Browse by title
Wil Hout and M. A.M. Salih
Richard Eccleston and Ainsley Elbra
Economic liberalisation and the rise of MNCs in recent decades have been a double-edged sword. With the exception of the 2008 Financial Crisis and its aftermath, the rise of global capitalism has been a key driver of economic growth and technological innovation, but at the same time has undermined state sovereignty and exacerbated inequality (Mikler 2018). Nowhere has this dualism been more apparent than in the realm of corporate taxation, which has become a prime example of what Martin Wolf (2012) describes as a ‘contemporary tragedy of the global commons’. The ‘tragedy’ is such that MNC tax avoidance is now estimated to deny governments over a quarter of a trillion US dollars per year, and after years of ignoring the issue governments and firms are being forced to act (Clausing 2015; OECD 2015).
Ainsley Elbra and Richard Eccleston
Blatant corporate tax avoidance has attracted the ire of politicians, citizens and consumers the world over in recent years. Since the financial crisis of 2008, international taxation has become a mainstream political issue championed by social justice campaigners and the progressive press the world over. Globally, governments and intergovernmental organisations have announced a range of reforms designed to ensure that MNCs pay their ‘fair share’ of tax, while some of the world’s most powerful and profitable firms have been subjected to multibillion-dollar fines.
Kurt Mettenheim and Olivier Butzbach
The authors explore the genesis of alternatives to private banks, that is, savings banks, cooperative banks and development banks in the nineteenth century. They interpret the establishment of alternative banks as social reactions of self-defense in Karl Polanyi’s sense. The strengths of these alternative banks are rooted in what they call patient capital. Financial investments can be called patient when they are not made in expectation of short-term profits but in anticipation of more sustainable returns over time toward social missions or public policy. Patient capital provides alternative banks with competitive advantages for which the authors provide evidence from statistical analysis and comparison of bank balance sheets in historical data and standard measures of bank performance using bankscope data on bank balance sheets from 2006 to 2012. The success of alternative banks in recent years allows them to argue that although reforms have marginalized alternative banks in liberal market economies, liberalization produced back-to-the-future modernization of patient capital practices at alternative banks in coordinated market economies and emerging and developing nations.
Ana Rosa Ribeiro de Mendonça and Simone Deos
The authors emphasize an overlooked raison d’être for public banks. They argue that limiting public banks to filling the gaps left by private banks, the standard argument in economics, neglects a very important dimension of public banks, that is, their capacity to act countercyclically and thereby stabilize access to credit during economic downturns. Taking a cue from Hyman Minsky, they point to the immanent volatility of financial markets dominated by private actors. In order to counter destabilizing tendencies, the presence of institutions with the logic of action that differs from that of the market is necessary. As public banks are not primarily concerned with profitability, they can play this role. To a certain extent, their presence in the market is an automatic stabilizer because public banks provide credit with long maturation. In times of crisis, they can also be used for discretionary intervention, that is, opening up new credit lines.
The author explores what leads public banks to disregard their public service function and how one can prevent this disregard. Taking the German public banks as an example, he briefly describes their ‘mission creep’ in the form of financialization. Guided by the theory of hegemonic discourse, he interprets mission drift as part of neoliberal hegemony. This leads him to be skeptical about technocratic organizational solutions to the problem. From his discourse and analytical point of view, awareness about the public mandate seems to be of utmost importance. If the key actors of public banks are not aware of the public mandate and do not identify with the public mandate, then staying within the public mandate cannot be expected. Therefore, he argues that one needs to start with the general debate about the content of the public mandate and how public banks can contribute to it.
The author addresses the problem of Indian public banks with non-performing loans. In her historical account of non-performing loans on the books of banks, the early years after nationalization are characterized by neglect of the problem. Only after the liberalization of the banking sector did the banks start to take serious measures to reduce the amount of non-performing loans, whereby the public banks were as successful as their private counterparts. However, in the recent decade the problem resurfaced when the share of bad loans to large corporations increased. Based on field interviews, Rajeev identifies a number of reasons for non-payment, some of which pertain to the low collateral recovery rates in the courts and the loan waiver policy adopted by the states from time to time, and others to the inadequate risk assessment and monitoring of borrowers. In contrast, self-help group based lending enhances the loan recovery rate in the poorer sections of society through a self-monitoring mechanism and hence should be extensively developed for the poor to access credit.
Simone Deos and Ana Rosa Ribeiro de Mendonça
The authors pick up on Hyman Minsky’s concept of a ‘big bank’, that is, the central bank as a lender of last resort, which together with big government stabilizes the economy. According to the authors, the provision of liquidity in order to avoid the financial crisis can be performed by a group of public banks in coordination with the central bank, thereby jointly playing the role of big banks. Empirically, they show that the impact of the 2008 crisis on the Brazilian economy was rather limited because the Brazilian Central Bank together with the public banks supplied sufficient liquidity for non-financial agents. Specific institutional characteristics of the Brazilian financial system have allowed these big banks to react promptly to the crisis.
Simone Deos, Camilla Ruocco and Everton Sotto Tibiriçá Rosa
The authors empirically explore the claim that public banks can counteract the volatility of financial markets at the hand of public banks in Brazil during the financial crisis of 2008. They provide a historical overview of two important Brazilian public banks, Banco do Brasil and Caixa Econômica Federal. They detail these banks’ anticyclical interventions during the crisis, which did not lower the quality of their respective portfolios. Only the shift to restrictive macroeconomic policies well after the crisis in 2014 has offset the expansion of public credit. The authors draw lessons from this: the anticyclical credit instruments have to be better coordinated with macroeconomic and currency policies.