The social impact of the global financial crisis brought global and domestic financial systems into public focus. While over the last ten years governments have introduced a range of regulatory reforms, there are still low levels of public trust in financial sectors, and academics continue to express their concerns about financial systems and their desire for more influence. This is particularly the case for those framing their evaluation of the quality of financial systems in terms of social values. This article offers those seeking more influence over the social values of financial systems, a fresh perspective on their available strategic options for influencing outcomes. It argues that they should consider strategies aimed at making allies of financial sectors and regulators in influencing change. The main advantage of these alliance strategies is that they address key constraints to influence, as identified in existing scholarship, which are difficult to relax because they are tied to features inherent in financial systems. By addressing these constraints, alliance strategies could increase the likelihood that financial system outcomes align more closely with their preferred social values.

An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of COVID-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.

This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.

This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.

Now, the disjointed global economic response to COVID-19, with its enormous ramifications for global prosperity and economic stability, has blown into the open the urgent need for an immediate reaffirmation of international political and economic cooperation.

What is needed is a clear, coordinated and public statement from the leaders of the world’s major countries affirming the many things on which they do already agree, and some on which they should be able to agree.

In particular that:

• they will give the strongest possible support for the WHO in leading the medical response internationally;
• they will be transparent and tell the truth to their peoples about the progress of the disease and the threat that it represents;
• they will work together and with the international financial institutions to provide businesses, particularly SMEs, and individuals whatever support they need to get through the immediate crisis and avoid long-term damage to the global economy; 
• they will ensure the financial facilities for crisis support to countries - whether at global or regional level - have whatever resources they need to support countries in difficulty;
• they will avoid new protectionist policies - whether in trade or finance;
• they commit not to forget the poor and vulnerable in society and those least able to look after themselves.

Such a statement could be made by G20 leaders, reflecting the group’s role since 2010 as the premier forum for international economic cooperation.

But it could be even more appropriate coming from the UN Security Council, recognising that COVID-19 is much more than an economic challenge; and also reflecting the practical fact, in a time when international travel is restricted, the UNSC has an existing mechanism in New York to negotiate and quickly agree such a statement.

A public statement by leading countries could do a great deal to help arrest a growing sense of powerlessness among citizens and loss of confidence among businesses worldwide as the virus spreads.

It could also set a new course for international political and economic cooperation, not just in relation to the virus, but also other global threats with potentially devastating consequences for economic growth and political stability in the coming years.

Linked to the call for a global response to the Covid-19 pandemic that I, Robin Niblett and Creon Butler have outlined, the case for a specific dramatic economic policy gesture from many policymakers in large economies is prescient.

It may not be warranted from all G20 nations, although given the uncertainties, and the desire to show collective initiative, I think it should be G20 driven and inclusive.

We need some sort of income support for all our citizens, whether employees or employers. Perhaps one might call it a truly People’s QE (quantitative easing).

Against the background of the previous economic crisis from 2008, and the apparent difficulties that more traditional forms of economic stimulus have faced in trying to help their economies and their people - especially against a background of low wage growth, and both actual, and perception of rising inequality - other ideas have emerged.

Central banks printing money

Both modern monetary theory (MMT) and universal basic income (UBI) essentially owe their roots to the judgement that conventional economic policies have not been helping.

At the core of these views is the notion of giving money to people, especially lower income people, directly paid for by our central banks printing money. Until recently, I found myself having very little sympathy with these views but, as a result of COVID-19, I have changed my mind.

This crisis is extraordinary in so far as it is both a colossal demand shock and an even bigger colossal supply shock. The crisis epicentre has shifted from China - and perhaps the rest of Asia - to Europe and the United States. We cannot expect policies, however unconventional by modern times, such as the dramatic monetary steps announced by the Federal Reserve Board and others like it, to put a floor under this crisis.

We are consciously asking our people to stop going out, stop travelling, not go to their offices - in essence, curtailing all forms of normal economic life. The only ones not impacted are those who entirely work through cyberspace. But even they have to buy some forms of consumer goods such as food and, even if they order online, someone has to deliver it.

As a result, markets are, correctly, worrying about a collapse of economic activity and, with it, a collapse of companies, not just their earnings. Expansion of central bank balance sheets is not going to do anything to help that, unless it is just banks we are again worried about saving.

What is needed in current circumstances, are steps to make each of us believe with high confidence that, if we take the advice from our medical experts, especially if we self-isolate and deliberately restrict our personal incomes, then we will have this made good by our governments. In essence, we need smart, persuasive People’s QE.

Having discussed the idea with a couple of economic experts, there are considerable difficulties with moving beyond the simple concept. In the US for example, I believe the Federal Reserve is legally constrained from pursuing a direct transfer of cash to individuals or companies, and this may be true elsewhere.

But this is easily surmounted by fiscal authorities issuing a special bond, the proceeds of which could be transferred to individuals and business owners. And central banks could easily finance such bonds.

It is also the case that such a step would encroach on the perception and actuality of central bank independence, but I would be among those that argue central banks can only operate this independence if done wisely. Others will argue that, in the spirit of the equality debate, any income support should be targeted towards those on very low incomes, while higher earners or large businesses, shouldn’t be given any, or very little.

I can sympathise with such spirit, but this also ignores the centrality of this particular economic shock. All of our cafes and restaurants, and many of our airlines, and such are at genuine risk of not being able to survive, and these organisations are considerable employers of people on income.

