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Dear Colleague,
In today's edition we hear how vaccines are only one step to ensuring a recovery from the crisis, an overview of our latest issue of Finance & Development, how global leaders are fighting corruption, the pandemic and developing countries, the benefits of scaled up COVID testing, how technology could widen gaps, wealth accumulation, among many other highlights. On that note, let's dive right in.
đŁ But first, starting today at 10:30 a.m. EST, the IMF will hold its sixth annual Richard Goode Lecture. The theme of this yearâs seminar is âRemaking the Post-COVID Worldâ presented by Professor Daron Acemoglu of the Massachusetts Institute of Technology. Watch it live here.
ACT DECISIVELY, ACT TOGETHER
Positive news on vaccines shouldn't invite complacency. Instead, countries need to act together and decisively on vaccine distribution, debt, and efforts toward a resilient and sustainable recovery, IMF Managing Director Kristalina Georgieva said Wednesday in a fireside chat with the Financial Times' Martin Wolf.
"Vaccines are wonderful, but they're not a magic wand," she said. "They don't wave all the problems just in a second. It will take time to be applied around the world. And this is why our main messages for 2021 are two. First do not withdraw policy support prematurely. Having vaccines is not the same as having applied them universally. And two, act decisively for vaccines to be as quickly available everywhere to everyone."
She noted that a partial, uneven recovery is still expected next year even with the promise of vaccines. But if vaccines are applied universally and as quickly as possible, it would give a $9 trillion boost to global output between now and 2025, she said.
The global financial system is resilient but financial stability can't be taken for granted. She outlined three areas policymakers should be focused on: the risks of low interest rates over a long period (the subject of a recent IMF departmental paper), the need for growth momentum to encourage lending in a low-rate world, and insufficient regulation of non-banking financial intermediaries.
A changing orthodoxy: "I donât think there are many cases in the history of the Fund where the managing director would be appealing to countries to spend more," the MD said in an interview where she was recognized as a Bloomberg 50 honoree, reiterating her appeal that countries spend to support their people but keep the receipts.
Along those same lines, she said one of her worries for next year is that policy support is withdrawn too soon or too early. Her second worry: "That we will miss an opportunity for transformation."
"2021 can be a fantastic year for the future of the world," she said, specifically naming efforts to address climate change and inequality.Â
A green, job-rich recovery:Â The MD joined with Rajiv Shah, president of The Rockefeller Foundation and former administrator of the US Agency for International Development, to make an appeal for a strong, coordinated, green public investment push.
"A debt-financed green investment plan combined with carbon pricing could actually boost economic growth for many years, creating around 12 million net new jobs through 2027," they wrote in an op-ed in Fortune Magazine.Â
Bringing back Bulgarian cuisine:Â In a conversation with CNN host Fareed Zakaria, the MD reflected on how the pandemic has changed life for her on a personal level.
"Personally I cannot say that my workday has shortened in spite of the fact there is no commute," she said. "The days can become long, the nights can become somewhat shorter. The biggest change for me has been making sure I connect to our team and I connect to my family."
"On a more pleasant side, I remember that I can cook," she added.
FINANCE & DEVELOPMENT: THE FUTURE OF JOBS AND OPPORTUNITY
Our December issue of Finance & Development is out this week. In its pages, we explore what can be done to shape a better tomorrowâone that puts people at the center of policy. From health to education to labor market policies, there is a deep need for redesigning society after COVID-19. Of the trends that have been exacerbated by the pandemic, inequality is one of the starkest, with uncertain but significant ramifications for the future. We focus on the transformative policies needed to reimagine the world of work and reduce inequality while building on the lessons learned during the crisis.
"In the deepest crises are born great opportunities. This is such a momentâa window for radical change, not to be squandered. In weeks to come, decades can happen," writes F&D editor-in-chief Gita Bhatt.
