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Trade and Development Report 2008

Commodity Prices, Capital Flows and the Financing of Investment

image of Trade and Development Report 2008

The Trade and Development Report 2008, subtitled Commodity Prices, Capital Flows and the Financing of Investment” highlights the paradox that the “capital poor” developing world is exporting capital to the “capital rich” developed countries. The Report suggests shifting the focus in financial policies from households putting more money aside and imports of foreign savings, to the reinvestment of profits and credit creation through the domestic banking system.

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International capital flows, current-account balances and development finance

Heads of State and Government gathered in Monterrey, Mexico, in March 2002 committed themselves through the Monterrey Consensus, inter alia, to attract and enhance inflows of productive capital (para. 21) and to make debt sustainable (para. 47). The beginning of the millennium also saw the shift of developing countries as a group from net capital importers to net capital exporters. Indeed, since the Asian financial crisis in 1997–1998 capital has increasingly been flowing “uphill” – from poor to rich countries. The magnitude of this new phenomenon has caused some observers to conclude that some developing countries have been creating a global “savings glut” (Bernanke, 2005).

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