It is also the case that time is of the essence, and we need our policymakers to act as soon as possible, otherwise the transmission mechanisms, including those about the permanent operation of our post World War 2 form of life may be challenged.

We need some kind of smart People’s QE now.

The measures taken to limit the spread of the coronavirus - in particular social distancing -  come with significant economic costs, as the drop both in demand for goods and services and in supply due to workers being at home sick will create a short-term economic shock not seen in modern times.

Sectors that are usually less affected by regular economic swings such as transport and tourism are being confronted with an almost total collapse in demand. In the airline sector, companies are warning they might only be able to hold out for a few months more.

Building on the calls to provide income support to all citizens and shore up businesses, European leaders should now be giving explicit permission to the European Central Bank (ECB) to provide whatever financial support is needed.

Although political leaders have responded to the economic threat, the measures announced across the continent have mainly been to support businesses. The crisis is broader and deeper than the current response.

Support for weaker governments

The ECB already reacted to COVID-19 by announcing measures to support the banking system, which is important to guarantee the continuity of the European financial system and to ensure financially weaker European governments do not have to confront a failing banking system as well.

Although government-subsidised reduced working hours and sick pay are a solution for many businesses and workers, crucially they are not for those working on temporary contracts or the self-employed. They need direct income support.

This might come down to instituting something that looks like a universal basic income (UBI), and ensuring money keeps flowing through the economy as much as possible to help avoid a cascade of defaults and significant long-term damage.

But while this is likely to be the most effective remedy to limit the medium-term impact on the economy, it is particularly costly. Just as an indication, total compensation of employees was on average around €470bn per month in the eurozone last year.

Attempting to target payments using existing welfare payment channels would reduce costs, but is difficult to implement and runs the risk of many households and businesses in need missing out.

The increase in spending and lost revenue associated with these support measures dwarf the fiscal response to the 2008-09 financial crisis. The eurozone economy could contract by close to 10% this year and budget deficits are likely be in double digits throughout the bloc.

The European Commission has already stated member states are free to spend whatever is necessary to combat the crisis, which is not surprising given the Stability and Growth Pact - which includes the fiscal rules - allows for such eventualities.

Several eurozone countries do probably have the fiscal space to deal with this. Countries such as Germany and the Netherlands have run several years of balanced budgets recently and significantly decreased their debt levels. For countries such as Italy, and even France, it is a different story and the combination of much higher spending and a collapse in tax revenue is more likely to lead to questions in the market over the sustainability of their debt levels. In order to avoid this, the Covid-19 response must be financed collectively.

The Eurogroup could decide to use the European Stability Mechanism (ESM) to provide states with the funds, while suitably ditching the political conditionality that came with previous bailout. But the ESM currently has €410bn in remaining lending capacity, which is unlikely to be enough and difficult to rapidly increase.

So this leaves the ECB to pick up the tab of national governments’ increase in spending, as the only institution with effectively unlimited monetary firepower. But a collective EU response is complicated by the common currency, and particularly by the role of the ECB.

The ECB can’t just do whatever it likes and is limited more than other major central banks in its room for manoeuvre. It does have a programme to buy government bonds but this relies on countries agreeing to a rescue programme within the context of the ESM, with all the resulting political difficulties.

There are two main ways that the ECB could finance the response to the crisis. First, it could buy up more or all bonds issued by the member states. A first step in this direction would be to scrap the limits on the bonds it can buy. Through self-imposed rules, the ECB can only buy up to a third of every country’s outstanding public debt. There are good reasons for this in normal times, but these are not normal times. With the political blessing of the European Council, the Eurosystem of central banks could then start buying bonds issued by governments to finance whatever expenditure they deem necessary to combat the crisis.

Secondly, essentially give governments an overdraft with the ECB or the national central banks. Although a central bank lending directly to governments is outlawed by the European treaties, the COVID-19 crisis means these rules should be temporarily suspended by the European Council.

Back in 2012, the then president of the ECB, Mario Draghi, proclaimed the ECB would do whatever it takes, within its mandate, to save the euro, which was widely seen as a crucial step towards solving the eurozone crisis. The time is now right for eurozone political leaders to explicitly tell the ECB that together they can do whatever it takes to save the eurozone economy through direct support for businesses and households.

In the last 100 years, global economic crises from the Great Depression of the 1930s to the 2008 financial crash have contributed to significant political changes in Europe, often leading to a rise in popularity for extremist parties and politics. As Europe contends with a perceived crisis of democracy - now compounded by the varied responses to the coronavirus outbreak - how should we understand the relationship between externally-driven economic crises, political upheaval and democracy?

The panellists will consider the parallels between the political responses to some of the greatest economic crises Europe has experienced in the last century. Given that economic crises often transcend borders, why does political disruption vary between democracies? What can history tell us about the potential political impact of the unfolding COVID-19-related economic crisis? And will the unprecedented financial interventions by governments across Europe fundamentally change the expectations citizens have of the role government should play in their lives?

This event is based on a recent article in The World Today by Hans Kundnani and Pepijn Bergsen who are both researchers in Chatham House's Europe Programme. 'Crawling from the Wreckage' is the first in a series of articles that look at key themes in European political discourse from the last century. You can read the article here. 

This event is open to Chatham House Members. Not a member? Find out more.

What is quantitative easing? How was it used after the 2008 financial crisis?

