Facing crisis upon crisis: how the world can respond

Our institutions are committed to shared peace and prosperity—especially vital goals at this crucial moment for the world we live in.

To put it simply: we are facing a crisis on top of a crisis.

First, the pandemic: it turned our lives and economies upside down—and it is not over. The continued spread of the virus could give rise to even more contagious or worse, more lethal variants, prompting further disruptions—and further divergence between rich and poor countries.

Second, the war: Russia’s invasion of Ukraine, devastating for the Ukrainian economy, is sending shockwaves throughout the globe.

Above all is the human tragedy—the suffering of ordinary men, women, and children in Ukraine, among them over 11 million displaced people. Our hearts go out to them.

The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices. The war has made this much worse, and threatens to further increase inequality.

And for the first time in many years, inflation has become a clear and present danger for many countries around the world.

This is a massive setback for the global recovery.

In economic terms, growth is down and inflation is up. In human terms, people’s incomes are down and hardship is up .

These double crises—pandemic and war—and our ability to deal with them, are further complicated by another growing risk: fragmentation of the world economy into geopolitical blocs—with different trade and technology standards, payment systems, and reserve currencies.

Such a tectonic shift would incur painful adjustment costs. Supply chains, R&D, and production networks would be broken and need to be rebuilt.

Poor countries and poor people will bear the brunt of these dislocations.

This fragmentation of global governance is perhaps the most serious challenge to the rules-based framework that has governed international and economic relations for more than 75 years, and helped deliver significant improvements in living standards across the globe.

It is already impairing our capacity to work together on the two crises we face. And it could leave us wholly unable to meet other global challenges—such as the existential threat of climate change.

It is a consequential moment for the international community.

The actions we take now, together, will determine our future in fundamental ways. It reminds me of Bretton Woods in 1944 when, in the dark shadow of war, leaders came together to envision a brighter world. It was a moment of unprecedented courage and cooperation.

Source: International Monetary Fund

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