Climate Finance

Front matter

Gareth Bryant and Sophie Webber

ECONOMIC TRANSFORMATIONS

Series Editors: Brett Christophers, Rebecca Lave, Jamie Peck, Marion Werner

Contents

Acronyms and abbreviations Acknowledgements

International climate politics and finance: beyond “gap talk” Capitalism and the rise of finance

The political economy of climate finance

Chapter 1

In contemporary global capitalism, both finance and climate change reach into every aspect of our lives. These two phenomena are increasingly coupled together as “climate finance” Finance is core to calculating and resourcing decarbonization and climate repair. Climate change is also now central to the way money flows across governments, businesses and households. Financial instability and crisis are, moreover, interlinked with multiplying climate impacts and tipping points. Climate finance has, in short, become integral to the political economy and economic geography of climate change. As finance has been positioned as the solution to climate change, different actors have engaged with climate finance to take competing positions on what the future of climate change and capitalism might look like. The different tools of climate finance that have emerged both reflect struggles over climate change and are actively shaping climate transition pathways. The politics of climate change is now being fought on the terrain of climate finance.

The Copenhagen 2009 and Paris 2015 Conferences of the Parties (COPs) to the United Nations Framework Convention on Climate Change (UNFCCC) were both monumental meetings for international climate politics and climate finance. As the global agreement among almost all countries to attempt to avoid “dangerous” climate change, the UNFCCC makes decisions and seeks progress through its annual COP meetings. At the Copenhagen COP in 2009, one of the major advances was a commitment by rich countries — which under the Convention are called Annex I, or developed and industrialized countries — to fund mitigation and adaptation actions in poor countries — called non-AnnexI, or developing countries. Initially, there was a commitment to provide US$30 billion per year of climate finance, and then up to US$100 billion per year by 2020. By the Paris COP in 2015, the Green Climate Fund (GCF), a newly established financial mechanism of the UNFCCC, was chosen to attract, distribute and programme this “climate finance’ Since then, the GCF has disbursed funding to more than 200 projects in 130 countries that seek to reduce emissions or facilitate adaptation, from increasing urban water supply to building solar photovoltaic (PV) power plants and much in between. Notwithstanding disagreements, including about governance and control and the balance between mitigation and adaptation projects, the GCF was widely celebrated as a step in the right direction towards recognizing the additional costs of climate change for poor countries.

By the Glasgow COP summit in late 2021, the US$100 billion pledge was again in the spotlight, this time for its numerous and systemic failures. Developed countries had fallen short of the annual US$100 billion target in climate finance: the Organisation for Economic Cooperation and Development (OECD), which tracks climate finance at the request of donor countries, found that only US$83 billion in climate finance was mobilized in 2020, building on approximately US$80 billion per year in 2018 and 2019 (OECD 2022a). Further, for critics, this figure is vastly inflated because it counts funding that is only barely related to climate change, is not additional to already committed development funding and it includes the value of loans that must be repaid. As a result, the international non-government organization (NGO) Oxfam argued that the climate finance mobilized was closer to US$20 billion per year (Carty, Kowalzig & Zagema 2020). There are also debates about the quality, character and benefit of the projects the GCF has supported. This failure in climate finance is a fundamental abrogation of responsibility from those who have caused climate change to those who will experience its impacts most acutely.

The GCF and other similar pledges have dominated public debate about climate finance. In this frame, climate finance references finance that goes from developed countries to developing countries as a reflection of commitments to the Convention and the base injustices of climate change. The goal of this climate finance is to cover the costs of adapting to climate impacts and decarbonization in countries that might not otherwise be able to afford it. This climate finance ought to be “new and additional” to any rich country’s existing development assistance to avoid double counting or greenwashing existing aid commitments. It is often assumed that climate finance is public, grant funding with no strings attached; however, the calculation of US$83 billion in climate finance mobilized in 2020 includes both loans and private sector “co-financing” for climate activities. Commonly, funding refers to resources such as grants or state allocations that are not repaid, whereas co-financing suggests financial terms around the repayment of debt, usually with interest, or ownership equity, to capture returns.