Quantitative easing (QE) has been in existence since the Japanese central bank introduced it at the turn of the millennium. The simplest way to think about it is this: when interest rates can't go down anymore and play their normal role of stimulating growth, central banks try to expand the money supply. So, they're expanding the quantitative amount of money they put into the system. 

Of course, after 2008 because of the scale of the financial and economic collapse, many Western countries resorted to QE. Some have never gotten rid of it. Others have started to, but as a result of this crisis, have gone straight back to that playbook.

33 million Americans have now filed for unemployment and one in five American workers have lost their jobs due to COVID-19. These are levels not seen since the Great Depression. You recently called for G20 countries to provide income support for all citizens. Why is this so urgent to implement now?

It is incredible to reflect back on the short time since I published that piece. I entitled it the need for a so-called people's QE, and in some ways a number of European countries, including the UK, have executed some aspects of what I was suggesting. 

The United States has not, even though the absolute amounts of money the US authorities have put through their fiscal system to try and support the economy is actually bigger as a percentage of GDP than many in Europe. 

What they haven't done is support ongoing employment through various schemes that many European countries have done, of which the UK has, to some degree, been one of the most ambitious.

That’s partly why you see such enormous filing for unemployment claims in the US. There’s no direct support to encourage employers to keep their employees on, in complete contrast to what you see in many Scandinavian countries who were the first to do it in Europe, and something the UK has since done. 

On a practical level, what might a smart people’s QE look like? 

We are living in an extraordinary time. Like many others in my generation, it’s nothing that any of us have gone through. Perhaps economically, the only parallel one can find is from the 1920s and 1930s.

It became obvious to me in early March that governments are going to have to essentially force as many of us as possible, if we weren't doing absolutely crucial necessities, to stop working or to work from home. It was pretty obvious that the consequences could be horrific. 

So, the idea of a people's QE that I suggested then, some would have regarded as quite audacious. The most dramatic thing that could be done was, to put it simply, governments effectively pay for every business and every employee to have a two month paid holiday. Obviously, this would cost a very large amount of money for governments, but it would be the least disruptive way of getting us all to stay home.

And when the time is right to start letting us get back to anything vaguely like normality, there wouldn't be as much permanent disruption. I think about six weeks have passed since I wrote that piece. Actually, given the policies many governments have announced, I'm not sure undertaking the audacity in generosity of what I suggested would have cost any more. Over the long term, it might have actually turned out to be less. 

Of course, there are ethics issues around whether the system could be gamed or not, amongst other issues. But six weeks later, I still believe that would have been the smartest thing to do. It certainly would have been much better than trying to encourage many businesses, particularly smaller ones, to take out loans.

A couple of countries got close to what I was suggesting – Germany and Switzerland were very quick to give 100% government guarantees to business, as well as generous wage support systems. But a number of other countries haven't, like the US, even though they wrote a $1200 check for each citizen. 

Should a people’s QE involve the purchase and write off of consumer debt and student debt by a central bank? 

I think these things might have to be considered. I remember being on a conference call to Chatham House members where we discussed what would be the likely economic consequences and what policymakers should do. One person on the call was talking about quite conventional forms of policy just through various forms of standard QE. 

During the Q&A, someone asked whether we thought the US Federal Reserve might end up buying equities. And I said, well, why not? Eventually, it might come to that. 

Actually, before that discussion was over, the Fed coincidentally announced they were going to buy high-yield corporate bonds, or very risky company debt. This is something that would have been unheard of even by the playbook of 2008. 

So, I don't think ideas like a kind of provision to help student debtors is entirely crazy. These are things that our policymakers are going to have to think about as we go forward in the challenging and unpredictable days and weeks ahead. 

Poorer countries like El Salvador have gone as far as cancelling rent and major utility bills for its citizens. Do you think countries like the US and UK have gone far enough to help people during the crisis?

Going one step further than a people’s QE and postponing major payments is a pretty interesting concept. I think in reality, it would be very disruptive to the medium to long-term mechanism of our societies. It could be very, very complicated. 

But, of course, some parts of the G20 nations, including the UK, have moved significantly in these areas as it relates to rent payments or mortgage payments. There have been significant mortgage holidays being introduced for many sectors of our community. I think the British government has been quite thoughtful about it without doing the whole hog of potentially getting rid of our transaction system for two months or beyond.

You know, this may well be something that has to be considered if, God forbid, there is a second peak of the virus. If countries come out of a lockdown and all that results in is a dramatic rise in infections and then death again, we're going to end up right back where we are. Policymakers may have to implement more generous versions of what we've done already, despite what the long term debt consequences could be.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act in the US has been criticized as a corporate bailout while offering little to the American people. It was recently reported that hedge fund managers are applying for bailouts as ‘small businesses.’ Do you think more oversight is needed in how the stimulus funds are allocated? 

The speed at which many countries have responded and introduced policies means that there's going to be some gaping holes which allow people to unfairly benefit from the system. And if indeed, that were to be the case, I cannot see why a hedge fund should benefit from government generosity.

A true hedge fund is supposed to be a form of investment manager that thrives in times of great volatility, and knows how to better navigate such financial markets than more conventional funds. So this shouldn’t be an environment where hedge funds seek the same kind of help as small businesses. That is certainly something the government should be very careful about.

Some economists argue that central banks are not independent as they finance fiscal spending through purchase of government bonds. Do the strong measures taken by central banks in response to the crisis undermine the argument for central bank independence? 

