Dear colleagues,

Wednesday was an important day for sovereign debt in the US Court of Appeals. Jubilee USA was there and provides a useful, quick write up. See below.

For background, and what I take to be the main policy implication, see a piece The Globalist asked me to write last December at http://www.theglobalist.com/StoryId.aspx?StoryId=9840. My argument was that it is now even in the interest of the private creditors to have an international sovereign debt workout mechanism, besides being best for social justice in the debtor countries.

Barry Herman
Graduate Program in International Affairs
The New School for Public Engagement
66 West 12th Street, Sixth Floor
New York, NY 10011, USA

Dear friends, 
 
A recent Guardian editorial noted how "small", "technocratic" and "fragmented" the discussion within the international development community has become. But it
missed a major reason for this: the continued but misplaced faith in "market fundamentalism". This adds to the perception that globalisation is an irresistible force beyond the control of governments, a process driven by countless invisible hands, infallible business acumen and continuous technological revolution, and reaching its zenith
with the unleashing of finance. 

Over the past three decades, open markets and global capital were supposed to raise savings, bolster investment, create jobs and spread new technologies; this would
release a tidal wave of economic prosperity, above all in the poorest countries. But finance-led globalisation has not lived up to its billing: debt-riven global growth has trended downward, capital formation has been sluggish, and recurrent crises have destroyed jobs and threatened livelihoods, even as those at the very top enjoyed soaring incomes. Some big emerging economies have enjoyed
sustained and even rapid growth, but it is no longer credible to think deregulated markets, financial engineering or shareholder value will deliver inclusive economic growth. 

Business as usual simply will not work any more. The
UN has recognised this in its call for a new post-2015
  development agenda. But to move the agenda forward, some hard truths will need to be recognised. There is a good deal more to development than poverty reduction. Simply adding human rights, peace and security – however important these challenges are –will not necessarily point things in the right direction. However understandable,
devoting attention to those at the bottom has resulted in insufficient attention being paid to those at the top with access to the resources needed to drive investment and create jobs. 

Development is less about deprivation and more about transformation – structural, institutional and normative – in ways that add to a country's wealth-creating potential, ensuring the gains are widely shared and extending the possibilities of future generations. For most developing countries, that still means building industrial capacity, providing secure livelihoods for rapidly growing urban populations, and guaranteeing food security. 

David Cameron's calls for eradicating extreme poverty and more responsible capitalism are well-intentioned. But
his call to use aid to strengthen the "golden thread" of open
markets misses the point, ignoring the strategies that have actually worked in successful developing countries over the past half century, where the state plays an active role in mobilising resources and disciplining their use. 

President Obama's inaugural address, which recognised that a successful economy mixes dynamic entrepreneurial effort
with effective collective action and a strong social contract, provides a more reliable compass. Success, he insisted, does not follow "when a shrinking few do very well and a growing many barely make it".

Making inequality part of the development policy
agenda has already gained traction. But to make lasting progress, it will be necessary to move beyond MDG-style targets and instead consider a global new deal allowing different economic strategies providing benefits for all. 

To start with, rebalancing the global economy should follow an expansionary macroeconomic path based on productive employment generation and shifting labour to higher value-added activities in developing countries. The rising threats
posed by food and energy insecurity and environmental degradation require a strong investment response, which must necessarily be led by public action. International institutions should support countercyclical fiscal policy and
public investment by making adequate funding available and attaching fewer conditions to their lending.
 
Second, unruly markets, especially financial markets, must be tamed. Even before the crisis, it was clear that stable and inclusive development is incompatible with speculative market behaviour and boom-and-bust cycles. Finance everywhere needs to get back to the business of providing security for people's savings and mobilising resources for productive investment. At the international level, that
means promoting capital controls (something the IMF
now seems ready to do), implementing a financial transaction tax (something the EU is now actively pursuing),
and designing a sovereign debt workout mechanism that deals fairly with lenders and borrowers alike (a long-standingUnctad proposal). 
 
Finally, growth is unlikely to be inclusive without effective measures for redistribution. Strengthening the position of labour to ensure wages match productivity growth is central, along with asset redistribution to prevent excessive concentration. Policies of universal social protection (including basic income policies) can help repair the social contract. Along with humanitarian aid for the poorest and most vulnerable, the international community needs to guarantee adequate policy space for countries to develop
measures relevant to their own contexts. 
 
The challenge in building such development-led
globalisation is not so much the shortage of big ideas but their scaling up through international collective action. Current  arrangements cannot serve this purpose, and have already lost legitimacy. A small number of economic powers, home to the world's largest corporations and financial institutions, continue to exercise a controlling influence at the IMF and the World Bank, driving negotiations at the World Trade Organisation and on the climate challenge. This dominance is no longer assured, but conditions for stable international economic co-operation remain elusive. Only a global new  deal can help build the levels of trust needed to tackle shared problems and broaden the scope for effective development partnerships. 
 
