Greater upheaval in post-pandemic world
The International Monetary Fund (IMF) and World Bank are holding their annual spring meetings this week amid the most extraordinary economic and political contexts in at least a generation. IMF Managing Director Kristalina Georgieva previewed these sessions last week, saying that the fund expects a complex, “multi-speed” recovery from the pandemic because economic fortunes are diverging so widely as a result of varying vaccination rates around the world.
She went on to warn that preexisting inequalities that have been exacerbated by the coronavirus crisis might lead not only to macroeconomic instability but also greater polarization, the erosion of trust in governments, and growing social unrest.
This troubled landscape reminds many of the aftermath of the 2007-2008 international financial crisis. The fallout from that shock was profound, not only economically; there was very significant international political turbulence, including the rise of anti-establishment populists riding an anti-globalization mood across much of the world.
The global economic shock from the pandemic has been even greater. Recognizing the challenges that lie ahead, Georgieva last week called on governments to give “everyone a fair shot” as they build on the extraordinary $16 trillion in global fiscal and monetary stimulus packages provided so far in 2020 and 2021. Without these, Georgieva said, the downturn would have been three times worse.
The remaining problem is, in her words, that economic prospects are “diverging dangerously,” with the global economy now in a multi-speed recovery that is increasingly powered by the US and China. However many other countries are falling behind, with new strains of the virus holding back growth prospects, especially in Europe and South America.
It is widely considered that the peak of the political aftershock that followed the 2007-2008 international financial crisis came in 2016, when Donald Trump was elected US president and the UK voted to leave the
EU. What was so striking about both of these events was that the actions of two countries previously known for political stability, and being traditional rule makers of the international order, caused the world to become a significantly more uncertain place. While 2016 might prove a defining year in the eyes of some historians, however, significant political volatility has been a feature of international politics for much of the post-financial crisis period. The most eye-catching examples of this were the political revolutions, popular uprisings and protests in emerging markets.
The IMF estimates that faster progress in ending the health crisis, including a more equitable sharing of vaccines, could add almost $9 trillion to the global gross domestic product by 2025. Georgieva last week highlighted the fact that only one country in Africa, Morocco, so far has started a program of coronavirus vaccinations.
Therefore while the window of opportunity to tackle the crisis remains partially open, it already seems likely there will be significant political consequences of the pandemic. In part this is because the salience of economic inequality has grown in many countries.