Reforms must focus on creating higher-quality jobs for more people in more places, says Martin Sandbu. âWork must be central because it is where many of the chronic and pandemic-related economic challenges intersect: inequality, precarity, and the new informality; geographic disparity; and technological change,â he writes.
The IMFâs Kristalina Georgieva highlights the importance of investing in women and young people and enhancing education, training, and re-skilling to open up opportunities.
Common threads run through the other articles. Heather Boushey and Lawrence Mishel argue for policies that strengthen worker power. Sabina Dewan and Ekkehard Ernst, who survey the economic fallout from the pandemic in developing economies, call for improved social protection and social insurance, especially for gig and informal workers. Binyamin Appelbaum shares his point of view on the role of economics in analyzing the inequities of distribution and incorporating insights from other disciplines.
Other contributors urge increased healthcare and childcare support; better designed progressive taxation to address income inequality; and scaled up investment in digital access as well as green technologies that would create new jobs in the process.
Read the full issue here.
KEEPING UP THE FIGHT AGAINST CORRUPTION
IMF Managing Director Kristalina Georgieva participated in the 19th International Anti-Corruption Conference this week. The event is organized every two years by Transparency International in partnership this year with the Republic of Korea. The event brings together around 3,000 participants from government, civil society, and the private sector to discuss the latest challenges and solutions to tackle corruption. This yearâs theme is âDesigning 2030: Truth, Trust & Transparency.â
The MD laid out a four-pronged approach for ensuring that funds being disbursed amid the crisis are going to their intended use.
"It is especially important to zero in on corruption in the midst of this crisisâthe worst health and economic crisis of our lifetimes," she said in her opening remarks. "There is so much suffering that every penny counts towards saving lives and protecting livelihoods."
The MD attended the opening plenary alongside AntĂłnio Guterres, Secretary General of the United Nations; Ban Ki-Moon, Professor at Yonsei University and former UN Secretary; JosĂŠÂ Ăngel GurrĂa, Secretary General of the OECD; Mari-Elka Pangestu, Managing Director at the World Bank; Masatsugu Asakawa, President of the Asian Development Bank; and Børge Brende, President of the World Economic Forum.
Watch the opening plenary here.
HOW SCALED UP TESTING COULD SAVE LIVES AND THE ECONOMY
The fact that the poor have been harder hit by the COVID-19 pandemic is well established, but IMF staff research finds that widespread and rapid testing could dramatically mitigate the impact on those forced to work on the front lines of infection.
"Our research shows that if half of asymptomatic infectious people were identified, deaths would be reduced by almost three-fourths within a year. Poor people benefit the most, with their COVID-19 fatality rate dropping by about three-fourths with improved massive testing, compared to a fall of about a half for the more well off," the IMF's Allan Dizioli, Michal Andrle, and John Bluedorn write in a new blog this week.
A more consistent testing approach could also lessen economic damage, according to the simulation. The economic hit caused by the pandemic shrinks to just 3.3 percent of GDP if 50 percent of the asymptomatic infectious are identified through testing and isolate to reduce contagion. This is achievable with a test with an 80 percent true positive rate (sensitivity) if about 60 percent of the whole population could be tested weekly.
ENSURING THE ROBOT REVOLUTION BENEFITS ALL
Artificial intelligence, machine learning, robotics, big data and other technologies are leading to an inevitable change in production processes, but lead to a growing divergence between advanced and developing economies.
"Our recent staff research finds that new technology risks widening the gap between rich and poor countries by shifting more investment to advanced economies where automation is already established. This could in turn have negative consequences for jobs in developing countries by threatening to replace rather than complement their growing labor force, which has traditionally provided an advantage to less developed economies," the IMF's Cristian Alonso, Siddharth Kothari, and Sidra Rehman write in a new blog.
The finding underscore the importance of investing in education and skills training to prevent divergence and point to potentially different growth dynamics among developing economies with different skill levels. The landscape is likely going to be much more challenging for developing countries which have hoped for high dividends from a much-anticipated demographic transition.