But let us put the US$83 billion in perspective. The UNFCCC defines “climate finance” as all public, private and alternative financing that supports mitigation and adaptation. Global flows of finance with some kind of climate goal well exceed the COP targets for international climate finance. As the non-profit research organization, the Climate Policy Initiative, shows in its oft-cited Global Landscape report, climate-related investments reached an estimated US$850—940 billion in 2020-21 (Climate Policy Initiative 2022). Both of these figures, in turn, fall well short of the costs of avoiding dangerous climate change. The Intergovernmental Panel on Climate Change (IPCC), the organization that assembles the latest scientific information on climate change for policymakers, estimates that keeping within 1.5°C of warming will cost an average of US$3.5 trillion per year (de Coninck et al. 2018). Then, add to that the costs of adapting to the climate impacts already baked into the climate system and compensation owed for loss and damage. In other words, the politics of climate finance as conventionally understood represent just a fraction of existing and necessary future investment flows and institutional configurations related to climate finance.

At the same time as the failings of the Copenhagen climate finance pledge were being tallied, other seismic transformations in finance linked to climate change were emerging. These transformations expanded the sphere of climate finance beyond political negotiations at UNFCCC meetings to the centres of the global financial system. In a speech to the 2019 Climate Action Summit at the United Nations (UN) General Assembly in New York, the former Governor of the Bank of England and UN Special Envoy for Climate Action and Finance, Mark Carney, announced that “a new, sustainable financial system is being built” (Carney 2019). Carney outlined three pillars of this emerging system: comprehensive disclosure of climate-related financial risks by companies, such as fossil fuel corporations; new and improved forms of climate risk management both by private sector financial institutions, such as banks, insurers and asset managers, and by financial governance institutions, including central banks and financial regulators; and sustainable investment that not only excludes fossil fuels but embraces the opportunities presented by supporting the transition to a climate-friendly economy.

A few months later in January 2020, Larry Fink, the Chief Executive Officer (CEO) of BlackRock, took up Mark Carney’s arguments. BlackRock is the world’s largest asset manager, controlling over US$8 trillion in assets. It is a shareholder in most major companies around the world. In his annual and widely read letter to CEOs, Fink wrote that he believed “we are on the edge of a fundamental reshaping of finance” (Fink 2020). Referring to the potential financial impacts of climate change on everything from municipal bonds to home mortgages and inflation rates, Fink stated that “investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk” Fink pledged to bring Carney’s pillars for a sustainable financial system into BlackRock’s operations, including integrating “environmental, social and governance” (ESG) measures into its investment portfolio, divesting from coal-focused companies, launching new “sustainable”

investment funds and voting against company managers and directors for failing to disclose and act on climate risks.

These announcements were not conjured up out of thin air. Divestment activists had coordinated a sustained programme of action against BlackRock and other financial institutions. These groups — from direct action environmental movement Extinction Rebellion to mainstream environmental NGOs such as Friends of the Earth — have piled pressure on BlackRock over recent years, compelling it to tackle climate change by “stopping the money pipeline” (Yearwood & McKibben 2020). Activists have highlighted the astonishing size of the fossil fuel assets under management at BlackRock and have lobbied for stock-market heavyweights to divest. In doing so, activists have made causal and global connections, linking BlackRock’s investment decisions to ecological destruction and dispossession, such as deforestation in the Amazon and the violation of Indigenous peoples’ rights.

The interventions from Carney, Fink and divestment activists are significant for the approach and argument developed in this book. First, they signal that climate finance is something that is embedded in and reshaping the core institutions of capitalism in a way that encompasses but far exceeds climate-related development finance, such as that of the US$100 billion climate finance pledge. The global geography of climate finance is not only one of fiscal transfers from the Global North to the Global South, but of investment and divestment. The ecological and economic effects of this emerging climate finance reverberate around the world through the capillaries of financial systems and commodity chains. In contrast, the billions of dollars that flow as climate-related development finance — while undoubtedly critical for the possibility of climate justice, for lives and ecologies in the Global South and the future course of global climate change — are dwarfed by the trillions in assets globally that are being made subject to climate change considerations. As Carney stated in his speech, although the shift to a new, sustainable financial system is not occurring fast enough to reach climate goals, climate change “will prompt reassessments of the values of virtually every financial asset” that will trigger a major reallocation of capital (Carney 2019). In divestment and environmental activist Bill McKibben’s description, Fink’s announcement may have caused a physical tremble in Manhattan, with the “sheer heft of ... money starting to shift” (McKibben 2020).

