The President of the European Bank for Reconstruction and Development (EBRD) Sir Suma Chakrabarti and former UK Prime Minister Gordon Brown have called for greater international cooperation to deal with the impact across the globe of the coronavirus pandemic.
At a virtual EBRD seminar attended by some 300 international policy experts, Gordon Brown also said that the economic orthodoxy that had prevailed in the wake of the 2009 crisis was now changing as the international community looked to deal with the aftermath of Covid-19.
Mr Brown had been a key figure in delivering a global response to the 2008/09 financial crisis.
In an initial discussion with the EBRD President, Mr Brown said there was still a mismatch between the emergency and the scale of the international response.
Specific challenges that remained to be addressed by the international community included the question of a debt waiver for the world’s 76 poorest countries, ramped up lending by the international development banks and need for a cooperative exit strategy to create future growth.
Mr Brown said fiscal and monetary policies would have to be coordinated to address the aftermath of the crisis. With fiscal space limited in many countries and China not in a position to provide a third of the global stimulus as it had in 2009, coordination had to be greater than it is now to restore growth.
President Chakrabarti outlined the EBRD’s response and recovery programme that had been already unveiled in mid-March and which was due to be strengthened further this week. “The EBRD’s response has been swift and decisive,” Sir Suma said. But he too stressed the EBRD could not act in isolation.
“International cooperation is key in the global response to Covid 19,” he said, noting strong coordination and regular meetings among the main multilateral development banks.
On the question of greater acceptance of fiscal deficits and inflation as the world emerged from the crisis, Mr Brown said he believed economic orthodoxy had changed since 2009. Just as higher deficits might now have to be accepted, “We will probably have to be tolerant of a little bit more inflation”.
Mr Brown and the EBRD President also discussed the role of the state in economies in future global architecture and the possibility that some governments would aspire to take greater control. Mr Brown said the question now was not what governments wanted but what people expected from government.
Both stressed the need for a reassessment of the “social contract” as the crisis had highlight stark inequalities across the globe. Mr Brown noted the very poorest countries of the world were suffering most from this crisis.
More advanced countries could afford more easily to deal with the health crisis. In the poorer countries, there was often a choice between people working and risking the disease or staying at home and having no income, he said.