Denizens of Washington are familiar with the fall gathering of international leaders and development experts this week at the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group (WBG). The sea of suits that descend upon the financial institutions housed in the nation’s capital do little to suggest an approaching battalion, but the world is on fire – this is our Dunkirk.
The meetings this year could be business as usual, but they shouldn’t be. The money it seems is always there to bail out banks, subsidize fossil fuel companies or fund tax cuts for the wealthy. But is it there to help avoid the current global crisis? So far there is little sign of it and that raises issues of trust and justice in a divided and frightened world.
This is not what anyone would call a “normal” time. We wake up each day to the climate emergency: a new record broken, an alarming new milestone achieved. A trifecta of crises have engulfed our world – food, fuel, and financial – with ripple effects that touch every aspect of life. Russia’s invasion of Ukraine, the protests in Iran, the unfolding conflict in Ethiopia further reflect this singular moment. A cost-of-living crisis has placed 345 million additional people at risk of food insecurity. Soaring energy prices are fueling inflation and unrest, and the world is still slowly working through a recovery from the COVID-19 pandemic.
With the United States’ current domestic and foreign policy concerns, it is perhaps understandable that the problems of developing countries might take a back seat for American leadership.
Understandable but unwise given the inextricable nature of America’s compounding crises to those taking root globally. The current crises unfolding in the United States simply cannot be addressed without looking to global solutions, none of which are possible without U.S. leadership.
The international community pledged to vaccinate the world. That never happened. Only 17% of people in low-income countries have had their two initial shots, in contrast to the 72.8% in European and the United Kingdom. Last year, wealthy countries promised to re-channel $100 billion in unused special drawing rights (SDRs), a reserve asset, to the most vulnerable countries, giving them flexibility to manage domestic financial crises. To date, low- and middle-income countries have received nothing. The United States has failed to make its pledge, and the European Union continues to block multilateral banks like the African Development Bank from the runway it needs to finance regional development.
The structure of these institutions comes from an entirely different era and was not designed for sustainable development, or to tackle existential climate change amidst cascading crises. It perpetuates both the mindset and power dynamics of a bygone colonial age.
Debt service payments should be suspended for countries at high risk. The IMF’s Resiliency and Sustainability Trust must be operationalized immediately, to get recycled SDRs to low- and middle-income countries. A new round of $650 billion in SDRs should be released.
Multilateral development banks must increase lending to help countries deal with crises, and to ensure that solutions pursued support the zero-carbon future we so desperately need. If the changes to capital adequacy recommended by the G20 frameworks review are implemented, it could unlock as much as $1 trillion in additional funds.
Failure to do what is necessary is unacceptable, but not impossible to imagine. Civil unrest, state collapse, and multilateral breakdown could well be the consequences of our collective failure. Why would we condemn ourselves to a worse, more damaging, fate if we could take the necessary steps now to rebuild our international system, with a clear understanding of the gaps and a vision for the future that can be greater than the sum of its parts?
At this year’s U.N. General Assembly, Mia Mottley, Prime Minister to Barbados, put it best: “We must embrace a transparent framework that allows our people who are losing faith in their institutions and in the governance of this world that fairness means something.” That applies as much to the malaise in U.S. institutions as it does to the general state of the world.
American growth is incumbent on investing in a sustainable global future that recognizes the precariousness of this moment and rises to the challenges it presents. There is a path out of our collective crises, but it will take persistent and creative U.S. leadership to navigate it.