Gordon Brown’s initiative—which sees a number of public figures and leaders from around the world being invited to tackle the crisis unleashed by coronavirus—is worth highlighting.
In 2009, just over 10 years ago, as Prime Minister of the United Kingdom, Brown led the second Group of Twenty (G20) meeting in London in the midst of the global economic crisis. Just like the current crisis, it was a difficult time at which the group was seeking sustainable and universal recovery, without leaving any country out. To this end, the G20 agreed to increase the International Monetary Fund’s capital from 250 billion dollars to 750 billion dollars. How were those 500 billion dollars added? 250 billion came from an increase in the percentage contributions made by each country to the institution, and the other 250 billion came from special drawing rights.
This measure, plus the reduction of the interest rate and the injection of 100 billion into the World Bank and regional banks—such as the Inter-American Development Bank for Latin America and the Caribbean—managed to regulate global finance, something that the market had been unable to do.
Eleven years later, we are faced with a crisis of similar magnitude and severity; the difference being that this one is affecting the real economy and is immediately raising unemployment rates as a result of quarantine and isolation policies. The fact that 6,300,000 US citizens are filing for unemployment benefits after the first few weeks of lockdown in the United States says it all.
Gordon Brown is setting a challenge and urging those of us who have been or are currently in political positions to act quickly, as all healthcare systems—including the most advanced and best funded—are being stretched beyond capacity. Thus, the proposal involves injecting 8 billion dollars to tackle the pandemic: 1 billion to cover the urgent needs of the World Health Organization, 3 billion to develop vaccines, 2.25 billion for medical treatment, and the remainder to purchase medical materials and equipment.
What is novel about this proposal for capital injection is that it would see one single supranational institution taking charge of these actions. The World Health Organization would be responsible for coordinating the production, distribution and acquisition of medical supplies in order to cover global demand and regulate prices. The fact that the purchase and organisation of medical supplies and equipment would be in the hands of a single institution would ensure that all countries, including the poorest, have access to them. This is an important point if we look at the current war over the purchase of masks.
The proposal also involves taking measures to tackle the economic crisis. It seeks to give a broader group of central and regional banks access to currency-swap agreements in order to increase available resources. This means that countries would not settle their trade balances using US dollars, but swaps would be authorised as a means of payment, and liquidity would be reserved to tackle the pandemic. Thus, the IMF should use those currency reserves and make the entirety of its lending capacity (one trillion dollars) available. In turn, each of the central banks should lower their interest rates and grant loans to stimulate investment and growth in their respective regions. This combination of measures is central to the envisaged route out of the crisis.
Fortunately, Saudi Arabia, the country that currently holds the group’s presidency, has convened the G20 summit and—in an unprecedented move—organised a meeting via teleconferencing. At the next meeting, a resolution should be passed on the document submitted by Gordon Brown and the methods for implementing the measures, as well as the proportions according to which each member would contribute funds, should be established. At the same time, the World Bank, the IMF and the regional banks must play their part and, before September, establish mechanisms for implementing the proposed actions.
There is not much time. Hopefully the international institutions will rise to the challenge of responding to this pandemic with the force that it demands, because this crisis will not be overcome by defeating the disease in any one country alone, but by guaranteeing an end to the affliction throughout the world.