In my view, an effective central bank has to do whatever is necessary, including doing very unconventional things, when the society in which that central bank operates needs it. 

Most of the time, central banks are pretty boring places, but they really become crucial organizations when we go through times like the 1920s, 1930s, 2008, and of course, this current crisis. If they want to maintain their legitimacy, whatever the true parliamentary or congressional legal standing is, they have to do things quickly and as we've seen in this case, differently than the convention in order to do what our societies need. 

Somebody was asking me just last week whether the Fed buying high grade debt was legal or not. I think that’s a pretty irrelevant conversation because if it’s not legal now, it will be made legal tomorrow. So, I think central banks have to keep their legitimacy and they have to do what is necessary when the time requires it. In that sense, I think most central banks have handled this crisis so far pretty well.

An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of COVID-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.

This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.

This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.

Now, the disjointed global economic response to COVID-19, with its enormous ramifications for global prosperity and economic stability, has blown into the open the urgent need for an immediate reaffirmation of international political and economic cooperation.

What is needed is a clear, coordinated and public statement from the leaders of the world’s major countries affirming the many things on which they do already agree, and some on which they should be able to agree.

In particular that:

• they will give the strongest possible support for the WHO in leading the medical response internationally;
• they will be transparent and tell the truth to their peoples about the progress of the disease and the threat that it represents;
• they will work together and with the international financial institutions to provide businesses, particularly SMEs, and individuals whatever support they need to get through the immediate crisis and avoid long-term damage to the global economy; 
• they will ensure the financial facilities for crisis support to countries - whether at global or regional level - have whatever resources they need to support countries in difficulty;
• they will avoid new protectionist policies - whether in trade or finance;
• they commit not to forget the poor and vulnerable in society and those least able to look after themselves.

Such a statement could be made by G20 leaders, reflecting the group’s role since 2010 as the premier forum for international economic cooperation.

But it could be even more appropriate coming from the UN Security Council, recognising that COVID-19 is much more than an economic challenge; and also reflecting the practical fact, in a time when international travel is restricted, the UNSC has an existing mechanism in New York to negotiate and quickly agree such a statement.

A public statement by leading countries could do a great deal to help arrest a growing sense of powerlessness among citizens and loss of confidence among businesses worldwide as the virus spreads.

It could also set a new course for international political and economic cooperation, not just in relation to the virus, but also other global threats with potentially devastating consequences for economic growth and political stability in the coming years.

Linked to the call for a global response to the Covid-19 pandemic that I, Robin Niblett and Creon Butler have outlined, the case for a specific dramatic economic policy gesture from many policymakers in large economies is prescient.

It may not be warranted from all G20 nations, although given the uncertainties, and the desire to show collective initiative, I think it should be G20 driven and inclusive.

We need some sort of income support for all our citizens, whether employees or employers. Perhaps one might call it a truly People’s QE (quantitative easing).

Against the background of the previous economic crisis from 2008, and the apparent difficulties that more traditional forms of economic stimulus have faced in trying to help their economies and their people - especially against a background of low wage growth, and both actual, and perception of rising inequality - other ideas have emerged.

Central banks printing money

Both modern monetary theory (MMT) and universal basic income (UBI) essentially owe their roots to the judgement that conventional economic policies have not been helping.

At the core of these views is the notion of giving money to people, especially lower income people, directly paid for by our central banks printing money. Until recently, I found myself having very little sympathy with these views but, as a result of COVID-19, I have changed my mind.

This crisis is extraordinary in so far as it is both a colossal demand shock and an even bigger colossal supply shock. The crisis epicentre has shifted from China - and perhaps the rest of Asia - to Europe and the United States. We cannot expect policies, however unconventional by modern times, such as the dramatic monetary steps announced by the Federal Reserve Board and others like it, to put a floor under this crisis.

We are consciously asking our people to stop going out, stop travelling, not go to their offices - in essence, curtailing all forms of normal economic life. The only ones not impacted are those who entirely work through cyberspace. But even they have to buy some forms of consumer goods such as food and, even if they order online, someone has to deliver it.

As a result, markets are, correctly, worrying about a collapse of economic activity and, with it, a collapse of companies, not just their earnings. Expansion of central bank balance sheets is not going to do anything to help that, unless it is just banks we are again worried about saving.

What is needed in current circumstances, are steps to make each of us believe with high confidence that, if we take the advice from our medical experts, especially if we self-isolate and deliberately restrict our personal incomes, then we will have this made good by our governments. In essence, we need smart, persuasive People’s QE.

Having discussed the idea with a couple of economic experts, there are considerable difficulties with moving beyond the simple concept. In the US for example, I believe the Federal Reserve is legally constrained from pursuing a direct transfer of cash to individuals or companies, and this may be true elsewhere.

But this is easily surmounted by fiscal authorities issuing a special bond, the proceeds of which could be transferred to individuals and business owners. And central banks could easily finance such bonds.

It is also the case that such a step would encroach on the perception and actuality of central bank independence, but I would be among those that argue central banks can only operate this independence if done wisely. Others will argue that, in the spirit of the equality debate, any income support should be targeted towards those on very low incomes, while higher earners or large businesses, shouldn’t be given any, or very little.

I can sympathise with such spirit, but this also ignores the centrality of this particular economic shock. All of our cafes and restaurants, and many of our airlines, and such are at genuine risk of not being able to survive, and these organisations are considerable employers of people on income.

