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56

Why Shadow Banking Is Bigger Than Ever
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by Daniela Gabor

? (2018). Why Shadow Banking Is Bigger Than Ever. Jacobin, 31, pp. 56-67

63

[...] For poor countries to access global institutional investors, they would need to reengineer their financial systems around securities markets on the terms of those investors, a Trojan horse for shadow banking and financial globalization.

On its 2017 launch, the World Bank euphemistically termed this strategy “Maximizing Finance for Development” (MFD). Its promotional video starts with simple arithmetic: ending extreme poverty and meeting the SDGs will cost $4 trillion a year; development aid is only $380 million a year, while remittances and philanthropy can generate another $1 trillion annually, leaving the world about $2.6 trillion short. Cue sad music and a bright solution outlined by an enthusiastic millennial voice: developing countries can offer $12 trillion in market opportunities to global institutional investors. These market opportunities include “transportation, infrastructure, health, welfare, education — everything actually.” Everything can become an asset class, as development is recast as an exercise in the privatization of public services to generate returns for global finance, and a “changed mindset” means abandoning any future hope for developmental states.

The World Bank video explains the process — formally termed the Cascade Approach — for turning everything into an asset class. The Cascade Approach offers a sequence of steps to diagnose why global investors are reluctant to finance development projects: first, identify reforms (regulatory or other policies) that improve the risk-return profile; if reforms are insufficient, then identify subsidies and guarantees to de-risk the project; if reforms, subsidies, and guarantees are still not enough, then opt for a fully public solution. This is a blueprint for promoting shadow markets in which bankable projects can be transformed into liquid securities ready for global institutional investors.

aaaahhh

—p.63 missing author 2 years, 9 months ago

[...] For poor countries to access global institutional investors, they would need to reengineer their financial systems around securities markets on the terms of those investors, a Trojan horse for shadow banking and financial globalization.

On its 2017 launch, the World Bank euphemistically termed this strategy “Maximizing Finance for Development” (MFD). Its promotional video starts with simple arithmetic: ending extreme poverty and meeting the SDGs will cost $4 trillion a year; development aid is only $380 million a year, while remittances and philanthropy can generate another $1 trillion annually, leaving the world about $2.6 trillion short. Cue sad music and a bright solution outlined by an enthusiastic millennial voice: developing countries can offer $12 trillion in market opportunities to global institutional investors. These market opportunities include “transportation, infrastructure, health, welfare, education — everything actually.” Everything can become an asset class, as development is recast as an exercise in the privatization of public services to generate returns for global finance, and a “changed mindset” means abandoning any future hope for developmental states.

The World Bank video explains the process — formally termed the Cascade Approach — for turning everything into an asset class. The Cascade Approach offers a sequence of steps to diagnose why global investors are reluctant to finance development projects: first, identify reforms (regulatory or other policies) that improve the risk-return profile; if reforms are insufficient, then identify subsidies and guarantees to de-risk the project; if reforms, subsidies, and guarantees are still not enough, then opt for a fully public solution. This is a blueprint for promoting shadow markets in which bankable projects can be transformed into liquid securities ready for global institutional investors.

aaaahhh

—p.63 missing author 2 years, 9 months ago