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Debt Relief Is the Most Effective Pandemic Aid

Summary:
Just as the pandemic can be contained most effectively and least expensively with aggressive early action, the lesson from the past is that global recessions and their human costs are best addressed quickly and boldly. A two-year debt-payment moratorium for every emerging and developing economy that needs help would serve both goals. LONDON/CAMBRIDGE – The nations of the developed world have responded to the COVID-19 crisis by supporting their domestic economies and financial systems in bold and unprecedented ways, on a scale that would have been unimaginable three months ago. The Invisible Killers PS OnPoint Photo12/Universal Images Group via Getty

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Just as the pandemic can be contained most effectively and least expensively with aggressive early action, the lesson from the past is that global recessions and their human costs are best addressed quickly and boldly. A two-year debt-payment moratorium for every emerging and developing economy that needs help would serve both goals.

LONDON/CAMBRIDGE – The nations of the developed world have responded to the COVID-19 crisis by supporting their domestic economies and financial systems in bold and unprecedented ways, on a scale that would have been unimaginable three months ago.

In contrast, when the world’s finance and central bank governors convene virtually this week for the semi-annual International Monetary Fund-World Bank meetings, steps will be taken to fortify the international system. But nothing comparable to what countries are doing domestically.

Historians such as Charles Kindleberger have argued convincingly that it was a failure of international cooperation that made the depression of the 1930s “Great.” And even when there has been coordinated action in response to the crises that have occurred since, more often than not it has been taken after a huge human cost.

The Bretton Woods conference on reconstructing the international financial system came after the devastation of a world war. The Brady Plan for resolving the Latin American debt crisis was agreed to only after the region suffered a lost decade.

The 2009 London G20 meeting on the global financial crisis, however, demonstrated the value of early and coordinated action to limit the damage to the global economy, maintain trade, and support fragile...

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