Category Archives: Economic

Economic, G20, Government, Politics, Society, United Nations

The ‘inequality emergency’

ECONOMIC

Intro: Rising economic division is destabilising nations and eroding accountability. Joseph Stiglitz’s G20 blueprint proposes a way toward global economic renewal. For the first time the G20 has declared a global inequality emergency

WAS it a diplomatic nicety when Swiss tycoons and business magnates handed Donald Trump a gold bar and a Rolex watch, gifts that were reciprocated by a cut in US tariffs? No. It was a reminder of how concentrated wealth seems to buy access and bend policy. Alarmingly, this might just become the norm if the global “inequality emergency” continues. That’s the clear message being sent out in the most recent work by the Nobel laureate Professor Joseph Stiglitz. The economist sees the widening gap between rich and poor as a human-made crisis which is destroying politics, society, and the planet. He’s not wrong.

The problem is no longer confined to a few fragile states. It is a global harm, with 90% of the world’s population living under the World Bank’s definition of “high income inequality”. The US sits just below that threshold and is the most unequal country in the G7, followed by the UK. Prof. Stiglitz’s insight is that the current system’s defenders can no longer explain its mounting anomalies. Hence he wants a new framework to replace it. His blueprint for change is contained within the G20’s first-ever inequality report, endorsed by key European, African, and middle-income nations.

It warns that the richest 1% captured 41% of all new wealth since 2000, while the bottom half gained just 1%. On average, someone in the global top 1% became $1.3m richer; a person in the poorest half gained $585. Meanwhile, 2.3 billion people are now moderately or severely food insecure – 335 million more than in 2019. Wealth concentration far outstrips income concentration, with the total assets of billionaires’ worth one-sixth of global GDP. Shockingly, billionaire wealth is rising almost in lockstep with global food insecurity.

The report argues that extreme inequality is a policy choice – produced by specific economic, political and legal decisions rather than by “globalisation” or technology. Financial deregulation, weakening labour protections, and privatisation all aid rising inequality. As does cutting corporate and top income tax rates. The report stresses that the most dangerous consequences are political, with highly unequal countries seven times more likely to experience democratic backsliding or authoritarian drift. Stiglitz points out that the super-rich account for a disproportionate share of carbon emissions, worsening climate risks borne by the poor. He rejects the pro-market argument that inequality is good for growth.

The G20 inequality report lays out a comprehensive redesign of global economic governance reminiscent of 1944’s Bretton Woods accord. What led to that overhaul is being identified again today: global rules and institutions that are generating crises, instability, and inequality. Prof. Stiglitz wants structural change – suggesting a rewrite of intellectual property rules as well as trade and investment treaties, a reform of global lenders, and an update of tax systems as well as sovereign debt arrangements.

A fairer global order must start where every paradigm shift begins: with knowledge, scrutiny, and shared facts. The Intergovernmental Panel on Climate Change (IPCC) – the UN-backed body assessing scientific opinion – was created in 1988 to give global authority to that knowledge. It reshaped climate politics. Prof. Stiglitz argues that the time has come for an International Panel on Inequality. Hundreds of experts agree. Endorsing it is by no means radical; it is simply the first step towards a saner world. Without it, the gold-bar diplomacy circling Trump will surely proliferate.

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Britain, Economic, European Commission, European Union, Government, Politics

UK-EU trade deal: a logical step forward

BRITAIN

Intro: The agreement made with the European Union will have limited tangible gains, but at least the tone set by the prime minister is a positive one

MUCH is being made of Sir Keir Starmer’s deal with the EU, but many things still remain to be worked out. The agreement which was announced in London should be regarded as a staging post rather than a final destination. It was, in effect, a commitment to have more meetings at which negotiators will try to make more deals.

On the issue of visa for young people and the UK’s mooted return to the Erasmus university-exchange scheme, there is little clarity beyond the rebranding of “youth mobility” as “experience”. A decision on the level of fees that European students must pay has also been kicked into the long grass. So have some details of how the UK will work with the bloc on policing and security, including the use of controversial facial-recognition technology in tackling drug and people smuggling across borders.

Increased cooperation on defence is significant and timely, given the ramping up of geopolitical instability under Donald Trump – although British arms manufacturers will have to go on pushing for access to the EU’s £150bn fund. On food and fishing, terms have been decided. Fewer checks on exports, including meat, will benefit UK food producers, particularly the smaller ones that were worst affected by Brexit. For Europeans, mainly the French, the big win is a 12-year agreement on fishing in British waters.

