National Governments Have Gone Big. The IMF and World Bank Need to Do the Same.

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, and at 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 semiannual International Monetary Fund-World Bank meetings, there will be steps 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 “great.” And even when there has been coordinated action in response to the crises that have come since, more often than not it has come after huge human cost. Thus 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 only agreed to after the human cost of a lost decade for the region.

On the other hand, the 2009 London Group of 20 meeting on the financial crisis 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 be in the developing world. About 900,000 can be expected to die from coronavirus in Asia and a further 300,000 in Africa, according to grim and perhaps cautious estimates from Imperial College London.