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Debt limits of rich countries hurt poor countries' growth, says World Bank's Malpass
Does the global financial system need a major overhaul?
In his final interview on GZERO World as president of the World Bank Group, David Malpass discusses a serious problem with host Ian Bremmer: the consolidation of economic and political power in the hands of the wealthiest countries. The world is facing a massive debt crisis––60% of low-income countries are now in debt distress or dangerously close to it. The poorest countries are paying an average of 16% of revenue on servicing loans.
Decades of low interest rates and cheap goods, followed by the pandemic and runaway inflation led countries to borrow huge sums of money. But it didn’t happen in an equitable way. Wealthy nations like the US and the European Union pumped trillions into their economies to keep them afloat. But poor nations kept borrowing money they couldn’t afford to pay back.
“The poorer countries are not catching up, and we really want a world where the people in lower income levels actually get to grow faster,” Malpass tells Ian Bremmer. “That’s what creates stability."
Malpass says that the goal of the World Bank, and any value-based society, is faster growth in poorer countries so they can catch up with advanced economies and stabilize. And that means integrating the economies of developing countries better with the West, which can at odds with nationalist economic policies like “Buy America,” near-shoring, and inshoring.
“I think there’s plenty of room in a logical world to say we don’t want dependency,” Malpass stresses, “But we also want to have a vibrant, global marketplace that is competitive. And the US needs to lead and be the starting point for a lot of this rethinking of the global system.”
Watch the episode of GZERO World with Ian Bremmer: World Bank's David Malpass on global debt & economic inequality
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Ian Bremmer: The West is united on Russian energy, the rest of the world is not
With talk at this year’s Munich Security Conference from most of the world’s most powerful countries about decoupling from Russian energy, it can be easy to forget that most of the world’s population has other priorities.
“What we're seeing is that a majority of the world's economic strength and certainly military strength really wants to put Russia back in a box, but a majority of the world's population does not. And that is because of what's happened with the pandemic. It's what happened with climate change”, said Eurasia Group President Ian Bremmer during a Global Stage livestream conversation hosted by GZERO in partnership with Microsoft.
Europe, he explains, can better afford to move away from Russian sources of energy than developing countries, who are increasingly feeling distant and fragmented from the West, and richer countries shouldn’t forget that.
Watch the full Global Stage Livestream conversation here: Is there a path ahead for peace in Ukraine?
COP27: Not good enough
Ian Bremmer's Quick Take: Hi everybody. Ian Bremmer here on a Quick Take to get you kicked off for your week.
I thought I would talk about the Climate Summit, which has just concluded in Sharm El Sheik, the COP27 was not one of the better moments for global climate response. If there was a big win, and I wouldn't call it a big win, but at least it's progress, it's on the establishment of a loss and damage fund and the idea is to use funds from industrialized countries that pay for climate related losses that are already being experienced in the billions and billions of dollars in poorer countries. The developing countries have been demanding the developed world indeed put such a fund together. The problem is of course, that in addition to the reluctance to get it done, just saying that you have such a fund does not have a mechanism for distributing money, a mechanism for raising money, and certainly there is no cash, there's no financing yet. Maybe over time you'll see the private sector make donations into this fund, maybe you'll see some government commitments but for now at least, it's an announcement of intentionality without any there there. That's the big news, right? That's the actual major headline that came out.
Besides that, the fact that the United States and China are talking together, once again, they are the two largest carbon emitters on the planet and so clearly talking is better than not talking. Though it was a little problematic that right after John Kerry, the special climate envoy from the US, met with his Chinese counterpart, Xie Zhenhua, Kerry then tested positive for COVID. Not ideal in terms of the mood music around that meeting, but again, promising that at least they are talking to each other. They clearly need to be.
Having said all of that, the idea of phasing out fossil fuels didn't make it into the text. There was a strong need to defend the 1.5 degrees centigrade maximum acceptable warming, which the world is going to shoot past, it's going to be two or 2.5 so it's a conversation without a lot of substance to it, but it almost died informally in this summit, and again, it shows you kind of how the world has not been able to get ahead of climate response in alignment with what policy makers that are given responsibility for dealing with climate have been pushing for.
I would say that most of the real action is actually happening in developing countries striking solo deals for their own countries. We saw that last year with South Africa and an $8.5 billion deal to help them finance a faster transition to renewables. This year, Indonesia, a $20 billion deal getting inked, Vietnam, India, Senegal, are all in pretty advanced stages of talks that should happen over the course of 2023, and that process is appealing to developing countries. It's pretty straightforward, it's a lot faster and there are a lot of African countries that are talking privately about planning on leveraging the COP platform but bypassing the overall negotiation system to bring money home.
What that means is that you have this very, very slow global wide progress, but very fast paced individual country packages makes an open question as to whether the COP itself has as much of a future. Will we see these big global climate summits? They are important because they are forcing mechanisms for individual leaders for the developed world to make announcements that then become policy over time. If you break that and you just do individual deals, you're going to lose a lot of progress overall in carbon emissions and in how fast you move to renewable.
By the way, the Secretary General is very concerned about this, that if you want to move towards a 2 or even a 2.5-degree goal as opposed to 3, which is where the world is presently heading, and you get rid of the COP process, individual deals are not going to get you there.
As it stands right now, the COP process should be a movement of momentum in two different ways. First, it's a global marker for new announcements and the emergence of trends in solutions and focus areas. Then secondly, it's the actual negotiations and country level action. If you lose that, there still is an enormous amount of money being invested in new technologies, there is enormous amount of requirement of countries to do more because of the impact of climate change that is growing around the world. You will still get there, but you'll get there more slowly, you'll get there less efficiently, and you'll get there with the developing countries taking even more of the burden on their shoulders because the wealthy countries are focusing on themselves and not on global north south or west south solutions.
As it is right now, sort of looking at what's happened over the last two, two and a half weeks, it feels like you're in a car that's accelerating off a cliff. This summit did not materially reduce the speed, but it did design some airbags so that's pretty much where we are and we'll be focusing a lot more on this issue going forward. Next year's summit in the United Arab Emirates, a country that cares a lot about diversifying their investment beyond fossil fuels, but also recognizes that they're going to be one of the last countries standing to be able to produce fossil fuels, a push and pull just like much the world is facing right now on responding to the growing challenge of climate change.
That's it for me, I'll talk to y'all real soon.
For more of Ian Bremmer's weekly analyses, subscribe to his GZERO World newsletter at ianbremmer.bulletin.com
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Want to help poor countries now? Open your markets to their farmers, World Bank chief tells wealthy nations
Many developing countries now face high inflation, especially rising food prices.
What can they do to alleviate some of that pain? Wealthy nations should step in by opening their markets to farmers from poor nations, World Bank President David Malpass says during a Global Stage livestream conversation hosted by GZERO Media in partnership with Microsoft.
"This is a moment to make friends, to help people that ... don't have as much."
That means lifting trade barriers and subsidies that aren't really necessary so there can be more room for others to sell their stuff.
Malpass also recommends that all governments transition away from economic and fiscal policies that have spurred inflation toward encouraging boosting production and supply.
That's the best way to help small businesses, the most under pressure from high interest rates and the food price hike.
Watch more of this Global Stage event: Live from Washington, DC: Financing the Future
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