stiglitz323_Christophe Gateaupicture alliance via Getty Images_imf world bank Christophe Gateaupicture alliance via Getty Images

Fixing Global Economic Governance

To address climate change and the rest of the Sustainable Development Agenda, we must do more to enhance emerging markets’ and developing countries’ revenues, so that they can make the necessary investments. As matters stand, however, international trade and financial arrangements are overwhelmingly arrayed against this goal.

NEW YORK – Following the annual meetings of the International Monetary Fund and the World Bank this month, the Middle East is teetering on the edge of a major conflict, and the rest of the world continues to fracture along new economic and geopolitical lines. Rarely have the shortcomings of world leaders and existing institutional arrangements been so glaringly obvious. The IMF’s governing body could not even agree on a final communiqué.

True, the World Bank, under its new leadership, has committed to addressing climate change, tackling growth challenges, and strengthening its anti-poverty policies. It aims to increase its lending by leveraging existing capital and by raising new funds. For the latter, however, it will need US congressional approval, and that seems unlikely with Republicans controlling the House of Representatives. Importantly, the planned increase in lending capacity falls far short of what the world needs. It is more than just a drop in the bucket, but the bucket remains largely empty.

As with the climate discussions surrounding the United Nations General Assembly in September, there was much talk about scaling up private capital by lowering the risk premium that investors demand for projects in poor countries. Although the social returns to investing in solar power in Sub-Saharan Africa (where there is abundant sunshine and a dearth of energy) are higher than in the cloudy north, the private sector has been reluctant to enter, owing to fears about political and economic instability.