It is also the case that time is of the essence, and we need our policymakers to act as soon as possible, otherwise the transmission mechanisms, including those about the permanent operation of our post World War 2 form of life may be challenged.

We need some kind of smart People’s QE now.

The measures taken to limit the spread of the coronavirus - in particular social distancing -  come with significant economic costs, as the drop both in demand for goods and services and in supply due to workers being at home sick will create a short-term economic shock not seen in modern times.

Sectors that are usually less affected by regular economic swings such as transport and tourism are being confronted with an almost total collapse in demand. In the airline sector, companies are warning they might only be able to hold out for a few months more.

Building on the calls to provide income support to all citizens and shore up businesses, European leaders should now be giving explicit permission to the European Central Bank (ECB) to provide whatever financial support is needed.

Although political leaders have responded to the economic threat, the measures announced across the continent have mainly been to support businesses. The crisis is broader and deeper than the current response.

Support for weaker governments

The ECB already reacted to COVID-19 by announcing measures to support the banking system, which is important to guarantee the continuity of the European financial system and to ensure financially weaker European governments do not have to confront a failing banking system as well.

Although government-subsidised reduced working hours and sick pay are a solution for many businesses and workers, crucially they are not for those working on temporary contracts or the self-employed. They need direct income support.

This might come down to instituting something that looks like a universal basic income (UBI), and ensuring money keeps flowing through the economy as much as possible to help avoid a cascade of defaults and significant long-term damage.

But while this is likely to be the most effective remedy to limit the medium-term impact on the economy, it is particularly costly. Just as an indication, total compensation of employees was on average around €470bn per month in the eurozone last year.

Attempting to target payments using existing welfare payment channels would reduce costs, but is difficult to implement and runs the risk of many households and businesses in need missing out.

The increase in spending and lost revenue associated with these support measures dwarf the fiscal response to the 2008-09 financial crisis. The eurozone economy could contract by close to 10% this year and budget deficits are likely be in double digits throughout the bloc.

The European Commission has already stated member states are free to spend whatever is necessary to combat the crisis, which is not surprising given the Stability and Growth Pact - which includes the fiscal rules - allows for such eventualities.

Several eurozone countries do probably have the fiscal space to deal with this. Countries such as Germany and the Netherlands have run several years of balanced budgets recently and significantly decreased their debt levels. For countries such as Italy, and even France, it is a different story and the combination of much higher spending and a collapse in tax revenue is more likely to lead to questions in the market over the sustainability of their debt levels. In order to avoid this, the Covid-19 response must be financed collectively.

The Eurogroup could decide to use the European Stability Mechanism (ESM) to provide states with the funds, while suitably ditching the political conditionality that came with previous bailout. But the ESM currently has €410bn in remaining lending capacity, which is unlikely to be enough and difficult to rapidly increase.

So this leaves the ECB to pick up the tab of national governments’ increase in spending, as the only institution with effectively unlimited monetary firepower. But a collective EU response is complicated by the common currency, and particularly by the role of the ECB.

The ECB can’t just do whatever it likes and is limited more than other major central banks in its room for manoeuvre. It does have a programme to buy government bonds but this relies on countries agreeing to a rescue programme within the context of the ESM, with all the resulting political difficulties.

There are two main ways that the ECB could finance the response to the crisis. First, it could buy up more or all bonds issued by the member states. A first step in this direction would be to scrap the limits on the bonds it can buy. Through self-imposed rules, the ECB can only buy up to a third of every country’s outstanding public debt. There are good reasons for this in normal times, but these are not normal times. With the political blessing of the European Council, the Eurosystem of central banks could then start buying bonds issued by governments to finance whatever expenditure they deem necessary to combat the crisis.

Secondly, essentially give governments an overdraft with the ECB or the national central banks. Although a central bank lending directly to governments is outlawed by the European treaties, the COVID-19 crisis means these rules should be temporarily suspended by the European Council.

Back in 2012, the then president of the ECB, Mario Draghi, proclaimed the ECB would do whatever it takes, within its mandate, to save the euro, which was widely seen as a crucial step towards solving the eurozone crisis. The time is now right for eurozone political leaders to explicitly tell the ECB that together they can do whatever it takes to save the eurozone economy through direct support for businesses and households.

A controversial debate during COVID-19 is the state of readiness within governments and health systems for a pandemic, with lines of the debate drawn on the issues of testing provision, personal protective equipment (PPE), and the speed of decision-making.

President Macron in a speech to the nation admitted French medical workers did not have enough PPE and that mistakes had been made: ‘Were we prepared for this crisis? We have to say that no, we weren’t, but we have to admit our errors … and we will learn from this’.

In reality few governments were fully prepared. In years to come, all will ask: ‘how could we have been better prepared, what did we do wrong, and what can we learn?’. But after every crisis, governments ask these same questions.

Most countries have put in place national risk assessments and established processes and systems to monitor and stress-test crisis-preparedness. So why have some countries been seemingly better prepared?

Comparing different approaches

Some have had more time and been able to watch the spread of the disease and learn from those countries that had it first. Others have taken their own routes, and there will be much to learn from comparing these different approaches in the longer run.

Governments in Asia have been strongly influenced by the experience of the SARS epidemic in 2002-3 and - South Korea in particular - the MERS-CoV outbreak in 2015 which was the largest outside the Middle East. Several carried out preparatory work in terms of risk assessment, preparedness measures and resilience planning for a wide range of threats.