The 41% of UK goods exported to the EU, worth £385bn, are more than is sent to the US and India combined – making this by far the most important trade deal so far. Though the UK remains outside the customs union, and regulations governing other goods including medicines have not been relaxed, the new measures mark a significant easing of trade.

By contrast, the new dispensation for UK travellers to join European passport queues, and looser rules about pets, are more about style than substance. But while conveniences like these will not bring the economic benefits that the PM seeks, they do send a signal. For ministers, any hint of an interest in rejoining the EU remains taboo. Instead, this modest scaling back of Tory-erected barriers is designed to show voters that Sir Keir is operating a rational and responsible government that puts the interests of British businesses and consumers first.

It should not have taken nine years since the referendum to reach this point. A group of around 60 Labour MPs is rightly pushing for the government to be more ambitious, emboldened by polling showing that most voters now think Brexit was a mistake. Free movement, however, remains a red line, and one inked in all the more vividly after the strong showing of Reform UK in recent local elections and national polls. This was also Starmer’s real chance to counter anti-immigration sentiment, not capitulating to it. He may yet come to rue his decision on this.

Among disappointing omissions is the lack of a mechanism to make touring by our creative artists, like musicians, easier. Nonetheless, the agreement is a much-needed step forward, even though the actual gains for the UK have been overstated.

Ursula von der Leyen, the European Commission president, was more accurate when she spoke of the deal as “framing” an improved future relationship. If Sir Keir wants to reverse the damage done to the country since Brexit, he will require to paint a picture of why an outward-looking, interconnected UK is more likely to succeed. Not one that has become an insular nation under Brexit.

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Banking, Economic, Government, IMF, Politics, Society, United States

Trump’s economic agenda collides with fragile financial systems

FINANCIAL ECONOMY

THE International Monetary Fund (IMF) is renowned for its rational level-headedness and is the calmest of all the global institutions. But when these usual and calm ideals are abandoned by technocrats to sound the alarm on the political roots of global financial instability, it’s time to pay close attention. The IMF is warning of a non-negligible risk of a $1tn hit to global output, as Donald Trump’s erratic “America first” agenda (part oligarchic enrichment scheme, part mobster shakedown) collides with a perfect storm of global financial vulnerabilities.

Such a shock would be equivalent to around a third of that experienced in the 2008 crisis, and would be felt in a much more fragile and politically charged environment. This time, the crisis stems not just from volatility in the markets, but from the politics at the heart of the system governing the US dollar. The IMF’s latest Global Financial Stability Report sees the danger in Trump’s trade policies, especially his “liberation day” announcements, which have pushed up America’s effective tariff rate to the highest in over 100 years.

The IMF has given notice to investors that Trumpian instability was taking place as US debt and equities – especially tech stocks – were overvalued. It cautions that hedge funds have made huge bets that have gone sour, requiring them to sell US treasuries for cash and potentially deepening the chaos in bond markets. Ominously, the IMF draws the comparison, first made by the analyst Nathan Tankus, with the “dash for cash” in 2020 during Covid. Then, the Federal Reserve rescued US treasury markets directly. Developing nations, already grappling with the highest and real borrowing costs in a decade, may now be forced to take on even more expensive debt just to cushion the blow from Trump’s new tariffs, risking a much feared “sudden stop” in capital flows.

At the heart of this chaos stands the US, the very country met to uphold the global financial architecture. Troubling, too, is the warning from Columbia University who have wondered whether the markets had begun to “sell America” after US long-maturity bond prices fell precipitously. The thinking is that markets were no longer responding to economic fundamentals but to politics as a systemic risk factor. In this case: Trump’s tariff threats and his increasing political pressure on the Fed’s chair, Jerome Powell.

Trump’s relentless attacks on the Fed chair have only added to capital flight from US equities, bonds, and the dollar itself. The money is fleeing to safe havens such as gold. Some of the loss has been clawed back, but at what cost? Investors aren’t just nervous about inflation or growth – they’re hedging against political chaos. That might explain the seemingly divergent IMF messaging: blunt systemic warnings in its report versus the soothing market-facing comments from a senior official at the IMF’s press conference. This is central bank diplomacy. The institution is signalling that it is worried while trying not to spark a self-fulfilling panic in treasuries and the dollar.

The real issue and concern here is not technical dysfunction in treasury markets or the mechanics of the Federal Reserve, which are the underpinning and bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trump regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?

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