The nations of the developed world have responded to the COVID-19 crisis by supporting their domestic economies and financial systems in bold and unprecedented ways, on a scale that would have been unimaginable three months ago.

In contrast, when the world’s finance and central bank governors convene virtually this week for the semi-annual International Monetary Fund-World Bank meetings, steps will be taken to fortify the international system. But nothing comparable to what countries are doing domestically.

Historians such as Charles Kindleberger have argued convincingly that it was a failure of international cooperation that made the depression of the 1930s “Great.” And even when there has been coordinated action in response to the crises that have occurred since, more often than not it has been taken after a huge human cost.

The Bretton Woods conference on reconstructing the international financial system came after the devastation of a world war. The Brady Plan for resolving the Latin American debt crisis was agreed to only after the region suffered a lost decade.

The 2009 London G20 meeting on the global financial crisis, however, demonstrated the value of early and coordinated action to limit the damage to the global economy, maintain trade, and support fragile emerging markets.

The next wave of the COVID-19 crisis will occur in the developing world. Around 900,000 are likely to die in Asia, and a further 300,000 in Africa, according to grim, but perhaps cautious, estimates from Imperial College London.

While social distancing is the West’s route to suppression of the virus, the developing world’s crowded cities and often overcrowded slums make isolation difficult. Advice on hand-washing means little where there is no access to running water. Without a basic social safety net, choices are narrow and stark: go to work and risk disease, or stay home and starve with your family.

But if the disease is not contained in these places, it will come back – in second, third, and fourth waves – to haunt every part of the world.

Pervasive economic and financial failure in emerging markets also threatens the viability of the supply chains on which all countries depend. Given its magnitude, emerging-market debt threatens the stability of a global financial system that is already dependent on strong central bank support.And with emerging markets accounting for more than half of global GDP, global growth is threatened as well.

Just as the US Federal Reserve and other major central banks have expanded their balance sheets in previously unimaginable ways, the international community needs this week to do, in former European Central Bank President Mario Draghi’s famous phrase, “whatever it takes” to maintain a functioning global financial system. At a time when the United States is borrowing an extra $2 trillion to meet its needs, it would be tragic if massive austerity was forced on an already-stressed developing world.

First « 1 2 3 » Next