Aurelia Butler

The World Bank Group leadership is under fresh fire from the US administration to step up its climate change efforts, after a blunt complaint from the US Treasury about its failure to take the level of action required.A letter to the international financial institution headed by Trump appointee David Malpass, seen by the Financial Times, says progress had been made to meet Treasury secretary Janet Yellen’s requests but there remained “specific gaps and room for increased climate ambition”.It also urges more “forceful and constructive leadership”. A US Treasury official said that while it “appreciated” the steps taken by the World Bank to advance climate ambitions over 2021, it had “continued to make clear” its position about the the bank falling short on its climate ambition.The US is the largest World Bank Group shareholder, and the only member nation that has a veto power over certain changes in the bank’s structure.The bank provides loans and grants to poorer countries and is seen as critical in distributing money to the developing world to help limit global warming as those economies grow. It has been increasingly criticised by the UN as well as climate experts for failing to align its funding activities with the ideal Paris agreement goal of keeping global warming to 1.5C since the 1800s. The US Treasury letter to World Bank senior management includes a series of requests about avoiding the financing of fossil fuel projects, in particular to help developing countries shift away from coal. The World Bank chose not to join the numerous countries and development banks that pledged at COP26 to end public financing for coal, oil and gas internationally this year, and the group’s climate plan does not include a deadline for phasing out direct and indirect fossil fuel financing.The letter also asks that the institution “only support gas investments in limited circumstances” and where there are “no other credible options”. Treasury officials have also made clear in meetings with civil society organisations that they are dissatisfied with the climate policies of multilateral development banks, and the World Bank in particular, according to a person familiar with the meetings. In an email to several non-profit organisations, a Treasury official said the department had been “pressing [World Bank] management to be more ambitious and proactive in a number of areas” such as “exercising greater [climate] leadership” and on the transition to clean energy.Under Malpass, the bank’s commitment to tackling climate change was criticised by UN special adviser Selwin Hart, who lambasted it at COP26 for being “an ongoing underperformer”. Former US president and climate expert Al Gore has described the bank as “missing in action”.The financial institution pushed for the joint statement by development banks at last year’s UN COP26 climate summit to be shortened and weakened, according to people with knowledge of the talks.The bank’s red tape has also made it difficult for developing countries to access financing related to climate change, say its critics. The letter from the US Treasury asks the bank to “significantly increase” funds available for climate adaptation and resilience. It also requests that the bank set “clear, specific and ambitious” targets for mobilising climate sector finance. Egypt’s finance minister recently told the FT that he believed multilateral development banks, such as the World Bank, were “not providing enough support on climate change, on financing”.“I would like to see better terms and better conditions and lower costs,” Mohamed Maait said. Conditions, such as the obligation on recipients to extensively monitor and report on the use of the money, created a substantial burden on countries with limited resources, he added. In response to the US Treasury letter, the World Bank Group said it was “committed to helping countries meet the goals of the Paris Agreement” and had “stepped up our [climate] financing”.“We will continue to work with client countries and international partners to support the transition to low-carbon, resilient growth, particularly for the poorest and most vulnerable countries,” the group said. More