THE RICH GET RICHER
Read a recent Chart of the Week Blog detailing how wealthy individuals are able to accumulate even more wealth.Â
"A paper co-authored this year by economists from the IMF and other institutions confirms that wealthier people are more likely to earn higher returns on their investments. It also shows that the children of wealthy people, while likely to inherit that wealth, arenât necessarily going to make the same high returns on investments," the IMF's Davide Malacrino writes in the blog.
Detailed data on wealth are extremely rare, but 12-years of tax records from Norway have opened a new window into wealth accumulation for individuals and their offspring. The data show that an individual in the 75th percentile of wealth distribution who invested $1 in 2004 would have yielded $1.50 by the end of 2015âa return of 50 percent. A person in the top 0.1 percent would have yielded $2.40 on the same invested dollarâa return of 140 percent.
MARK YOUR CALENDAR: THE PANDEMIC IN DEVELOPING COUNTRIES
The IMF's Research Department will host a virtual conference on Dec. 9 looking at the COVID-19 pandemic in developing countries. The event will aim to open avenues of communication between the IMF and policymakers, civil society organizations, youth leaders and other stakeholders in developing economies. IMF Chief Economist Gita Gopinath will host a fireside chat on containing the virus in developing countries with Marc Lipsitch, director of Harvard University's Center for Communicable Disease Dynamics.
The conference, being held in conjunction with United Kingdom's Foreign, Commonwealth and Development Office will also feature a session on pandemic policies for people, featuring Reza Baqir, Governor of the State Bank of Pakistan; Rachel Glennerster, Chief Economist, UK FCDO; Ricardo Hausmann, Director of the Growth Lab at Harvard's Center for International Development; Patrick Ngugi Njoroge, Governor of the Central Bank of Kenya; and moderated by Adva Saldinger, Senior Reporter for Devex;
Another session will feature civil society representatives and local activists speaking about the impact of the crisis on their communities. A final session focusing on strategies for a resilient recovery will feature IMF Managing Director Kristalina Georgieva; Action Aid International Chair Nyaradzayi Gumbonzvanda; Senegal Minister of Economy Abdoulaye Diallo; and will be moderated by Eleni Giokos, Correspondent for CNN Africa.
We are eager to hear your questions for the panelists. Please submit any to me in advance of the event.
The full event, which will start at 9 a.m. EST, will be live streamed here.
PODCAST: SIGNPOSTS IN THE FOG
COVID-19 has shown the important role that data and statistics play in assessing the disruptions caused by the pandemicâeconomic and otherwiseâand implementing measures to mitigate its impact. In this podcast we hear more from Oxford University Professor of Globalization and Development Ian Goldin's keynote speech at the recent IMF annual Statistical Forum. In this podcast, Goldin says bouncing back should not imply resorting to pre-pandemic approaches but to set out on a new and more sustainable path.
Listen to the full podcast here.
NEW: IMF INFRASTRUCTURE GOVERNANCE PORTAL
Countries can lose over 1/3 of potential benefits from infrastructure investment due to inefficiencies. Infrastructure investment also has a critical role to play in facilitating a strong economic recovery.Â
Check out our new portal aimed at helping countries improve the quality of their investments in infrastructure.Â
IMF LENDING
Check out our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19. We are also regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMFâs Executive Board.
To date, 78 countries have been approved for emergency financing, totaling over US$31 billionâthe most recent approval was in the amount of US$185 million to Nicaragua to address the impact of the COVID-19 pandemic. Looking for our Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notesâmore than 50 to dateâby IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more.
FINAL THOUGHT
Thank you again very much for your interest in the Weekend Read. We really appreciate your time. If you have any questions, comments or feedback of any kind, please do write me a note.Â
And if you're on LinkedIn, subscribe to this newsletter in a more đ visual format.
Sincerely,
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