Case Study of Preparedness: South Korea By 2007, South Korea had established the Division of Public Health Crisis Response in Korea Centers for Disease Control and Prevention (KCDC) and, in 2016, the KCDC Center for Public Health Emergency Preparedness and Response had established a round-the-clock Emergency Operations Center with rapid response teams. KCDC is responsible for the distribution of antiviral stockpiles to 16 cities and provinces that are required by law to hold and manage antiviral stockpiles.

And, at the international level, there are frameworks for preparedness for pandemics. The International Health Regulations (IHR) - adopted at the 2005 World Health Assembly and binding on member states - require countries to report certain disease outbreaks and public health events to the World Health Organization (WHO) and ‘prevent, protect against, control and provide a public health response to the international spread of disease in ways that are commensurate with and restricted to public health risks, and which avoid unnecessary interference with international traffic and trade’.

Under IHR, governments committed to a programme of building core capacities including coordination, surveillance, response and preparedness. The UN Sendai Framework for Disaster Risk highlights disaster preparedness for effective response as one of its main purposes and has already incorporated these measures into the Sustainable Development Goals (SDGs) and other Agenda 2030 initiatives. UN Secretary-General António Guterres has said COVID-19 ‘poses a significant threat to the maintenance of international peace and security’ and that ‘a signal of unity and resolve from the Council would count for a lot at this anxious time’.

Case Study of Preparedness: United States The National Institutes of Health (NIH) and the Center for Disease Control (CDC) established PERRC – the Preparedness for Emergency Response Research Centers - as a requirement of the 2006 Pandemic and All-Hazards Preparedness Act, which required research to ‘improve federal, state, local, and tribal public health preparedness and response systems’. The 2006 Act has since been supplanted by the 2019 Pandemic and All-Hazards Preparedness and Advancing Innovation Act. This created the post of Assistant Secretary for Preparedness and Response (ASPR) in the Department for Health and Human Services (HHS) and authorised the development and acquisitions of medical countermeasures and a quadrennial National Health Security Strategy. The 2019 Act also set in place a number of measures including the requirement for the US government to re-evaluate several important metrics of the Public Health Emergency Preparedness cooperative agreement and the Hospital Preparedness Program, and a requirement for a report on the states of preparedness and response in US healthcare facilities.

This pandemic looks set to continue to be a grave threat to humanity. But there will also be future pandemics – whether another type of coronavirus or a new influenza virus – and our species will be threatened again, we just don’t know when.

Other disasters too will befall us – we already see the impacts of climate change arriving on our doorsteps characterised by increased numbers and intensity of floods, hurricanes, fires, crop failure and other manifestations of a warming, increasingly turbulent atmosphere and we will continue to suffer major volcanic eruptions, earthquakes and tsunamis. All high impact, unknown probability events.

Preparedness for an unknown future is expensive and requires a great deal of effort for events that may not happen within the preparers’ lifetimes. It is hard to imagine now, but people will forget this crisis, and revert to their imagined projections of the future where crises don’t occur, and progress follows progress. But history shows us otherwise.

Preparations for future crises always fall prey to financial cuts and austerity measures in lean times unless there is a mechanism to prevent that. Cost-benefit analyses will understandably tend to prioritise the urgent over the long-term. So governments should put in place legislation – or strengthen existing legislation – now to ensure their countries are as prepared as possible for whatever crisis is coming.

Such a legal requirement would require governments to report back to parliament every year on the state of their national preparations detailing such measures as:

• The exact levels of stocks of essential materials (including medical equipment)
• The ability of hospitals to cope with large influx of patients
• How many drills, exercises and simulations had been organised – and their findings
• What was being done to implement lessons learned & improve preparedness

In addition, further actions should be taken:

• Parliamentary committees such as the UK Joint Committee on the National Security Strategy should scrutinise the government’s readiness for the potential threats outlined in the National Risk register for Civil Emergencies in-depth on an annual basis.
• Parliamentarians, including ministers, with responsibility for national security and resilience should participate in drills, table-top exercises and simulations to see for themselves the problems inherent with dealing with crises.
• All governments should have a minister (or equivalent) with the sole responsibility for national crisis preparedness and resilience. The Minister would be empowered to liaise internationally and coordinate local responses such as local resilience groups.
• There should be ring-fenced budget lines in annual budgets specifically for preparedness and resilience measures, annually reported on and assessed by parliaments as part of the due diligence process.

And at the international level:

• The UN Security Council should establish a Crisis Preparedness Committee to bolster the ability of United Nations Member States to respond to international crisis such as pandemics, within their borders and across regions. The Committee would function in a similar fashion as the Counter Terrorism Committee that was established following the 9/11 terrorist attacks in the United States.
• States should present reports on their level of preparedness to the UN Security Council. The Crisis Preparedness Committee could establish a group of experts who would conduct expert assessments of each member state’s risks and preparedness and facilitate technical assistance as required.
• Regional bodies such as the OSCE, ASEAN and ARF, the AU, the OAS, the PIF etc could also request national reports on crisis preparedness for discussion and cooperation at the regional level.

COVID-19 has been referred to as the 9/11 of crisis preparedness and response. Just as that shocking terrorist attack shifted the world and created a series of measures to address terrorism, we now recognise our security frameworks need far more emphasis on being prepared and being resilient. Whatever has been done in the past, it is clear that was nowhere near enough and that has to change.