Second, these comments and actions signal which kinds of climate finance — in the broader sense — are becoming dominant, as climate change becomes increasingly central to capitalist finance. The focus on carbon disclosure, risk management and sustainable investing adds up to a vision for climate finance that privileges market-oriented climate action that is heavily influenced by conventional economic thinking. Private actors simply need better information to identify climate-friendly investments and reallocate capital accordingly. The role of state institutions is not to directly fund climate actions, but to create the architecture for markets to deliver efficient outcomes, to take on risks on behalf of the private sector to unleash the full potential of private investment. Carbon pricing may play a role, but this economic ecosystem comprises many, many more climate-mediated markets and financial tools. According to the dominant ideas and actors of climate finance, with these elements in place, climate change can be addressed and be highly profitable. As Fink bullishly outlined, “our investment conviction is that sustainability- and climate-integrated portfolios can provide better riskadjusted returns to investors” (Fink 2020).

Third, while Carney and Fink represent the dominant version of climate finance, their visions and agendas have been heavily contested by climate movements. BlackRock’s shift — at least at the level of discourse and policy — has faced scrutiny from environmental organizations and activists. BlackRock retains significant fossil fuel investments and has a record of voting against climate resolutions at company annual general meetings. A few months after Fink’s 2020 letter, protesters gathered outside BlackRock’s annual general meeting with banners reading “BlackRock: Hot Air on Climate” and “BlackRock: Stop Stealing our Future” (Corbet 2020). Carney too has felt the heat from climate activists. At the same climate summit that recognized the broken US$100 billion climate finance promise, COP26 in Glasgow in 2021, climate striker Greta Thunberg with activists from Greenpeace and the Indigenous Environment Network, walked out of an event hosted by Carney launching a taskforce aimed at scaling up voluntary carbon offset markets, shouting “no more greenwashing” and calling offsetting a “get out of jail for free card” (Shankleman & Ainger 2021). Significantly, pressure on finance has not only come from pro-climate action progressive activists. BlackRock’s climate rhetoric has come under fire from Republican politicians in the US who have threatened to divest funds under their control or outright ban climate-conscious investing.

Political contestation over climate finance often occurs on the terms of the finance sector. Divestment activists argue that fossil fuels are bad investments with unacceptable financial risks. Right-wing politicians argue that finance should not be politicized and should seek only to maximize returns. Financial institutions such as BlackRock are careful to position their statements in line with their fiduciary duties. Nonetheless, the emerging politics of climate finance has real impacts on financial markets and climate change itself. The structural decline of coal assets, for example, while a market phenomenon, cannot be separated from political heat applied over coal investments.

In this book, we follow these developments to take climate finance beyond the sphere of technocratic policy debates that seek to measure the size of financing “gaps” and categorize what is and is not “new and additional” We do not treat climate finance as a discrete — albeit major — component of international climate politics. Instead, we develop a political economy and economic geography account of climate finance that spans international climate finance, such as that represented by the GCF and its failed US$100 billion target, and climate-induced transformations in public finance, financial statecraft and financial markets. By examining these developments within the same analytical frame, we seek to bring climate finance into the realm of the political economy and geography of capitalist finance.

We argue that climate finance is an indicator and mediator of climate futures. In doing so, we follow a real shift taking place in global capitalism: climate change is becoming increasingly central to the operation of finance. Simultaneously, finance is becoming increasingly central to climate change. We trace a wide range of climate finance developments from the creation of new climate asset classes, climate disclosure, carbon pricing, climate tech start-ups, green monetary policy, and claims for repayment of climate debts. Across these and many other examples, we show how different configurations of climate finance are being positioned as the solution to climate change and how climate politics is taking place on and through the terrain of finance.

Thus, we grapple with both the opportunities and constraints that emerge by imagining and operationalizing climate futures through the lens of climate finance. The book introduces the political economy of climate finance through six “positions”: climate capital, climate risk, precision markets, speculative markets, big green states and climate justice finance. These positions are financial, geographical and political and act to configure different possible climate futures. Before we develop this argument and approach, let us first introduce in more detail how we got to this point.

INTERNATIONAL CLIMATE POLITICS AND FINANCE: BEYOND “GAP TALK”

The international climate policy architecture is now three decades old, with scientific advances, negotiations and deliberations proceeding for many years before that still. Over this period, the form of the UNFCCC has changed, as have the actors and institutions involved, the mechanisms drawn upon in response to climate change and the key debates and contests. Despite these changes, the problem of finance has remained central to climate policy throughout. Climate targets have become financial commitments. Accordingly, different responses to climate change are examined in financial terms: how will we pay for adaptation to climate impacts or just and sustainable transitions away from fossil fuels? What kinds of financial tools will we use to incentivize this action and where will this money come from? And thus, a bigger question for our analysis: how did it become a common-sense policy and political formulation to equate the state of the climate to the size of financial flows mobilized in its name?

