Beware Independent Central Banks

By Jomo Kwame Sundaram

JOHANNESBURG, South Africa, Sep 23 2025 (IPS) - US President Trump’s snide barbs against his appointee, US Federal Reserve Bank Chairman Jerome Powell, have revived support for central bank independence – long abused by powerful finance interests against growth and equity.

Independent central banks are supposed to improve the quality, equity, and growth impact of monetary policy. Instead, they have primarily served powerful financial interests, with contractionary and regressive effects leading to slower, unequal growth.

Independent of whom?

Central banks were established to determine monetary policy to shape financial conditions to achieve national economic objectives.

In recent decades, the new conventional policy wisdom has been that independent central banks should set monetary policy. Thus, they have been influenced by powerful financial interests, typically foreign, in smaller, open developing countries.

In the last half-century, many governments have changed laws under the influence of international finance to legislate central bank independence from governments of the day, especially the executive and legislative branches.

Meanwhile, most central banks have come to equate financial stability with price stability as ‘inflation targeting’ became the leading policy fetish.

When inflation rises, central banks raise interest rates, which reduces economic activity. However, some central banks of open economies, especially those pegging to major international currencies, target the exchange rate.

Thus, reducing inflation by conventional means worsens contractionary pressures. Many governments now face the threat of ‘stagflation’, i.e., recession with inflation. Central banks recognise this trade-off regarding how much growth has to decline for inflation to fall.

With interest rate management as their primary policy tool, central banks may raise interest rates in anticipation of inflation, despite its adverse consequences for growth, income and employment.

Such contractionary effects have reduced wages and jobs worldwide. Only a few, mainly large developed economies, have had other priorities, such as growth or employment.

Ironically, the end of the Bretton Woods fixed exchange rates regime and the counter-revolution against Keynesian economics from the late 1970s ensured the irrelevance of Milton Friedman’s monetarist emphasis on central banks’ money supply targeting.

Worsening inequity

Central banks worldwide respond to and anticipate inflation by raising interest rates to curb inflation.

‘Inflation targeting’ causes significant collateral damage, typically reducing growth, income and employment. Poor households’ incomes are likelier to fall, especially with labour-displacing technological change, such as mechanisation, automation, and artificial intelligence (AI) applications.

As unemployment increases, poor workers are more likely to lose jobs, especially hurting poorer families. Banks have typically profited handsomely from such situations, although most people are worse off.

With lending rates rising, banks get even more interest as borrowing rates lag, not increasing as much. Max Lawson cites an IMF study finding that the adverse effects of higher interest rates are “not counterbalanced by the positive effects of lower interest rates.”

The US Fed strongly influences central banks worldwide. Higher Fed interest rates from 2023, in response to minor inflationary pressures, have hurt developing countries, especially the poorest.

As most Global South companies and governments have incurred dollar-denominated debt, countries’ central banks raised interest rates to deter capital outflows.

Quantitative easing

‘Quantitative easing’ (QE) refers to central bank interventions buying financial assets. Such interventions were sought as it is difficult for central banks to cut interest rates below zero to revive economies. QE seemed to fit the bill.

Commercial banks typically get more for their deposits with the central bank when it raises interest rates. Thus, they receive considerable additional windfall interest payments from the central bank risk-free.

QE programmes seek to raise asset prices. Central banks buy assets such as government debt, inducing private investors to acquire riskier assets. US government debt is still the most important financial asset in the international monetary system.

Thus, QE tries to induce growth, presuming earlier contractionary policies will continue to curb or ‘moderate’ inflation.

This has even been justified as prudent, as inflation rates were below target despite interest rates near zero.

Major Western central banks adopted QE following the 2008-09 global financial crisis. Many governments spent even more in response to the COVID-19 pandemic from 2020.

Such efforts sought to counter the downward spiral of falling financial asset prices. The US Fed’s QE intervention involved ‘portfolio rebalancing’. It bought over $600 billion in US Treasury bonds and almost $300 billion in mortgage-backed securities.

Wealth is concentrated in relatively few hands in most societies. Jordi Bosch showed the top ten per cent holding 11 times more wealth than the bottom half in the euro zone, while the bottom fifth had more debt than assets.

QE interventions increase financial asset prices, enriching owners, especially the rich, who have more assets. As prices rise, their worth generally increases. Hence, such central bank interventions further enrich the already wealthy.

As the world struggles to cope with challenges posed by the current conjuncture, we must not jump out of the frying pan back into the fire kindled by central bank independence.

Related IPS Articles:

• Global South Stagnating under Heavier Debt Burden

• Exchange Rate Movements Due to Interest Rates, Speculation, Not Fundamentals

• Developing Countries Need Monetary Financing

• Stop Worshiping Central Banks

• Central Bank Myths Drag down World Economy

• Ideology and Dogma Ensure Policy Disaster

• Inflation Phobia Hastens Recessions, Debt Crises

• Inflation Targeting Farce: High Costs, Moot Benefits

• Fighting Inflation Excuse for Class Warfare

• When Saviours Are the Problem

• Finance Drives World to Stagflation

Available online at: Beware Independent Central Banks

North Worsens Tropical Catastrophe

By Jomo Kwame Sundaram

KUALA LUMPUR, Malaysia, Sep 9 2025 (IPS) - Greenhouse gas (GHG) emissions have risen over the last two centuries, with current and accumulated emissions per capita from rich nations greatly exceeding those of the Global South.