Case Study of Preparedness: The UK The National Risk Register was first published in 2008 as part of the undertakings laid out in the National Security Strategy (the UK also published the Biological Security Strategy in July 2018). Now entitled the National Risk Register for Civil Emergencies it has been updated regularly to analyse the risks of major emergencies that could affect the UK in the next five years and provide resilience advice and guidance. The latest edition - produced in 2017 when the UK had a Minister for Government Resilience and Efficiency - placed the risk of a pandemic influenza in the ‘highly likely and most severe’ category. It stood out from all the other identified risks, whereas an emerging disease (such as COVID-19) was identified as ‘highly likely but with moderate impact’. However, much preparatory work for an influenza pandemic is the same as for COVID-19, particularly in prepositioning large stocks of PPE, readiness within large hospitals, and the creation of new hospitals and facilities. One key issue is that the 2017 NHS Operating Framework for Managing the Response to Pandemic Influenza was dependent on pre-positioned ’just in case’ stockpiles of PPE. But as it became clear the PPE stocks were not adequate for the pandemic, it was reported that recommendations about the stockpile by NERVTAG (the New and Emerging Respiratory Virus Threats Advisory Group which advises the government on the threat posed by new and emerging respiratory viruses) had been subjected to an ‘economic assessment’ and decisions reversed on, for example, eye protection. The UK chief medical officer Dame Sally Davies, when speaking at the World Health Organization about Operation Cygnus – a 2016 three-day exercise on a flu pandemic in the UK – reportedly said the UK was not ready for a severe flu attack and ‘a lot of things need improving’. Aware of the significance of the situation, the UK Parliamentary Joint Committee on the National Security Strategy launched an inquiry in 2019 on ‘Biosecurity and human health: preparing for emerging infectious diseases and bioweapons’ which intended to coordinate a cross-government approach to biosecurity threats. But the inquiry had to postpone its oral hearings scheduled for late October 2019 and, because of the general election in December 2019, the committee was obliged to close the inquiry.

The World Health Organization (WHO) declared the spread of COVID-19 to be a Public Health Emergency of International Concern (PHEIC) on January 30 this year and then characterized it as a pandemic on March 11.

Declaring a PHEIC is the highest level of alert that WHO is obliged to declare, and is meant to send a powerful signal to countries of the need for urgent action to combat the spread of the disease, mobilize resources to help low- and middle-income countries in this effort and fund research and development on needed treatments, vaccines and diagnostics. It also obligates countries to share information with WHO.

Once the PHEIC was declared, the virus continued to spread globally, and WHO began to be asked why it had not yet declared the disease a pandemic. But there is no widely accepted definition of a pandemic, generally it is just considered an epidemic which affects many countries globally.

Potentially more deadly

The term has hitherto been applied almost exclusively to new forms of flu, such as H1N1 in 2009 or Spanish flu in 1918, where the lack of population immunity and absence of a vaccine or effective treatments makes the outbreak potentially much more deadly than seasonal flu (which, although global, is not considered a pandemic).

For COVID-19, WHO seemed reluctant to declare a pandemic despite the evidence of global spread. Partly this was because of its influenza origins — WHO’s emergency programme executive director said on March 9 that ‘if this was influenza, we would have called a pandemic ages ago’.

He also expressed concern that the word traditionally meant moving — once there was widespread transmission — from trying to contain the disease by testing, isolating the sick and tracing and quarantining their contacts, to a mitigation approach, implying ‘the disease will spread uncontrolled’.

WHO’s worry was that the world’s reaction to the word pandemic might be there was now nothing to be done to stop its spread, and so countries would effectively give up trying. WHO wanted to send the message that, unlike flu, it could still be pushed back and the spread slowed down.

In announcing the pandemic two days later, WHO’s director-general Dr Tedros Adhanom Ghebreyesus reemphasised this point: ‘We cannot say this loudly enough, or clearly enough, or often enough: all countries can still change the course of this pandemic’ and that WHO was deeply concerned ‘by the alarming levels of inaction’.

The evidence suggests that the correct message did in fact get through. On March 13, US president Donald Trump declared a national emergency, referring in passing to WHO’s announcement. On March 12, the UK launched its own strategy to combat the disease. And in the week following WHO’s announcements, at least 16 other countries announced lockdowns of varying rigour including Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Hungary, Netherlands, Norway, Poland, Portugal, Serbia, Spain and Switzerland. Italy and Greece had both already instituted lockdowns prior to the WHO pandemic announcement.

It is not possible to say for sure that WHO’s announcement precipitated these measures because, by then, the evidence of the rapid spread was all around for governments to see. It may be that Italy’s dramatic nationwide lockdown on March 9 reverberated around European capitals and elsewhere.

But it is difficult to believe the announcement did not have an effect in stimulating government actions, as was intended by Dr Tedros. Considering the speed with which the virus was spreading from late February, might an earlier pandemic announcement by WHO have stimulated earlier aggressive actions by governments?

Declaring a global health emergency — when appropriate — is a key part of WHO’s role in administering the International Health Regulations (IHR). Significantly, negotiations on revisions to the IHR, which had been ongoing in a desultory fashion in WHO since 1995, were accelerated by the experience of the first serious coronavirus outbreak — SARS — in 2002-2003, leading to their final agreement in 2005.

Under the IHR, WHO’s director-general decides whether to declare an emergency based on a set of criteria and on the advice of an emergency committee. IHR defines an emergency as an ‘extraordinary event that constitutes a public health risk through the international spread of disease and potentially requires a coordinated international response’.

