The Global South Debt Revolution That Wasn’t

Abstract

In this article, we analyse how international crises and conflicts over sovereign debt have transformed the agenda of the United Nations Conference on Trade and Development (UNCTAD), the Geneva-based organization founded in 1964 and whose history is closely linked to the G77 group of developing countries. We show how UNCTAD’s projects for structural reform of the international financial architecture were contested and ultimately rejected in the 1970s. Such defeats were a blow to the transformative goals that UNCTAD had initially set to achieve. In the 1980s, UNCTAD gradually became a technical agency and its mandate restricted to providing expert assistance and support to developing countries during their negotiations with the Paris Club. Meanwhile, the mandate to produce expertise at the macro level (the so-called ‘upstream’ area), was effectively transferred to the IMF and World Bank. With the development of the Debt Management Financial Analysis System (DMFAS), UNCTAD went from promoting systemic change in international financial architecture to sponsoring the micro-management of domestic policies as remedy to over-indebtedness. But we also show that UNCTAD did not always restrict itself to doing such ‘downstream’ work, i.e., improving debt issuing capacities and technologies of developing countries. While UNCTAD’s recent project on fair principles of lending and borrowing principles conforms to what’s expected from the group of advanced countries, another project involving the creation of an international mechanism of sovereign debt restructuring functioned as a disturbance to this fragile downstream–upstream division of labour between international organizations.

The three phases of financial power: Leverage, infrastructure, and enforcement

“…Sovereign debt issued by governments in the Global North has assumed a pivotal role in the global financial system, providing the "safe assets" without which collateralized shadow banking could not operate on the scale it has achieved (Boy, 2015;Gabor and Ban, 2016;Gabor and Vestergaard, 2018;Thiemann, 2018;Vermeiren, 2019). The political economy of sovereign debt plays out differently in the Global South (Deforge and Lemoine, 2021). Whereas many lower-and middle-income countries used to borrow directly from foreign banks, today, they mostly borrow by issuing tradable bonds (Hardie, 2012;Kvangraven et al, 2021).…”