Early in the pandemic, experts projected that the world economy could shrink by almost 10% in 2020. Yet what played out was a contraction of 3.1%—still a huge loss of output, but not nearly as dire. To a large extent, this was due to international cooperation. Countries came together to diagnose the problem: a simultaneous shock to supply and demand. This meant that standard policy responses would not be sufficient. That’s why policy-makers took extra-ordinary fiscal and monetary measures to support businesses and households. Without this coordinated response, we would have faced another Great Depression. And without the global collaboration of scientists and health authorities, we would not have had effective vaccines in record time. When crisis strikes, as it has so often in the past three years, international cooperation can save lives and livelihoods, and lay the foundations for a faster recovery.
Both the financial response and the vaccines are representative of the broader benefits of decades of economic integration and cooperation, which also helped billions of people to become healthier, wealthier, and better educated. Over the past three decades, around 1.3 billion people were lifted out of extreme poverty. To get there, we had to reach across borders. Think of trade integration, spurred by lower trade barriers and the emergence of global supply chains. And think of the spread of new technologies and cross-border capital flows that have underpinned much-needed investment, especially in emerging and developing economies.
But this is only part of the story. The dislocations from trade and technological change have harmed some communities. Inward-looking policies and trade tensions have been on the rise for some years. And now geopolitical fragmentation is raising the specter of a “new cold war” that could see the world break into economic blocs at a cost of trillions of dollars in lost productivity.
In other words, unless we confront fragmentation, we are at risk of sleepwalking into a future that is poorer and less secure. And as we work to overcome these divisive forces, we must focus on the most vulnerable. This includes many countries in Africa and the Caribbean that are already bearing the brunt of climate change. Should they face this challenge alone, even though others contributed so much more to the climate crisis? Or consider the growing risk of a debt crisis in emerging and developing economies. Should they face this dire fiscal situation alone, even though most are being hit by external shocks rather than domestic policy missteps?
The answer must be no. The suffering of one country can easily affect others and threaten global growth. So it’s in everyone’s interest to urgently strengthen international cooperation on these vital issues. The IMF is founded on the principle that we are stronger together. Thanks to the collective will of our membership, we provided a record $650 billion allocation of Special Drawing Rights (SDRs), funds that allowed many vulnerable countries to maintain access to liquidity, freeing up resources to pay for vaccines and health care. And we are now helping countries with stronger reserves to channel their SDRs to countries whose need is greater.
For example, so far we have around $40 billion in pledges to support our new Resilience and Sustainability Trust, which will allow the IMF to provide long-term financing for the first time. Our goal is to help vulnerable low and middle-income countries build resilience against structural challenges such as climate change and pandemics. While we cannot prevent new shocks, we can bolster the resilience of our people, our communities, and our societies.
One thing is clear: we must overcome diminished trust and growing fragmentation, because no country should face these challenges alone. The pandemic showed us that we can cooperate to harness human courage, compassion, and ingenuity. And this is exactly how we can help build a better future for all people.
—As told to Belinda Luscombe
Georgieva is the managing director of the International Monetary Fund
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