Existential threats and Neoliberalism — II

During the hey days of the Covid pandemic, and especially post Covid pandemic there was lot of talk of world starting with a ‘new normal’ in terms of multilateralism, whereby not repeating the mistake of countries becoming much more inward looking, blurring the line between self-interest, and selfish interest, for instance, in terms of practice of ‘vaccine apartheid’, and politics in terms of wrongly creating an air of xenophobia among demos instead of blaming neoliberal and ultra-nationalist mindset as reasons behind economic misery faced by demos – especially in the wake of ever rising happenings of climate change catastrophes.

Sadly, this thinking of a ‘new normal’ has been increasingly lost in the years that followed the end of Covid pandemic, which urgently needs to be re-kindled, with a global push towards a three-pronged policy based on economy, ecology, and epidemiology, so that climate change crisis could be effectively dealt with, along with reaching SDGs related targets in a timely manner, especially since the pace of progress towards both the climate change-, and SDGs related goals has unfortunately continued to remain very slow up till now.

Existential threats and Neoliberalism—I

Instead, similar to what happened in the HBO series ‘Game of Thrones’ that became a global phenomenon over the last decade or so, while countries continued with power politics, under ultra-nationalism, and protecting the politico-economic extractive institutional design status quo – including continuing with the practice of keeping weak policies towards money laundering, off-shore accounts acting as safe-heavens for mainly ill-gotten money, or money saved from tax jurisdictions (rather than fixing some rough edges of tax system), and a lack of a meaningful wealth tax – they forget that the ‘winter is coming’, and within it the ‘White Walkers’, to borrow a famous phrase of that drama, and very dangerous enemies of mankind in that drama serial, which overall meant very hard times were coming, and need to be related to in terms of thresholds of climate change as being fast approached that will reportedly bring irreversible changes in climate globally, and overall life as we know it.

Hence, conflict may be in the shape of Ukraine-Russia war or the crises in the Middle East and Kashmir, especially given such conflicts also holding the catastrophic potential of being serious nuclear flashpoints; not to mention ‘doomsday clock’, which was made after World War II, is closest to midnight currently than it has ever been, where midnight being the point at which nuclear war happens. Therefore, conflicts, especially the ones indicated above need to be settled at the earliest to not only save life, but also time and money, which has become all the more precious as the existential threat of climate change crisis is fast-unfolding.

Moreover, neoliberal policy needs to be rolled back, and highlighted as the culprit behind hardship in countries in terms of both sub-optimal pricing, along with practice of over-board austerity policy, instead of unjustifiably blaming it on economic migrants, and overall raising xenophobia.

In terms of what is required as climate finance needs, ‘Third report of the independent high-level expert group [IHLEG] on climate finance’ indicated in this regard: ‘External finance from all sources, international public and private along with others, will need to cover $1 trillion per year of the total investment need by 2030 and around $1.3 trillion by 2035. …This would imply a 15- to 18-fold increase on current levels.’ Sadly, amounts committed by developed countries are too little, whereby in the Conference of the Parties (COP) meetings, that is COP29 meetings held in Baku, Azerbaijan last November, developed countries committed to providing only $250 billion annually, and to increase this amount to $300 billion by 2035.

Similarly, while IMF made a one-off allocation of SDRs to the tune of $650 billion in 2021 to support countries deal with Covid pandemic, such allocation mostly got allocated to already rich countries – for instance, Pakistan a highly vulnerable country to climate change and ‘Pandemicene’ phenomenon is closely related to it, received only around $2.77 billion – since it was wrongly allocated on the basis of how much each country contributes to the pool of IMF resources or, in other words, on the basis of quota, rather than allocation being made on needs basis of individual countries.

Although there have been numerous calls to not only make another release of $650 billion, with even a bill moved in US Congress to expand the envelope to enhance this ceiling for IMF, but there has been no breakthrough; not to mention the recommendation under the ‘Bridgetown Initiative’ of an annual release of climate change related SDR allocation for highly climate change vulnerable countries, has not received a nod of approval from the IMF till yet.