Major scientific and diplomatic conferences and summits on climate change occurred throughout the 1970s and 1980s, with achievements including the creation of peak science-policy aggregator the IPCC in 1988. It was not until the early 1990s, however, that the global climate policy architecture was consolidated through the UNFCCC, which took effect in 1994. This phase in global climate policy history was one of “regime creation’, during which goals, key principles, actors and rules were agreed (Schroeder 2010). Accordingly, key institutions were established, including that the overarching goal is to avoid “dangerous” climate change, that responsibility for action to address climate change is “common but differentiated” and that the flexibility and efficiency of market mechanisms is paramount. Whereas the specifics of legally binding targets were debated for years to come in and beyond the COPs, these tenets remain in place today.

The global climate policy arena has subsequently evolved through numerous summits and new agreements. Since the original UNFCCC Treaty, followed by the 1997 Kyoto Protocol, climate change has gained momentum as a public policy and public concern, just as experienced and anticipated impacts have mounted. Political contestation over how to respond to climate change, however, has only intensified. As a result, the 2015 Paris Agreement no longer seeks formal commitments from states — which proved too high a hurdle for recalcitrant signatories. Rather, the Agreement allows signatory states to choose their own emissions reductions targets: their self-declaredand assessed nationally determined contributions. As with previous agreements, the nationally determined contributions of the Paris Agreement fall short of emissions reductions that might avoid “dangerous” climate change. During this period, debates about the role and form of climate finance have remained central, while financial tools and actors have grown in prominence. These debates include those about the role of markets, transfers of money to poor and vulnerable states and the prominence of non-state actors.

Market mechanisms for achieving greenhouse gas emissions reductions have been core to the international climate architecture for decades. The Kyoto Protocol included several market tools for reducing greenhouse gas emissions. Called “flexibility” mechanisms, these included the Clean Development Mechanism (CDM), Joint Implementation and Emissions Trading. Reflecting neoliberal common sense, markets for carbon (and carbon equivalents) were claimed to be the most efficient means of delivering emissions reductions. Market tools were the most politically acceptable option for North American proponents in particular, although the centre of gravity for carbon markets shifted to Europe in the years following the Kyoto agreement. These market mechanisms operate under the assumption that greenhouse gas emissions reductions are globally equivalent. As such, the mechanisms facilitated flexibility and least cost, by allowing countries to meet their emissions target through projects that reduced emissions in another, cheaper country.

Political economists and economic geographers of climate change have called the financial activity generated by the market mechanisms of the Kyoto Protocol — as well as regional and national carbon prices, trading schemes and voluntary offset markets — the “new carbon economy” (Boyd, Boykoff & Newell 2011; Boykoff et al. 2009). The critical research about this new carbon economy has revealed its uneven geographies; while the flexibility mechanisms operate with a kind of flat earth assumption about the interchangeability of emissions and reductions across space, the production, trade and benefits of markets in bundles of carbon are unevenly distributed (Pearse & Bohm 2014). Despite their long-standing, carbon markets remain patchy and volatile, subject to political whims of nation states and international agreements and policies (Bulkeley & Newell 2015). Perhaps most importantly, these market mechanisms have rarely delivered on their goals of inducing emissions reductions (Bryant 2019).

A second contestation over the international architecture relates to funding and finance for developing and vulnerable countries, including for adaptation, climate-resilient development and, more recently, loss and damage. As an arena for climate governance, adaptation was resisted or sidelined through the early stages of the UNFCCC process (Schipper 2006). This started to change throughout the 2000s, with recognition that future climate impacts were inevitable and some were beginning to be felt; this shift emerged with advocacy about vulnerability in developing countries, including by the Alliance of Small Island States. The first steps towards funding adaptation activities were taken in 1995, when the Global Environment Facility (GEF), the financial mechanism for the UNFCCC housed within the World Bank, was drawn upon to fund adaptation planning. Although the years that followed saw limited financial and project-based activity, the 2001 Marrakesh Accords established three funds to support adaptation: the Special Climate Change Fund for adaptation and other activities; the Least Developed Countries Fund to support adaptation actions and the production of national adaptation plans of action in least-developed countries; and the Adaptation Fund, which would receive funding through the CDM. The GEF is the trustee for these funds. These advances culminated in the US$100 billion pledge to fund adaptation and mitigation activities in developing countries agreed at the Copenhagen COP in 2009 — the target that was ultimately missed.

