The triple crisis of debt, demand and decarbonisation: a preliminary analysis of the impact of COVID-19 on commodity-dependent developing economies

Abstract

Purpose This paper aims to offer a preliminary overview and analysis of the impact of the COVID-19 crisis on commodity-dependent developing economies (CDDEs). Using debt, decarbonisation and demand as empirical and analytical prisms to understand impacts and dynamics, the paper offers “rent space” as a theoretical tool to appreciate the changing possibilities for using resource rents for capital accumulation and expand development frontiers. It maps out the certain common features among this group of developing countries facing an increasingly adverse and uncertain situation. It offers a political economic perspective on the global dynamics and internal political situation that constrain these countries’ ability to manage the effects of this external shock that date to the 2008 crisis, and to therefore shore up an effective recovery in the coming years. Design/methodology/approach The paper draws together secondary literature and evidence from a number of sources including the World Bank, United Nations and International Monetary Fund on the empirical situation in these countries in view of COVID-19. The paper uses a thematic approach to understand how the current crisis has exposed these embedded and worsening vulnerabilities in this group of countries. Findings Results demonstrate the wide-ranging effects of COVID-19 as an existential crisis of demand in short and medium term, the explosion of debt due to actually occurring financialisation and the looming medium and long-term consequences of decarbonisation that may oblige countries to abandon exploitation of fossil fuel resources. Originality/value In the final analysis, COVID-19 has revealed a number of lingering effects of the commodity boom and global financial crisis. The increased indebtedness that resulted not only underscores the long-term unviability of commodity-based development as a strategy but also reveals new unprecedented weaknesses and challenges. Given the current configuration of global and domestic political economy dynamics, the paper shows that the “rent space” in fossil fuel exporters is particularly constrained and shrinking, compared to mineral exporters, but all showing a trend towards concentration in commodity production overall and worsening prospects for green recovery or industrial pathway.

The new ‘bond-age’, climate crisis and the case for climate reparations: Unpicking old/new colonialities of finance for development within the SDGs

“…Hence, enduring systemic vulnerabilities weaken the resource and fiscal outlay and capacity of both households and the state. In addition, the intentional and uneven integration of developing countries in the global financial system have resulted in increasing debt and financial speculation in developing countries that contribute to perennial vulnerabilities (UNCTAD, 2018; Kvangraven, Koddenbrock and Sylla, 2020;K. K. Perry, 2020c).…”

The New ‘Bond-Age’, Climate Crisis and the Case for Climate Reparations: Unpicking Old/New Colonialities of Finance for Development Within the SDGs

“…Kvangraven, Koddenbrock and Sylla, 2020; K. K. Perry, 2020c (Rodney, 1972;Girvan and Girvan, 1973;Amin, 1977). These factors that exacerbate misery and financial subordination and generate uneven geographies of devastation can be seen as continuity rather than major change in conditions.…”

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“…Since the beginning of the pandemic, millions of individuals have had to put both their lives and livelihoods on hold; in fact, as the pandemic continued into 2021, it was expected that more than 130 million individuals lived under the poverty level (UNCTAD, 2020). Moreover, as COVID-19 spread throughout the world, no sector of business or economy felt the damaging impact of the pandemic more than the Small and Medium-Sized Enterprise (SME) sector (Durst et al, 2021;Perry, 2021).…”