A ‘Center for Economic and Policy Research’ (CEPR) published article ‘The International Monetary Fund’s special drawing rights: why a new issuance is necessary and feasible at this time, and would save many lives’ in November 2022, pointed out in this regard: ‘1. The 2021 SDR issuance is estimated to have saved hundreds of thousands of lives, if we use, e.g., the Bank for International Settlements’ research on the relation between recessions and mortality.2. Yet the US Treasury Department has “ruled out a new allocation of IMF Special Drawing Rights resources and said the Fund needed to stick to its core activities of strong surveillance, policy advice and reforms required in its lending.” …About 80 low- and middle-income countries are in, or at risk of, debt distress. …3. A new SDR issuance, which would come at no cost to the US taxpayer, could make a significant difference in the US economy in the immediate future by preventing some of the loss of export-related jobs here, as demand for US exports falls with recessions in other countries.’

Although the article is a bit dated, not much has changed in terms of fundamental risks, whereby although inflation has been on the fall globally, and overall growth prospects have improved, yet risks facing global economic growth have been on a sharp rise, given the fast-rising challenge from climate change crisis, putting all the more pressure on developing countries – especially those that are highly climate vulnerable, and significantly debt distressed, including Pakistan – to pick up the pace for reaching needed level of economic resilience.

Instead, loans are being provided as ‘recycled’ SDRs to the tune of $100 billion by developed countries since they received majority of allocation from the overall allocation of $650 billion made in August 2021.

So, basically this provision of $100 billion by developed countries is from that enhanced allocation of SDRs in 2021. Only $100 billion is being re-cycled to be placed in turn into the ‘Resilience and Sustainability Trust’ (RST), which is the basis for the ‘Resilience and Sustainability Facility’ (RSF).

Here the lack of multilateral spirit could be seen from the fact that even the relatively low amount of $100 billion is yet to completely reach RST, since only $46.8 billion (or SDR35.8 billion) had arrived in RST by November 22, 2024!

Although better than nothing, yet this ‘re-cycled’ allocation falls exceedingly short in terms of the amount allocated, whereby more than half of US$650 billion went to rich countries, not to mention that this is being provided to developing countries as a loan, not as a grant– with climate related conditionalities that is – which is odd because initially the mode of enhanced allocation was in the form of grant.

Moreover, not only is it being provided as a loan, here, in two of the three sub-groups, even surcharge – a ‘junk fee’ charged in the event of late repayment of loans – is being charged from countries taking loans under RSF! As a corollary, climate related conditionalities could include recipient countries providing best quality petroleum, and subsidizing solar panels in the short-term, along with working on medium- to long-term target of graduating to becoming a net-zero carbon-, and green economy.

Meeting climate finance requirements, therefore, needs adopting a multi-pronged strategy on the lines indicated above.

Business as usual cannot work, and in addition to appropriately making available pathways for unlocking fiscal space, and financial support, trade also needs to be put on much fairer, non-neoliberal terms for all countries.

There is a need for a Bretton Woods-styled landmark negotiations that lay the basis for a truly global effort that the current world of polycrisis calls for, which include focus on dealing with economy, ecology, and epidemiology in a combined way to effectively deal with the existential threats of climate change, and the related ‘Pandemicene’ phenomenon on one hand, and rising inequality, lessening level of political voice, and overall meeting SDGs on the other.

No country can be safe if it follows ultra-nationalism, and where elites continue to build walls of extractive institutions to watch out for their vested interests. There is no more room to be mainly on the learning curve and not to take timely action against existential threats and not to meet SDGs, remain a prisoner of short-sightedness and selfishness, and to be a slave of power and wealth. It is, after all, the greed of a high level that has put upon us these existential threats. Therefore, the challenge requires a multilateral spirit based on truth, and rationality.

Moreover, at the individual country level, it should be crystal clear, if history is anything to be learnt from, that macroeconomic stability, economic growth, and strengthened democracy cannot be achieved in any sustainable way, if Neoliberalism and over-board austerity are continued to be practiced.

Copyright Business Recorder, 2025