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Enlightened self-interest

December 12, 2020
Turning Points
Bloomberg


This year, the world witnessed an epic abdication of global American leadership. Nations used to seeing the U.S. mobilize for disasters all across the globe—pandemics, hurricanes, earthquakes, floods—watched as President Donald Trump opted out of leading an international fight against Covid-19. Instead, he chose to defund the World Health Organization and bicker with China about the source of the coronavirus.

But it wasn't just America who dropped the ball. By the time the United Nations Security Council got around to discussing the pandemic, the virus had already spread to more than 200 countries and territories, killing 90,000. That number is now 1.6 million.

Now, as the first vaccines become available, there's a chance to salvage what's left of multilateral cooperation. A crucial test will be raising funds for a collaborative effort, overseen by the the WHO, to procure tests, therapies and vaccines to fight Covid-19 in the world's least developed countries. The so-called "Access to Covid-19 Tools (ACT) Accelerator" initiative needs $38 billion.

After a global appeal, it remains short by $28.2 billion.

Residents in Juba, South Sudan, attend a public health awareness demonstration on detection and prevention of the coronavirus held by UNICEF last April. 

Photographer: Alex McBride/AFP

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Without the funds, the pandemic will rage on in the world's poorest countries for years, pooling in reservoirs among unvaccinated populations to one day trigger a new pandemic.

The humanitarian case for giving could hardly be clearer: Underdeveloped countries, through no fault of their own, have been overwhelmed by a pandemic that emerged from the natural world, one which the International Monetary Fund warns could "wipe out a decade of progress reducing poverty." 

But if the case for altruism fails to sway wealthy countries, they should be motivated by self-interest. A report by the Eurasia Group calculates that the economic benefits that would accrue to 10 major economies by distributing vaccines to poor nations through the ACT Accelerator would be at least $153 billion in 2020-21, rising to $466 billion by 2025—around 12 times the $38 billion cost of the program.

Alex Kazan, an author of the Eurasia report, told me that the return-on-investment figures came from looking at the large benefits that flow to the rich world from poor countries, which buy everything from energy to education and tourism services. He's guardedly optimistic that rich countries will pitch in, once they've vaccinated their own populations and their economies are up and running. 

"Right now countries are focused internally," Kazan said. By the middle of next year, he thinks "there'll be a turn in focus—hopefully."

Thus far, a self-centered vaccine nationalism has trumped any collaborative spirit. Rich nations representing just 14% of the world's population have bought up 53% of all the most promising vaccines. The wealthiest countries have hogged enough doses to vaccinate their populations almost three times over by the end of next year (Canada tops the list, per capita, with enough to vaccinate its people five times over). Meanwhile, almost 70 poor countries might only be able to vaccinate one in ten people against Covid-19 next year.

"No one should be blocked from getting a life-saving vaccine because of the country they live in or the amount of money in their pocket," said Anna Marriott, an Oxfam official. "But unless something changes dramatically, billions of people around the world will not receive a safe and effective vaccine for Covid-19 for years to come."

Finance: Dollar Enters Dangerous Territory

One of the great ironies of the 2008 global financial meltdown was that even as the crisis raged, international money surged towards its epicenter—America—helping boost the dollar. Notwithstanding the fact that it was the U.S. that almost cratered the global economy, the greenback was almost universally seen as a safe haven. 

So it's a measure of the eroding faith among investors in the dollar, and the institutions that underpin its value, that the coronavirus pandemic has prompted a stampede into Bitcoin. Its price has more than quadrupled since March as investors look for alternatives to the world's primary reserve currency amid fears the Fed is debasing its value by endlessly printing money.

Ruchir Sharma. 

Photographer: Christopher Goodney/Bloomberg

Ruchir Sharma, Morgan Stanley Investment Management's chief global strategist, writes that the dollar is at a turning point. Last year, U.S. debts to the rest of the world surpassed 50% of its economic output, a threshold he said "that often signals a coming crisis." Since then, those liabilities have spiked to 67% of output—"deep in the warning zone." He adds that the dollar's reign "is likely to end when the rest of the world starts losing confidence that the U.S. can keep paying its bills."

Before cryptocurrencies became a contender to replace the dollar, however, there was much excited talk about whether the Chinese renminbi could be an alternative reserve currency. Renminbi boosters imagined its international role expanding along with China's globe-spanning Belt and Road Initiative, propelled by trade and investment contracts denominated in the Chinese currency.

That never happened: the vast majority of Belt and Road deals were denominated in dollars.

And now the initiative itself seems to be winding down. Data compiled by researchers at Boston University say that overseas lending from two of China's largest policy banks—the China Development Bank and the Export-Import Bank of China—has collapsed from a peak of $75 billion in 2016 to just $4 billion last year, according to an report in the Financial Times.

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