At a recent international conference hosted by Harvard Law School, a representative of the government of Barbados, which is working to reframe international finance around the demands of climate change, asked a simple question.
“Why is the world’s biggest fan for climate finance coming from one of the world’s smallest countries?” asked Avinash D. Persaud, special envoy to the prime minister of Barbados for investment and financial services. Because, he explained, the Caribbean island nation has no other choice: Barbados and other tropical countries are the “canaries in the mine,” whose situation renders them most vulnerable to environmental damage.
Earlier this year Barbados introduced the Bridgetown Initiative, which aims to foster cooperation between rich and poor countries around climate efforts. Its goals include overcoming institutional investors’ reservations about investing in clean energy projects in developing countries.
Persaud’s remarks came at a conference on “Money as a Democratic Medium,” which was organized by Harvard Law School Professor Christine Desan and took place between June 15 and 17 in both Cambridge, MA and Hamburg, Germany. The multiple locations reflected the expansion of the event’s focus since its launch in 2018 from the role money plays in American democracy to a worldwide investigation of money as a public project. To mirror this broader scope, the event was known this year as MDM 2.0.
As Desan explained in her opening remarks, although Barbados is confronting a debt crisis, the current government led by Prime Minister Mia Amor Mottley has begun to prioritize essential infrastructure improvements over repayments to foreign investors — many of which represented the same countries that had contributed to the climate crisis. Persaud expanded on this challenge in his keynote address to the audience of scholars and policymakers from across the globe.
“Climate change impacts everybody, but between the Topics of Cancer and Capricorn, experience of loss and damage is four times greater than anywhere else,” he said. When icecaps melt, Persaud explained, the water gravitates toward the middle of the earth, causing rising temperatures, rising sea levels and destruction for the 3.2 billion people of Asia, Africa, Latin America and the tropics who live near the equator. “We are the canaries gasping for air, but finding air for us is not the solution. We have to save the mine.”
“Climate change impacts everybody, but between the Topics of Cancer and Capricorn, experience of loss and damage is four times greater than anywhere else.”
Avinash D. Persaud, special envoy to the prime minister of Barbados for investment and financial services
Thus, he said, the Bridgetown Initiative does not confine its focus to Barbados. The stock of greenhouse gases now causing global warming, he said, was put there by the world’s richest countries — yet underdeveloped countries now account for the majority of new emissions, and they lack the resources to address it. “Let’s be blunt about this: The countries that got rich through industrialization process are now saying to the poor countries, ‘You need to stop coal, you need to ban it’. If I can finance developing countries to do the green transition cheaply, attractively, easily, then they can do it. But I can’t force them.” Economists, he said, tend to overlook the fact that traditional green measures — installing solar panels, decommissioning coal mines, finding new jobs for the miners — “is extremely capital intensive. It’s not because people are in denial of the science, it’s just not economic.”
The initiative, he said, calls for developing countries to spend $2.4 trillion a year on green transition — a sum he admitted is astronomical. Yet some of those measures have a revenue stream attached: “Solar panels make money; wind turbines make money. About two-thirds of that 2.4 billion is invested in things that do.”
“Let’s be blunt about this: The countries that got rich through industrialization process are now saying to the poor countries, ‘You need to stop coal, you need to ban it’.”
Avinash D. Persaud
A second “bucket” contains things that generate savings: “Building a stronger sea wall means my city is not flooded twice a year. That saves me money which I can use to pay back the debt.” The third and smallest bucket would be grants for reparations, for communities whose houses, schools, and livelihoods have been washed away. “We need new revenues — which is the politically correct term for international taxes.”
Yet he said that investors tend to be unconvinced that green investments will pay off. In addition, they tend to overpay to hedge foreign exchange risks. In response, the Bridgetown Initiative calls for banks to provide a foreign exchange guarantee. “We will remove the excessive risk payment, the overpayment, and that will boost the rate of the returns … to make it suitable for offerers of life insurance and pension funds. That is the prize we’re after.”
Persaud’s talk was one highlight of a three-day conference that brought a diverse group of lawyers, economists, academics, and scholars to the Harvard Law campus. “Economics as a discipline tends to treat money as a black box — simply the term in which prices occur or the medium in which value transfers,” said Christine Desan in an interview. “That’s an inadequate approach if money is an institution, as it appears to be historically and legally. The MDM conferences break new ground in recognizing money as an institution, itself an essential aspect of the way we govern ourselves. Once we do that, we reach questions of democracy and justice; they are relevant criteria for every governance institution we build.”
Speaking of the weekend’s other highlights, she said “One plenary brought visionary thinkers who are designing mutual credit networks at the local level into conversation with experts on community development finance, who are used to thinking about how to scale projects to make them sustainable across larger areas. The question became whether state public banks might be able to support local credit initiatives with careful regard to their not-for-profit orientation.”
“Another panel,” Desan said, “consisted wholly of economists, each doing pathbreaking work by offering models of money as a form of credit. That approach is not tradition; innovatively, it recognizes money as a legal institution and better describes the dynamics, including booms and busts, that occur in monetary economies.”
During a Saturday morning panel on “Global Reverberations,” University of Denver Professor Ilene Grabel noted a few parallels between the present day and the 1980s — U.S. banks are again failing, a recent war (this time, against COVID) has damaged the economy, and the global south is facing a debt-driven “lost decade.” But she said that the present context is more ominous: “We are on the road, in my view, to a post-American financial order, and the ride is a rough one … Financial governance over the past decade bears little resemblance to that of the neoliberal order.”
Grabel named the Barbados efforts as a more encouraging example of what one of her heroes, the German economist Albert Hirschman, referred to as possibilism. “And the obligation to embrace possibilism is most urgent when prospects are most bleak, which they certainly are right now.”
“We are on the road, in my view, to a post-American financial order, and the ride is a rough one … Financial governance over the past decade bears little resemblance to that of the neoliberal order.”
University of Denver Professor Ilene Grabel
Boston University Professor Jonathan Kirshner countered that the dollar’s dominance in world markets is still secure, if only barely and perhaps temporarily. He compared it to a table on which three legs have fallen: the United States’ political stability; its invulnerability to financial crises (which he said, was the case for half a century); and the U.S. role as leading decision-maker in the global economy.
All of these are arguably gone, he said, but one pillar remains: The lack of a plausible alternative to the dollar. “You can’t look out the window in the United States and think it is obviously economically and politically stable place. There seem to be fewer grownups in the room running American politics. But guess what: The table can stand on one leg. The dollar endured in a sustained way because it was better than any alternative.” Yet if the dollar were to decline, the impact on international relations may not be dire. “I suspect that if we were to see a contraction of the dollar’s international use, it might not have the profound consequences for American power that many predict.”
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