-communicable diseases (NCD) criticise that despite NCDs are now the leading cause of death worldwide, they did not receive a single mention in the 2000 MDGs.
Historically, infectious diseases such as HIV/AIDS, Tuberculosis and Malaria have been at the center of global health initiatives, as they easily spread across national borders and threatened the lives of millions of people in low- and middle-income countries with under-developed health care systems. Yet as the world celebrates its progress on the reduction of infectious diseases, the globalisation of unhealthy lifestyles, rapid and unplanned urbanisation, and liberal market forces have propelled a possibly greater threat to the health and development of the Global South, organisations like the World Health Organisation (WHO) fear. This threat is often referred to as “the invisible epidemic” of non-communicable diseases (NCDs), yet strategies on how to overcome them still remain unclear.
Causes and effects of non-communicable diseases
Source: World Health Organization
This blog entry is the first in a series of contributions exploring the rise of NCDs as a major health and development issue in low- and middle-income countries. The aim is to present and discuss evidence of the leading actors who are increasingly seeing NCDs not only as a challenge for developing countries, but also as an issue of transnational health governance that cannot be resolved at the national level alone. Read the rest of this entry »
This is the first part of a three-part series on the regulation of securitization before and after the crisis. Why were the banks so affected by the run on the shadow banking sector, which was formally off-balance sheet? How can we explain the lack of regulation in the shadow banking sector? How did governments promote the expansion of the credit supply via the shadow banking system?
Securitization has had a very bad press reputation in recent years (but see “securitization is not that evil after all”), being related to overly complex re-securitizations, which became impossible to value during the financial crisis of 2007/2008. Before that crisis, securitization was en vogue, favored by most financial economists as a way to spread credit risk from banks into the financial markets, thereby increasing the resilience of the financial system as a whole (s. Bhattacharya et al 1997). The idea was to liquefy credits, to turn them into tradable assets, generating deep secondary markets in which traders could constantly readjust the amount of risk they held in their portfolio. Banks could refinance the credits they gave and thereby expand their lending. Credit would become cheaper, as the demand for securitized assets generated from credit increased, raising the available supply of credit.
Turning credits into tradable assets requires that the transfer of these assets into money is possible instantaneously and without loss of value. Otherwise, the entire idea of readjusting one’s portfolio to changing market circumstances; which is what underlies modern portfolio theory (also the Black-Scholes formula requires continuous adjustment of the traders position, which is why trading in continuous time is a necessary assumption for the pricing to work). Credits on banking books, in contrast, are held on the book of the banook at historical cost accounting (s. Sigrids work on fair value accounting); i.e. not changing their value from the contracted valuethe moment the contract is signed. Only if banks undertake corrections in value to account for expected losses does the value of these credits in the books of the bank change.
In this blog I will look at the infrastructural preconditions of securitization (Special purpose entities, in the following SPEs) and the shifts in how they were proposed to be treated at an international level and how they were treated on a national level before the crisis and after the crisis. Before the crisis, there was pressure by the Committee of European Banking Supervisors to not force these SPEs on the balance sheet of banking groups (CEBS 2004). After the crisis, we can witness a 180° shift in the position of the financial stability board which states that it wants full prudential consolidation for sponsored SPEs. In my three blog entries I will have look at the impact these transnational recommendations had before the crisis on actions of national governments and will speculate about the fate of the current regulatory proposals in the future. Read the rest of this entry »
The last few weeks have seen a number of news stories indicating that the broad agreement reached by the G20 in early 2009 regarding the regulation of Over the Counter (OTC) derivatives is breaking down. On January 5th 2010, for example, the Financial Times titled ‘Cracks in transatlantic derivatives rules‘. In the UK, the Financial Services Authority and the Treasury published in December 2009, a report on regulation of these marketswhich, whilst couched in supportive language, made a number of criticisms of the Commission of the European Communities document on this topic published in October 2009 .
Meanwhile in the US, the US Treasury is aiming to achieve legislation on this topic; in Congress, the House has agreed a draft bill which differs again in some respects from both the UK and the EU and the Senate is due to consider the issue this month. Most recently, non-financial companies in the EU under the aegis of the European Association of Corporate Treasurers have protested strongly about some of the existing proposals in a letter addressed to the EU Commission on the grounds that they will financially penalize them .
The result is a somewhat confusing situation in which the danger is that regulation will not be coherent across the main financial markets and regulatory arbitrage will emerge, potentially paving the way for a further destabilisation of the global economy. Many of these debates and differences appear very technical but as I have sought to show in a recent article on ‘Legitimacy in financial markets: credit default swaps in the current crisis’ in Socio-Economic Review, underlying them are major issues of politics and power.
In 2009, many received wisdoms of late capitalism are crumbling. To mention a few disappointments, which it didn’t take a telescope to see from a mile away,
- No – we haven’t overcome the business cycle.
- Sorry – China and India aren’t gonna drag us out of the recession.
- Nope – deregulation doesn’t bring widespread prosperity.
- Too bad – wealth doesn’t grow on trees or in banks or hedge funds.
- Please – add your own favourite here: __________________________
A crisis is a moment in which illusions or expectations fall apart. In the Nigerian novel “Things Fall Apart”, the patriarchal protagonist Okonkwo confronts a world of changing values (colonialism, Christianity) in which he finds he has no leading role left to play. Rather than adapt to these circumstances, he takes his life.
This pessimistic example, however, doesn’t seem to apply to some international organisations in the current crisis. Rather, after years of seeming anachronistic, the World Bank, IMF, NATO and OECD are experiencing something of a revival – notable absentee: the UN.
According to classical (or vulgar?) institutional theory, institutions persist rather statically until some kind of “critical juncture” suddenly occurs, at which point they disappear or reinvent themselves (or are reinvented). As far as critical junctures go, they don’t get much bigger than the 2007 to 20xx? global capitalist crisis. Read the rest of this entry »