Tropical vulnerability

The last six millennia have seen much higher ‘carrying capacities’, soil fertility, population densities, and urbanisation in the tropics than in the temperate zone.

Most of the world’s population lives in tropical and subtropical areas in developing nations, now increasingly threatened by planetary heating.

Different environments, geographies, ecologies and means affect vulnerability to planetary heating. Climate change’s effects vary considerably, especially between tropical and temperate regions.

Extreme weather events – cyclones, hurricanes, or typhoons – are generally much more severe in the tropics, which are also much more vulnerable to planetary heating.

Although they have emitted relatively less GHGs per capita, tropical developing countries must now adapt much more to planetary heating and its consequences.

Many rural livelihoods have become increasingly unviable, forcing ‘climate refugees’ to move away. Increasing numbers in the countryside have little choice but to leave.

Worse, economic and technological changes of recent decades have limited job creation in many developing countries, causing employment to fall further behind labour force growth.

Unequal development has also worsened climate injustice. Adaptation efforts are far more urgent in the tropics as planetary heating has damaged these regions much more.

Technological solutions?

While science may offer solutions, innovation has become increasingly commercialised for profit. Previously, developing countries could negotiate technology transfer agreements, but this option is becoming less available.

Strengthened intellectual property rights (IPRs) limit technology transfer, innovation, and development. The World Trade Organization (WTO) greatly increased the scope of IPRs in 1995 with its new Trade-Related Intellectual Property Rights (TRIPS) provisions.

Thus, access to technology depends increasingly on ability to pay and getting government permission, slowing climate action in the Global South. Financial constraints doubly handicap the worst off.

Despite rapidly mounting deaths due to the unprecedented COVID-19 pandemic, European governments refused to honour the West’s public health exception (PHE) concession in 2001 to restart WTO ministerial talks after the 1999 Seattle debacle.

Instead of implementing the TRIPS PHE as the pandemic quickly spread, Europeans dragged out negotiations until a poor compromise was reached years after the pandemic had been officially declared and millions had died worldwide.

With the second Trump administration withdrawing again from the World Health Organization (WHO) and cutting research funding, tropical threats will continue to dominate the WHO list of neglected diseases.

Climate finance inadequate

Citing the 2008 global financial crisis (GFC), rich nations claimed they could only afford to contribute a hundred billion dollars annually to climate finance for developing countries in line with the sustainable development principle of ‘common but differentiated responsibility’.

This hundred-billion-dollar promise was made before the 2009 Copenhagen Conference of the Parties (COP) to secure support for a significant new climate agreement after the US Senate rejected the Kyoto Protocol before the end of the 20th century.

Rich nations promised to raise their concessional climate finance contributions from 2020 after recovery from the recession following the GFC. However, official development assistance has declined while military spending pledges have risen sharply.

The rich OECD nations now claim that the hundred-billion-dollar climate finance promise has been met with some new ‘creative accounting’, including Italian government funding support for a commercial gelateria chain abroad!

In recent climate finance talks, Western governments increasingly insist that only mitigation funding should qualify as climate finance, claiming adaptation efforts do not slow planetary heating.

Meanwhile, reparations funds for ‘losses and damages’ remain embarrassingly low. Worse, in recent years, much of the West has abandoned specific promises to slow planetary heating.

Despite being among the greatest GHG emitters per capita, the USA has made the least progress. The two Trump administrations’ aggressive reversals of modest earlier US commitments have further reduced the negligible progress so far.

In late 2021, the Glasgow climate COP pledged to end coal burning for energy. But less than half a year later, the West abandoned this promise to block energy imports from Russia after it invaded Ukraine.

Concessional to commercial finance

Responding to developing countries’ demands for more financial resources on concessional terms to achieve the Sustainable Development Goals (SDGs) and address the climate crisis, World Bank president Jim Kim promoted the ‘from billions to trillions’ financing slogan.

The catchphrase was used to urge developing countries to take much more commercial loans as access to concessional finance declined and borrowing terms tightened.

With lower interest rates in the West due to unconventional monetary policies following the 2008 GFC, many developing nations increased borrowing until interest rates were sharply raised from early 2022.

Funds leaving developing countries in great haste precipitated widespread debt distress, especially in many poorer developing countries. Thus, purported market financial solutions compounded rather than mitigated the climate crisis.

Meanwhile, growing geopolitical hostilities, leading to what some consider a new Cold War, are accelerating planetary heating and further threatening tropical ecologies, rural livelihoods, and well-being.

Related IPS Articles:

• Net Zero by 2050 Delays Needed Urgent Climate Action

• Western Climate Hypocrisy Exposed by NATO Energy Policy

• Rich Nation Hypocrisy Accelerating Global Heating

• Carbon Markets Biased, Distorted, Undermined

• Insider Exposé of ESG Greenwashing

• Beware Climate Finance Charade

• Can Carbon Trading Stop Global Heating?