Richard Kozul-Wright,
Head Unit on Economic Cooperation and Integration Among Developing Countries UNCTAD

Jayati Ghosh,
Executive Secretary of the International Development
Economics Associates (IDEAS) 
 

Dear Isabel, Richard, and all

Great initiative to relaunch the debate. One book I can recommend is the one on "Public Debt and Austerity in the EU" published by transform Europe and the Nicos Poulantzas Institute. Many good articles, strong focus on Greece but providing a general analysis of the EU crisis and covering some other countries too. Download here:
http://transform-network.net/uploads/tx_news/public_debt.pdf
 
As far as Eurodad is concerned, we are regularly covering bits and pieces of crisis and crisis response on our website and in our newsletter:http://www.eurodad.org

The crisis and alternative solutions will also be the focal topic of our international conference in Prague in early June. We will have a background document published in advance, and a conference report later. Details on
the conference (work in progress) here: http://eurodad.org/1543649/
 
All the best
Bodo

Bodo Ellmers
Senior Policy and Advocacy Officer
Eurodad,
European Network on Debt and Development

Dear friends,

In view of the ongoing discussion, I thought the following
recently written analysis on US austerity would be of some interest. 
http://www.truth-out.org/news/item/14389-austerity-us-style-exposed

Richard Wolff
Professor of Economics Emeritus,
University of Massachusetts, Amherst

Dear Colleagues,

I’m writing today to share with you a publication we have just launched at the Friedrich-Ebert-Stiftung New York Office entitled, “The Future We the People Need: Voices from New Social Movements in North Africa, Middle East, Europe & North America” (http://library.fes.de/pdf-files/iez/global/09610-20130215.pdf) which I hope will offer
information and insights for this reignited debate about recovery with a human face.  Thank you to Richard Jolly and Isabel Ortiz for getting the conversation going again, as the issues raised have clearly not been resolved.

Many new social movements have sprung up since the financial crisis in 2008. In North Africa, the Middle East, Europe and North America they emerged out of social protests against economic austerity, inequality and
political exclusion. This publication features 20 contributions, from activists and analysts in Egypt, Tunisia, Israel, Greece, Ireland, Spain, the US, Canada and Mexico, who were invited, not to look back at the protests to analyze their
causes, but to critically and constructively examine the creative proposals and campaigns that have emerged from them. 

The motifs that come through— frustration with government for failing to address political and social exclusion, lack of faith in official political processes and actors, the belief that new social movements are sowing seeds of a more direct democracy—are common in each country and all regions.
However, the theme that is emerging most strongly is that of a deep crisis in political representation. 

As the UN system is now immersed in discussions to construct a future for sustainable development, what the Rio+20 outcome calls,“The Future We Want,” this publication aims to help articulate why “we the people’s” needs can and must inform the next generation of development goals. The voices of new social and political movements are not well represented in the "post-2015"
debates, and connections between these movements, which we explore in the book, are not well understood. After months of research and networking with activists
and analysts in these countries, I hope this publication will begin to change that.
Very best wishes,
Sara

Sara Burke
Senior Policy Analyst
Friedrich-Ebert-Stiftung
www.fes-globalization.org/new_york/

Today we are bringing a social investment package to start
bringing social policies to invest and protect people back to the debate and we propose actions #socialinvestment

Dr Lieve Fransen
Director Social Policy
and Europe 2020
DG Employment, Social Protection and
Inclusion.
Joseph 2 street 27
Brussels

Dear friends,

The debt crisis of the 1980s led to a severe recession in almost all African and Latin American countries. IMF and World Bank adjustment programmes required countries to cut back on their expenditures, introduce user charges for health and education, and reduce or abolish minimum wages.  Per capita income became stagnant and sometimes fell. Reductions in protection led to the collapse of industrial sectors in many countries, and to high unemployment. Poverty rose and income distribution worsened. Most countries had no or very limited programmes of social protection.  All this led to what became known as the
‘lost decade of development’. 

UNICEF responded with calls for Adjustment with a Human Face, arguing that children and families need to be protected during economic crisis and explaining how this
could be done. The recipe – more expansionary macro-programmes, redirection of meso-policies to protect crucial social and economic sectors serving the poor, and the introduction of social protection programmes. By the time of the Millennium Summit in 2000, the world generally acknowledged the priority importance of reducing poverty.

In 2008, a new global recession developed, with irresponsible lending by Western banks again as a main cause. The poor all over the world, in developed as well
as many developing countries, are again suffering – this time from a crisis that is entirely due to actions taken in the developed world. The crisis has already lasted five years. It is critically important that this does not extend to a new
lost decade; and that people do not suffer for as long as they did in the 1980s.

But, déjà vu, many countries are continuing to cut public expenditures, wage bills, subsidies, pension and health expenditures, while unemployment remains high or
rising and the number of decent jobs is often falling due to reduced economic growth and labour reforms. 

A rigid focus is kept on public debt and fiscal balances, even though people are suffering unnecessarily and there are alternatives. 

Policy and action now need to turn to alternatives, not used to tighten further the screws of austerity.  The lesson of earlier crises is that the state needs to be stronger not
weaker; the financial sector needs to be reformed, to make it the servant and not the master of the whole economy; young people need to be helped to get education, not left in unemployment; women need to have opportunities for using
all their skills, not just left to pick up the pieces or be employed in part time jobs; health services need to be strengthened for all section of the population; and regional and international action is needed to support countries
pursuing such policies, not being used to enforce further cut
backs.

If you share our outrage, please join us in exploring alternatives. Our earlier booklet, “Be outraged: There are
alternatives”, set out actions which could be taken. We now need to update this discussion, both to explore what now needs doing and to share references to work or findings
documenting the contradictions of austerity and the opportunities of alternatives.  

Issues of economic inequality and social justice have come to dominate the global debate, together with rising levels of
social unrest and worldwide discontent. The world must address big questions, but we only hear small answers. 

The social costs of the crisis are very high, as reported among others in our book “A Recovery for All” . We had to conclude the first e-discussion (2010-2012) with a question
mark – “A recovery with a human face?”

Today, the World Day of Social Justice, we are starting a second phase of the e-discussion.  
 
We welcome your views/research on alternatives for a socially-responsive recovery. Just send an email to
[email protected]

We look forward to a vibrant discussion. 
Best regards,
Richard Jolly and Isabel Ortiz