Adam Smith, the father of modern capitalism, famously thought that fair markets required a shared moral framework between buyer and seller. That’s no surprise, considering that his ideas came out of the 18th-century marketplace, in which producers and consumers were likely to be neighbours. Advances in technology, transport and communications have taken us a long way since then, creating complex global supply chains. These have reduced consumer prices but introduced risks of their own, from market-distorting monopoly power to labour exploitation and environmental degradation.One of the costs of these supply chains — which exist in both physical products and also global capital — has been the rise of powerful corporate middlemen. These include companies like, for example, Cargill, which transports more than 200mn tonnes of food and other cargo a year, and any number of large financial institutions that package complex securities, Big Tech platforms like Amazon, giant retailers like Walmart or even the real estate brokers that intermediate between home buyers and sellers.These middlemen grease the wheels of capitalism, but also distort it in ways that are undermining our economy and society, argues Columbia University’s Kathryn Judge in her new book Direct: The Rise of the Middleman Economy and the Power of Going to the Source. Middlemen make it possible for us to “buy goods made on the other side of the world, build a diversified investment portfolio, order groceries from the comfort of our couch”, she writes. But this connective power is “undermining accountability” by creating so much separation between buyers and sellers that it’s impossible to tally the real cost of convenience and low prices.There are plenty of examples to support the case, from textiles made with child labour, to E. coli outbreaks in complex food supply chains, to the disproportionate rents taken by middlemen in financial services or platform technology. In the latter, information asymmetries make it difficult for market participants to have a shared understanding of what’s being bought and sold (another thing that Smith believed was a pre-requisite for well-functioning markets).Hyper-globalisation and extreme concentrations of corporate power are certainly factors behind market failures from the subprime crisis of 2008 to the supply-chain shortages of recent years. But Judge believes “the growth of the middleman economy” itself is the problem because it disintermediates responsibility, and even morality, within our market system.Consider, for example, how the landscape of public company stock ownership has changed in recent decades. In the US in 1950, only 6.1 per cent of such stock was held by institutions — the rest was owned outright by individuals who voted on matters such as who should sit on a board. Today, institutional middlemen like pension funds, mutual funds, hedge funds and so on, own 70 per cent of those shares. Most use two other large middlemen, the proxy advisers ISS and Glass Lewis, to tick the boxes on corporate voting matters despite efforts by the Securities and Exchange Commission to crack down on such “robovoting”. All this makes real corporate social accountability difficult.There are many other such examples. Is it any wonder that after decades of a market system controlled by middlemen focused on lower costs, higher risk adjusted returns and “efficiency”, we have more financial volatility, a growing number of supply-chain disruptions and a warming planet?The two big questions are how to create system change and who will bear the cost of it. There are no silver-bullet answers for either, though technology offers new possibilities to connect buyers and sellers. The rise of peer-to-peer lending, direct-to-consumer retailers and 3D printing which allow for shorter supply chains are all examples of this, though none currently provides anywhere near the scale to replace current systems of finance or manufacturing.A better and clearer tallying of the input costs of our current market system might help. Just as the now infamous 18th-century block print of a slaveholding ship showing humans packed foot to head in horrible conditions shifted how average individuals saw their sugar bowl, so the increasing amount of research revealing the correlations between things like cheap food and obesity, or fast fashion and landfill dumping, or complex securitisation and predatory lending, could help create demand for a fairer and more sustainable market system today.The challenges of inflation (which will push some consumers and policymakers back towards low prices as the sole metric of wellbeing) and inertia will be powerful headwinds against system change. Yet it’s important to remember that it is already happening in some areas, albeit slowly. As Judge, an expert in financial regulation, points out, we are only just beginning to process, some 15 years on from the 2008 crises, how cutting layers of complexity out of lending systems has led to more stable banks and less indebted consumers.Just as the subprime crisis led us to examine the costs of middlemen in finance, so today’s supply chain disruptions may force us to calculate the true cost of low prices in other goods and [email protected] More

Airports across Europe have struggled to cope with a post-pandemic rebound in demand, but British airports have been particularly hit by major disruption over the past week. Schools were on a half-term break and the country also had a long public holiday weekend to mark Queen Elizabeth’s 70 years on the throne.Shapps, who said earlier this week airlines should stop selling tickets for flights they could not staff, said the industry had to sort out the problem.”The industry itself needs to solve it,” he told BBC TV. “The government doesn’t run airports, it doesn’t run the airlines. The industry needs to do that.”Airlines had hoped for a bumper summer for passengers after two years of COVID-19 travel restrictions.But they have struggled to recruit staff after the turmoil of the pandemic, and complain it is taking longer to recruit new employees and vet them for security clearance. Shapps said staff cuts during the pandemic had gone too deep. “We’ll work with the industry very hard … to make sure we don’t see a repeat of those scenes,” he said.A change in the law was making it easier to deal with the administration needed for security clearance, he said, adding he did not envisage a need for the army to be called in to help speed up the security checks. More