Rich countries should respond to the coronavirus emergency by creating a new “Marshall Plan” of massive financial support aid for lower income nations, one of the world’s most respected development economists has argued.
Experts have warned that decades of progress in alleviating poverty and raising living standards in developing world are potentially in jeopardy not only because of the health impact of Covid-19 but also the disastrous knock-on impacts of the global recession.
Esther Duflo, who was awarded the Nobel prize in economics in 2019, told Econ Films’ CoronaNomics show that governments of countries in the global “south”, particularly in Africa, would need to mobilise huge cash support for suffering households in order to prevent destitution and hunger.
“I would advise for the richer countries to come behind the effort and help,” said Ms Duflo.
“We have the ability as a global community to avoid turning it into this catastrophe.”
“You want to think of it as a new Marshall Plan to help the countries in the south to bounce back from this crisis in the same way that Europe was able to bounce back from the World War Two crisis.
The Marshall Plan, named after the US Secretary of State George Marshall, was an unprecedented programme of financial assistance from America to shattered Western European nations, including West Germany, after the Second World War.
Historians regard it as a supreme act of enlightened self-interest by the US since it not only supported diplomatic allies but also helped to restore markets for its exports and underpinned the global post-war economic boom.
Ms Duflo added that part of the tragedy of the coronavirus crisis impact on developing countries was that it came at the end of a long period of improvement in living standards.
“It’s probably the biggest crisis in in my professional lifetime because otherwise the last three decades have been very good from the point of view of reducing poverty, hunger and child mortality,” she said.
The death toll in the developing world from the virus has so far been lower than feared, but the economic toll from government-ordered lockdowns and disruption to global trade has already been huge.
Emerging market currencies have slumped against the dollar, making imports much more expensive. The price of the raw materials that many export have plummeted too. Tourism, on which many poorer countries rely, has collapsed.
The United Nations has warned of a “hunger pandemic” as result of the economic dislocation, with an additional 130 million people pushed to the brink of starvation by the end of 2020.
The UN has called for rich countries to provide $2.5 trillion of support developing states, including grants, debt cancellation and emergency lending via the International Monetary Fund.
Achim Steiner, the head of the United Nations Development Programme, also appearing on CoronaNomics, said that there had been talk of solidarity from Western governments with the developing world but no action yet.
“The funding that so far has been made available in terms of additional funding is virtually zero,” he said.
Mr Steiner added that it was in the interests of the rich world to provide support for the developing world, particularly for their health systems, because if the disease is not under control everywhere on the planet it will likely return to their territories, causing a second outbreak.
“I think right now it’s the best investment that any country can make,” Mr Steiner said.
“It is in our self-interest, because otherwise we are fighting a losing battle right now.”
Watch the full CoronaNomics interview with Esther Duflo and Achim Steiner here.