The politics of this adaptation funding and finance are lively. One area of disagreement relates to the balance of activities and funding for mitigation, adaptation and loss and damage. Mitigation and adaptation are often seen as opposing policy domains, the former related to attempts to reduce greenhouse gas emissions and the latter related to managing the impacts of climate change. Loss and damage is more vague, without an official definition under the UNFCCC. It is often used to refer to the consequences of climate change that are “leftover” after mitigation and adaptation actions and can include both intangible losses as well as quantifiable costs.

As developing and vulnerable countries have lobbied for, the GCF is supposed to equally allocate its funding and finance to adaptation and mitigation. However, it and other sources of climate finance continually and overwhelmingly prioritize mitigation projects, meaning that adaptation in vulnerable countries remains under-resourced. The frameworks for obligations to pay for adaptation also differ, with states supporting either principles of responsibility, capability, polluter pays, doing no harm, or payments for damage (Khan & Roberts 2013). Another area of contestation relates to counting and accounting for adaptation funding. On the one hand, in the words of the Paris Agreement, adaptation moneys should work towards “climate-resilient development” in combination with official development assistance. On the other hand, the UNFCCC declares consistently that funding for adaptation must be “new and additional” to development funding of any sort. Accounting systems for ensuring this is the case do not exist (Weikmans & Roberts 2019). Integrating adaptation funding and finance within the existing architecture of development assistance gives a lot of power to multilateral development banks and foreign aid agencies (Webber 2016). As a result, many vulnerable recipient countries have difficulty accessing funding, meeting administrative and bureaucratic requirements and achieving country-led adaptation.

A final trend and point of contestation in the international climate regime is the growing role of non-nation-state actors, in particular private finance. Since the early climate conventions, which centred nation-state actors, the sites and scales of climate governance have proliferated to include the citizen, urban, regional and intergovernmental level (Bulkeley & Newell 2015). Private financial actors, including industry, banks, institutional investors, asset managers and financial service providers, have become increasingly prominent over time. Where the lofty promises of various financial solutions to climate change have failed, state negotiators have typically sought to overcome these issues through greater involvement of private finance and investors (Bigger & Webber 2021). Funding adaptation and mitigation activities within the UNFCCC and its agreements is now a world of loans and investment underwritten by states but delivered by private finance (Gabor 2021b). Private finance sources and financialized tools have become solutions to both funding crises and political roadblocks within the international regime.

Debates about these different climate finance tools — markets, adaptation funding and the role of private finance — reflect a common mode of analysis of climate finance: “gap talk”. Gap talk seeks to organize climate finance into formal categories that describe its source (e.g. public or private), aim (e.g. mitigation or adaptation) or tool (e.g. grant or loan). The Global Landscape of Climate Finance reports from the California-based non-profit research organization, the Climate Policy Initiative, are indicative. These widely shared and cited reports diagram climate-related financial flows and investments (e.g. Climate Policy Initiative 2022). They show the overall size and trends in climate-related investments: year on year increases that nonetheless fall short of investment needs; the growing role of private finance; and, despite rapid increases, limited investment in adaptation. The overarching purposes of this gap talk are to calculate gaps between current flows of climate finance, according to different categories, and the estimated financial cost of responding to climate change.

Within this gap talk framework, the successes of adaptation and mitigation are measured explicitly in terms of financial throughput or mobilization. Rather than focusing on policy goals and project achievements, gap talk centres pledges and targets. Climate politics becomes a question of what can be counted as climate finance and how more can be mobilized. In this sense, gap talk is “prefigurative’, gesturing towards future climate finance flows to be “unlocked” or “tapped” and reorganizing state and inter-state action towards this task (Knuth 2015). Gap talk and its associated reports and analyses tell us a great deal about climate finance flows across space and time, including trends in the actors and financial tools involved. Importantly, the enormous quantity of monetary resources needed to fill financing gaps communicates the urgency and scale of action that is required. However, it tells us less about the political economy of climate finance, or the climate futures that different forms of climate finance might produce.

