International dimensions
COVID-19 has exposed and exacerbated inequalities between countries just as
it has within countries. The least developed economies have poorer health
conditions, health systems that are less prepared to deal with the
pandemic, and people living in conditions that make them more vulnerable to
contagion, and they simply do not have the resources that advanced
economies have to respond to the economic aftermath.
The pandemic won’t be controlled until it is controlled everywhere, and the
economic downturn won’t be tamed until there is a robust global recovery.
That’s why it’s a matter of self-interest—as well as a humanitarian
concern—for the developed economies to provide the assistance the
developing economies and emerging markets need. Without it, the global
pandemic will persist longer than it otherwise would, global inequalities
will grow, and there will be global divergence.
While the Group of Twenty announced that it would use every instrument
available to provide this kind of help, the aid so far has been
insufficient. In particular, one instrument used in 2009 and easily
available has not been employed: an issuance of $500 billion in Special
Drawing Rights (SDRs). So far, it has not been possible to overcome the
lack of enthusiasm of the United States or India. The provision of SDRs
would be of enormous assistance to developing economies and emerging
markets—with no or little cost to the taxpayers of developed economies. It
would be even better if those economies contributed their SDRs to a trust
fund to be used by developing economies to meet the exigencies of the
pandemic.
So too, the rules of the game affect not just economic performance and
inequalities within countries, but also between countries, and in this
arena the rules and norms governing globalization are central. Some
countries seem committed to “vaccine nationalism.” Others, like Costa Rica,
are doing what they can to ensure that all knowledge relevant to addressing
COVID-19 is used for the entire world, in a manner analogous to how the flu
vaccine is updated every year.
The pandemic is likely to bring about a rash of debt crises. Low interest
rates combined with financial markets in advanced economies pushing loans
and profligate borrowing in emerging market and developing economies have
left several countries with more debt than they can service, given the
magnitude of the pandemic-induced downturn. International creditors,
especially private creditors, should know by now that you can’t squeeze
water out of stone. There will be a debt restructuring. The only question
is whether it will be orderly or disorderly.
While the pandemic has revealed the enormous cleavages across the countries
of the world, the pandemic itself is likely to increase disparities,
leaving long-lasting scars, unless there is a greater demonstration of
global and national solidarity. International institutions, like the IMF,
have provided global leadership, acting in exemplary ways. In some
countries too there has been leadership that has enabled them to address
the pandemic and its economic aftermath—including the inequalities that
otherwise would have arisen. But as dramatic as the successes have been in
some places, just as dramatic are the failures elsewhere. And those
governments that have failed internally have hampered the necessary global
response. As evidence of the disparate outcomes becomes clear, hopefully
there will be a change of course. The pandemic is likely to be with us for
a while and its economic aftermath for a much longer time. It’s still not
too late for such a change of course.
