Pakistani Prime Minister Imran Khan on Monday called upon wealthy nations to finance a more extensive rescue package for developing economies in the wake of the coronavirus pandemic.
Unfortunately, wealthy nations are grappling with trillion-dollar pandemic meltdowns of their own.
Khan is working with like-minded leaders to assemble a coalition at the United Nations to “commence consultations for proposing a comprehensive solution to the debt challenges of developing countries against the backdrop of Covid-19,” as Pakistan’s Dawn put it. His call for a bigger bailout plan than anything proposed to date was made during a phone conversation with Ethiopian Prime Minister Abiy Ahmed Ali.
“Global recession is imminent,” Khan told Ali, in a manner that suggested his intended audience was much broader than the prime minister of Ethiopia. “Developing countries would need a combination of additional measures to meet urgent financial requirements, sustain growth, strengthen fragile health systems as well as to save lives and provide social protection to those below the poverty line.”
Stimulus programs, loans, and debt relief for the underdeveloped world are naturally major topics of discussion as the pandemic grinds on. The International Monetary Fund (IMF) and World Bank are facing what the Wall Street Journal described as a “deluge of aid requests” from emerging markets. Appeals for a massive bailout have been made to the G20 assembly of the world’s largest economies as well.
Individual nations such as the United States, the European powers, and Japan have announced trillion-dollar global stimulus plans. As of Monday, over $10 trillion in bailouts were on the table to combat a global financial crisis the IMF compared to the Great Depression. Major industries that link the developed and developing world, notably including the airlines, are teetering on the brink of collapse. The world’s economic powerhouses have all taken massive hits from the coronavirus themselves, so their ability to protect and nourish poor economies is limited.
Largely absent in these bailout tallies is the country that should be compensating the world for the pandemic it unleashed, Communist China. The New York Times noted last month that while the rest of the world is “opening its wallet to fight the effects of the coronavirus outbreak,” the Chinese Communist Party (CCP) is “holding back” on both aid to developing nations and domestic bailouts.
To date, the CCP has been unmoved by even the most polite suggestions that it could win all sorts of public relations credit for itself by sending some no-strings-attached aid to developing nations. Deeply paranoid about the dangers of a global backlash against it, the CCP seems more interested in insulting and bullying every nation that asks tough questions about the origins of the coronavirus than winning brownie points by handing out financial aid.
Beijing has a habit of trumpeting its “medical aid” to countries ravaged by the Wuhan virus – even when the “aid” is actually sold at retail prices and proves to contain equipment of exceptionally shoddy quality – but it seems wary of getting on the hook for any significant economic assistance, perhaps because its own economy is in much worse shape than the CCP wants to admit, and it is reluctant to provide any form of assistance that could be interpreted as an admission of liability for the pandemic.
London School of Economics professors Maitreesh Ghatak, Xavier Jaravel, and Jonathan Weigal wrote at the New York Times in late April to warn that over $100 billion in capital has fled emerging markets since the beginning of 2020, and the coronavirus bomb is still ticking in areas like sub-Saharan Africa.
Many developing countries were already facing severe debt crises before the pandemic – along with some much more developed nations such as Turkey – so they have no way to marshal emergency spending for medical equipment and coronavirus-related economic relief. More loans, even at very reasonable disaster rates, would only increase their crushing debt burdens, making investors even less likely to take a gamble on them once the pandemic recedes.
Cautioning that the developed world cannot sustain the shocks from a string of insolvencies and economic collapses in developing nations, the professors recommended a new “Marshall Plan” to “transfer resources immediately to the developing world on a massive scale,” which they dubbed the “Global Solidarity Fund.”
This plan may face the same problem Pakistani Prime Minister Khan and his alliance are likely to encounter at the United Nations: nobody has one percent of GDP to spare and there will be few takers for a bailout scheme that asks nothing more of China than it does of Germany or even virus-ravaged Italy.
As other bailout proponents have noted, even attractively priced loans are tough sells to teetering, overextended developing economies, but without even the faintest promise of repayment, anything else is difficult to ask from developed countries grappling with their own coronavirus economic meltdowns.
The American people are looking at unemployment and GDP reports that look like something out of a feverish nightmare and watching major industries wobble on the edge of the bankruptcy void; in two months we went from an economy performing beyond expectations to a world in which the prosperity of 2019 seems like a thousand years ago, and we may need to accept that certain goods and services we took for granted on New Year’s Eve will simply cease to exist. Millions of people went from ambitious workers looking forward to career growth in a red-hot labor market to fearfully wondering if their jobs will ever come back.
From the perspective of macroeconomics, it’s true that if the coronavirus pushes the dominoes of insolvent Third World economies into a cascade collapse, the ensuing humanitarian calamity will horrify the compassionate people of the West and the fiscal shockwave will be felt on Main Street. The Chinese Communist Party’s irresponsible lies and lust for power have robbed those compassionate people of their ability to do much about it.
In the face of staggering unemployment reports like the one coming our way in America on Friday, there will be little enthusiasm for donating a percentage of our GDP to Pakistan or Africa, especially to countries that are already deeply in hock to China’s Belt and Road program of debt colonialism. Beijing should be expected to take care of its own colonial possessions. May it cost them every last coin in their treasuries, and in the secret offshore accounts of Xi Jinping and the rest of the Communist Party hierarchy.
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