The guardians of the global economy came up short.
Facing what the
But critics faulted the Group of 20 for failing to adopt for the rest of the world the all-out approach they’ve embraced to help their own countries.
“I had modest expectations, which they significantly disappointed,” former U.S. Treasury Secretary
There’s a lot at stake. A timid G-20 response risks consigning the world to what former IMF Chief Economist
More than 100 of the IMF’s 189 member countries have asked for aid, the most ever. The fund already doubled its available rapid-financing lending to $100 billion to meet the demand, but the IMF says emerging markets need to spend at least $2.5 trillion. Their own resources won’t fully cover this, so they will need significant help.
It’s not that the IMF and
The World Bank, for its part, aims “to deploy as much as $160 billion over the next 15 months” to help developing nations cope with the health and economic emergency, President
One big piece missing from the initiatives adopted at the online meetings, according to some analysts: a fresh IMF issue of Special Drawing Rights -- its reserve assets, a bazooka to boost global liquidity.
The IMF last did this in 2009, when it issued $250 billion to ease a cash crunch during the financial crisis. The move has the backing of fund management and some European nations, but it requires 85% of the votes on the IMF’s 24-member executive board, and a proposed $500 billion SDR allocation was blocked by the IMF’s biggest shareholder: the U.S.
U.S. Treasury Secretary
The IMF now is looking at ways to move reserves from rich countries that got them in previous issues to the poor countries. One possibility is for the rich nations to donate reserves to the Poverty Reduction and Growth Trust, an interest-free account to help the poorest nations.
‘Not a Normal Time’
The U.S. favors grants over the creation of new SDRs, but
He also criticized the G-20 for not specifically pledging to avoid restrictions on trade in medical equipment and critical food supplies. That again is in contrast to 2009, when major nations agreed to eschew the sort of protectionist steps that aggravated the Great Depression, most prominently the Smoot-Hawley Tariff legislation in the U.S.
“The movement of nations to close their borders and hold their products within represents the closest brush with the kind of nationalist philosophy that animated the Smoot-Hawley trade death spiral that we’ve seen since the Second World War,” said Summers, a Harvard University professor and a paid contributor to Bloomberg News.
Former U.S. Treasury official
It isn’t only what the G-20 has failed to do. Critics contend that some of the steps it did take fell short. The debt-payment suspension for the world’s poorest nations lasts only through the end of the year, although the G-20 said it is open to extending it.
The moratorium covers governmental credit amounting to some $20 billion in relief, according to Saudi Arabia Finance Minister and G-20 Chairman
The institute -- a global trade association that counts the world’s biggest banks and financial institutions as members -- has said it is willing to join a temporary debt-payment suspension for poor nations. The trouble is that a lot of private creditors lie outside its ambit.
“I would have liked to have seen more leadership from the G-20 in organizing the process” for private-creditor debt relief, said Obstfeld, who is now a professor at the University of California at Berkeley, even as he called what the group did do a “very promising first step.”
Obstfeld said the debt standstill should be extended beyond the end of 2020 and broadened to include other better-off, but highly indebted, countries that might benefit. The World Bank Development Committee encouraged the bank and the IMF to look at ways to ease fiscal stress for middle-income countries on a case-by-case basis.
Looking further ahead, Summers said the approach the U.S. takes during the crisis could have “huge ramifications” for the philosophical contest going on between Western liberalism and Asian authoritarianism.
With China providing assistance throughout the world, “global stinginess on the part of the U.S. and the institutions it created may be long remembered,” he said, though he added that Beijing’s support may end up being seen as “self-serving and not very effective.”
“There are very high stakes,” confronting the G-20, Posen said. “If they could just get their act together, there are attainable goals that would make a material difference to how many lives are lost and how fast we recover.”
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