As states contemplate how to restart the global economy after the pandemic, it’s important to remember that we’ve been here before. The global financial crisis of 2008 didn’t cause as much social and economic harm as COVID-19 has, but it did force governments around the world to intervene in the economy, to limit the fallout from the crash.
Vital though these interventions are, states need to consider what a post-pandemic economy looks like. If handled correctly, it could be a once-in-a-lifetime opportunity to create a system that’s fundamentally fairer and more sustainable.
That would mean ensuring that climate action is baked in to stimulus packages and bailouts. There were similar ideas floated in the wake of the 2008 crash, but they only amounted to investments in green energy and infrastructure of around 16% of total fiscal stimulus spending.
Given the mounting urgency of the climate crisis, a post-pandemic recovery programme would need to be much more ambitious, ensuring a planned retreat from fossil fuels that reallocates employment into secure and socially useful work, while also making the global economy and supply chains more resilient to inevitable future shocks.
Before COVID-19, momentum around the world had been building for “a green new deal” – a programme of state-led investment to rapidly reduce emissions and economic inequality by creating green infrastructure and jobs.
Amid the recent turmoil, investors are looking for safe assets. Governments could finance a green overhaul of the economy by encouraging them to invest in low carbon infrastructure through “green bonds”. These could be issued directly by central governments, or through national or regional green investment banks. That investment could help transform the electricity system to integrate renewable energy generation, roll out charging points for electric vehicles, and build cycle networks and low-carbon housing.
With the nine-to-five rhythm of the weekday grinding to a halt, the lockdown has affected profound changes in energy demand. While the UK approaches its record for the number of days without generating energy from coal, now is a good time to restructure national electricity grids away from a centralised model, with fossil fuel power plants radiating energy outwards, to a model where energy generation is distributed among many sources of solar and wind, like rooftop photovoltaic panels and community-owned wind farms.
The pandemic has also exposed the fragility of the UK’s food supply, with its limited storage capacity, a just-in-time supply model, and dependence on imported food. Suddenly we’ve realised the social and environmental absurdity of flying and driving much of our food from big producers far away.
Many people have taken the initiative during this crisis to support small businesses and buy food from local suppliers. Economic stimulus measures could build on this by ensuring large public sector organisations that are anchored within communities, such as councils, colleges or hospitals, source their food from local producers. The Preston model of “re-localising” economic activity shows how it might be done.
While many people are stuck in their houses, thoughts have inevitably turned to home improvement. It wouldn’t cost a great deal for governments to roll out a mass home insulation effort after the crisis, targeting households which are struggling most with fuel poverty first. This would pay for itself in energy savings, and warmer homes would improve the health and well-being of many, while also creating green jobs that can’t be outsourced.
Despite the numerous declarations of “climate and ecological emergencies” in 2019, the pandemic of 2020 has shown what a global emergency looks like in real time – and how public resources can be leveraged to rapidly deal with it. While green investment and climate action were afterthoughts in post-2008 economic recovery programmes, they must be the guiding principle behind rebuilding the economy after the pandemic.
This is a concerted effort among news organisations to put the climate crisis at the forefront of our coverage. This article is published under a Creative Commons license and can be reproduced for free – just hit the “Republish this article” button on the page to copy the full HTML coding. The Conversation also runs Imagine, a newsletter in which academics explore how the world can rise to the challenge of climate change. Sign up here.
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
Author of the article:
Bloomberg News
Jonathan Ferro and Christopher Condon
Published Apr 18, 2024 • 2 minute read
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(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
Article content
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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Article content
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
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