• COP27 Fiddling as World Warms

• Climate Hypocrisy Ensures Global Warming

Available online at: North Worsens Tropical Catastrophe

A New Non-Alignment for the Global South

By Jomo Kwame Sundaram

CAMPINAS, Brazil, Aug 26 2025 (IPS) - The Global South had little voice, let alone influence, in shaping the economically ‘neoliberal’ and politically ‘neoconservative’ globalisation leading to contemporary geopolitical economic conflicts. Pacifist non-aligned cooperation for sustainable development offers the best way forward.

Peace, Freedom, Neutrality

Realising non-alignment for our times should begin with current realities rather than abstract, ahistorical principles. 2025 is also the 70th anniversary of the beginnings of non-alignment, first mooted at the Asia-Africa summit in Bandung, Indonesia.

The Association of South-East Asian Nations (ASEAN) was established in 1967 by anti-communist governments of the region. In 1973, its leaders agreed the area should be a Zone of Peace, Freedom, and Neutrality (ZOPFAN).

The world was deemed unipolar American discourse after the first Cold War. Meanwhile, most of the Global South remained non-aligned in what the Rest see as a multipolar world.

Despite critical dissent, the West seems to have lost interest in preserving peace. Unsurprisingly, the US and its NATO allies increasingly ignore the United Nations. Foreign military interventions since the first Cold War already exceed the many of that longer era.

During World War II, military production generated growth and employment in Germany, Japan and the US. But surely, development today is best achieved peacefully and cooperatively.

Pacifist non-alignment should cut unnecessary military spending. Although big powers compete for hegemony by weaponising international relations, they will still try to ‘buy’ support from the non-aligned.

Realistically, most small developing nations cannot lead international peace-making. But they can and should be a stronger moral force urging justice, peace, freedom, neutrality, development, and international cooperation.

Return of the Global South

The Group of 77 (G77) developing countries’ caucus and the UN Conference on Trade and Development (UNCTAD) were both established in 1964. Headquartered in Geneva, UNCTAD is part of the UN Secretariat but has been steadily marginalised.

The G77 has a formal presence throughout the UN multilateral system. It now has over 130 members, including China, but its impact outside New York in recent decades has been limited.

Sustainability challenges and planetary heating are generally worse in the tropics, where most people in developing countries are. Meanwhile, hunger worldwide has worsened since 2014, while World Bank-reported income poverty has risen since the COVID-19 pandemic.

An inclusive and equitable multilateralism can better address the world’s challenges, especially peace and sustainable development – so crucial for progress in our dark times.

Global South needs better voice

While working for Goldman Sachs, Lord Jim O’Neill referred to Brazil, Russia, India, and China as the BRIC countries.

With South Africa joining, ostensibly representing Africa, they soon began meeting regularly. As members of the G20 group of the world’s twenty largest economies, the BRICS initially lobbied on financial issues.

They have since incorporated other large economies of the South, but also incurred the wrath of President Trump. While some nations have sought to join the enlarged BRICS plus (BRICS+), a few have hesitated after being invited.

BRICS has no record of strong and consistent advocacy of the interests of smaller developing economies. Most financially weak small nations doubt that BRICS+ will serve them well.

Higher US interest rates have triggered massive capital inflows, especially from the poorest countries, depriving them of finance at a time of greater need.

Meanwhile, aid levels have fallen tremendously, especially with Trump 2.0. Official development assistance (ODA) to the Global South is now below 0.3% of GDP, less than half the 0.7% commitment made in 1969.

Lowering tax rates has further squeezed the West’s already limited budgetary resources as stagnation deepens. Trump’s tariffs, US expenditure cuts, and greater Western military spending deepen worldwide economic contraction.

Non-alignment for our times

The Global South must urgently promote a new non-alignment for multilateral peace, development, and international cooperation to address Third World challenges better.

Even IMF number two, Gita Gopinath, agrees that developing countries should opt for non-alignment to benefit from not taking sides in the new Cold War.

With the exception of Brazil’s Lula, leadership by statesmen with international standing beyond their national stature largely passed with Nelson Mandela.

A few dynamic new leaders have emerged, but have not taken on the responsibilities of Global South leadership. Such leadership is in short supply despite the urgent need.

It is much easier to revive, reform, and reinvigorate NAM than to start from scratch. Although it has been less influential in recent decades, it can be revitalised.

Also, foreign policies are typically less subject to other typical national domestic policy considerations. Hence, they do not vary as much with the governments of the day.

Also, most developing country governments must appear to protect national interests to secure political support and legitimacy for survival.

Hence, conservative, even reactionary governments may take otherwise surprising anti-hegemonic positions in multilateral fora, especially with growing widespread resentment of bullying for extortion.

Related IPS Articles:

• Can East Asia Show the Way?

• Will Europe Wage Peace?

• New Geopolitics Worse for Global South

• The Global South in the New Cold War

• IMF Urges Non-alignment in Second Cold War

• Deepening Stagflation: Out of the Frying Pan into the Fire

• War or Peace, Barbarism or Hope

Available online at: A New Non-Alignment for the Global South