CAPITALISM AND THE RISE OF FINANCE

The dominance of gap talk reflects the that way finance has been positioned at the centre of climate politics and policy. This “financialization” of climate change has its roots in the broader, extraordinary rise of finance in the contemporary capitalist economy. In this book we refer to the particular kind of economy we are in as capitalism: an economic system based on a set of social relations dominated by privately owned production for profit, in which most officially valued work is done by workers for a wage (Stanford 2015). As an economic system, capitalism is embedded in four key social, political and cultural institutions: private enterprise, market exchange (including for labour), the money and credit system and the state (Ingham 2008) — all of which are punctuated by gendered, racialized and other inequalities, exclusions and oppressions. Importantly, capitalism is variegated across space, with different geographical “models” of capitalism and geographical unevenness within global capitalism (Block 2019). Capitalism is also variegated across time, with distinct periods of capitalism with their own financial histories, that intersect in important ways with climate change.

Thesecondhalfofthe twentieth century saw the creation ofa global financial architecture designed to support economic growth. Post-war growth drove what scientists of the Anthropocene describe as the Great Acceleration in human impacts on Earth systems, including the climate system (Steffen et al. 2015). Political economists instead trace the social and economic roots of climate change to the transition to capitalism itself — a phenomenon described as the Capitalocene (Moore 2016). Nonetheless, it was during post-war capitalism and its crisis-led restructuring that many of the institutional drivers of, and dominant solutions to, climate change were set in motion. Following the capitalist crisis period of the 1970s, neoliberal reforms elevated financial expansion as a goal in its own right. Widespread awareness of climate change and pressure for climate politics and policy emerged at the height of this neoliberal reform period that placed finance on the ascendency — a historical coalescence described by Naomi Klein (2014) as “bad timing” From this conjuncture, it is no surprise that finance became positioned as the essential solution to climate change.

The post-war financial order established national and international institutions that could manage the economy in the interests of its architects in the Global North (Panitch & Gindin 2012). Nationally, its genesis was in the eventual “New Deal” response by the US Government to the Great Depression of the 1930s. The US New Deal developed systems of financial regulation that sought to restrict and separate different financial activities and institutions; due to its coupling with public infrastructure investment, this approach has provided inspiration for more radical climate finance proposals for a Green New Deal (GND). In 1944, the Bretton Woods conference established an international financial and monetary system aiming to support post-war growth and financial stability, with the US at the helm. The Bretton Woods agreements established an international monetary regime in which currencies were fixed to the US dollar, in turn convertible to gold. The International Monetary Fund (IMF) and the World Bank Group were created to oversee post-war reconstruction and promote international economic cooperation. Governments developed their capacities to control the flows of investment and credit across national borders, enabling emerging economies to try to build national financial and economic capacity through state-led import substitution industrialization strategies.

Together, these financial arrangements underpinned what is often called the “golden age” of capitalism. High growth rates sustained a long boom across the advanced capitalist world, although with socially uneven effects both between and within borders. However, the Bretton Woods system came under strain in the 1970s as a stagflation crisis of increasing unemployment and inflation shook the global economy. Oil shocks, declining profits and productivity, financial imbalances and increasing labour conflict stressed the Bretton Woods system. In 1971, the US ended coverability of US dollars to gold, ushering in the system of flexible or floating exchange rates. A thirdworld debt crisis subsequently spread from Latin America across the developing world.

This crisis created the political-economic conditions for the neoliberal transformation of the global economy (Cahill & Konings 2017). Constraints on finance were liberalized, as the neoliberal state shifted towards its role as a facilitator of the expansion of private finance and financial “innovation” In the US, the New Deal era Glass-Steagall Act, which had separated commercial and investment banking practices, was circumvented and then repealed. The capital controls that were a hallmark of Bretton Woods were dismantled, enabling the globalization of finance. A new monetary regime saw central banks prioritize inflation targeting over goals such as full employment. Fiscal austerity rules of budget discipline constrained traditional channels of public investment, opening new avenues for states to instead subsidize private investment. The reregulation of organized labour engineered historic defeats for workers who were faced with decades of wage stagnation. Bretton Woods-era international financial institutions moved away from their original mandates and instead sought to enforce Washington Consensus policies of fiscal and monetary discipline and financial liberalization, opening up economies in the Global South to global markets. These policies were implemented as conditions for receiving debt restructuring or concessional loans and functioned to unevenly integrate developing countries into global trade, production and financial networks.