In the case of COVID-19, the committee first met on January 22-23 but were unable to reach consensus on a declaration. Following the director-general’s trip to meet President Xi Jinping in Beijing, the committee reconvened on January 30 and this time advised declaring a PHEIC.

But admittedly, public recognition of what a PHEIC means is extremely low. Only six have ever been declared, with the first being the H1N1 flu outbreak which fizzled out quickly, despite possibly causing 280,000 deaths globally. During the H1N1 outbreak, WHO declared a PHEIC in April 2009 and then a pandemic in June, only to rescind both in August as the outbreak was judged to have transitioned to behave like a seasonal flu.

WHO was criticized afterwards for prematurely declaring a PHEIC and overreacting. This then may have impacted the delay in declaring the Ebola outbreak in West Africa as a PHEIC in 2014, long after it became a major crisis. WHO’s former legal counsel has suggested the PHEIC — and other aspects of the IHR framework — may not be effective in stimulating appropriate actions by governments and needs to be reconsidered.

When the time is right to evaluate lessons about the response, it might be appropriate to consider the relative effectiveness of the PHEIC and pandemic announcements and their optimal timing in stimulating appropriate action by governments. The effectiveness of lockdowns in reducing the overall death toll also needs investigation.

What is quantitative easing? How was it used after the 2008 financial crisis?

Quantitative easing (QE) has been in existence since the Japanese central bank introduced it at the turn of the millennium. The simplest way to think about it is this: when interest rates can't go down anymore and play their normal role of stimulating growth, central banks try to expand the money supply. So, they're expanding the quantitative amount of money they put into the system. 

Of course, after 2008 because of the scale of the financial and economic collapse, many Western countries resorted to QE. Some have never gotten rid of it. Others have started to, but as a result of this crisis, have gone straight back to that playbook.

33 million Americans have now filed for unemployment and one in five American workers have lost their jobs due to COVID-19. These are levels not seen since the Great Depression. You recently called for G20 countries to provide income support for all citizens. Why is this so urgent to implement now?

It is incredible to reflect back on the short time since I published that piece. I entitled it the need for a so-called people's QE, and in some ways a number of European countries, including the UK, have executed some aspects of what I was suggesting. 

The United States has not, even though the absolute amounts of money the US authorities have put through their fiscal system to try and support the economy is actually bigger as a percentage of GDP than many in Europe. 

What they haven't done is support ongoing employment through various schemes that many European countries have done, of which the UK has, to some degree, been one of the most ambitious.

That’s partly why you see such enormous filing for unemployment claims in the US. There’s no direct support to encourage employers to keep their employees on, in complete contrast to what you see in many Scandinavian countries who were the first to do it in Europe, and something the UK has since done. 

On a practical level, what might a smart people’s QE look like? 

We are living in an extraordinary time. Like many others in my generation, it’s nothing that any of us have gone through. Perhaps economically, the only parallel one can find is from the 1920s and 1930s.

It became obvious to me in early March that governments are going to have to essentially force as many of us as possible, if we weren't doing absolutely crucial necessities, to stop working or to work from home. It was pretty obvious that the consequences could be horrific. 

So, the idea of a people's QE that I suggested then, some would have regarded as quite audacious. The most dramatic thing that could be done was, to put it simply, governments effectively pay for every business and every employee to have a two month paid holiday. Obviously, this would cost a very large amount of money for governments, but it would be the least disruptive way of getting us all to stay home.

And when the time is right to start letting us get back to anything vaguely like normality, there wouldn't be as much permanent disruption. I think about six weeks have passed since I wrote that piece. Actually, given the policies many governments have announced, I'm not sure undertaking the audacity in generosity of what I suggested would have cost any more. Over the long term, it might have actually turned out to be less. 

Of course, there are ethics issues around whether the system could be gamed or not, amongst other issues. But six weeks later, I still believe that would have been the smartest thing to do. It certainly would have been much better than trying to encourage many businesses, particularly smaller ones, to take out loans.

A couple of countries got close to what I was suggesting – Germany and Switzerland were very quick to give 100% government guarantees to business, as well as generous wage support systems. But a number of other countries haven't, like the US, even though they wrote a $1200 check for each citizen. 

Should a people’s QE involve the purchase and write off of consumer debt and student debt by a central bank? 

I think these things might have to be considered. I remember being on a conference call to Chatham House members where we discussed what would be the likely economic consequences and what policymakers should do. One person on the call was talking about quite conventional forms of policy just through various forms of standard QE. 

During the Q&A, someone asked whether we thought the US Federal Reserve might end up buying equities. And I said, well, why not? Eventually, it might come to that. 

Actually, before that discussion was over, the Fed coincidentally announced they were going to buy high-yield corporate bonds, or very risky company debt. This is something that would have been unheard of even by the playbook of 2008. 

So, I don't think ideas like a kind of provision to help student debtors is entirely crazy. These are things that our policymakers are going to have to think about as we go forward in the challenging and unpredictable days and weeks ahead. 

Poorer countries like El Salvador have gone as far as cancelling rent and major utility bills for its citizens. Do you think countries like the US and UK have gone far enough to help people during the crisis?

Going one step further than a people’s QE and postponing major payments is a pretty interesting concept. I think in reality, it would be very disruptive to the medium to long-term mechanism of our societies. It could be very, very complicated. 

But, of course, some parts of the G20 nations, including the UK, have moved significantly in these areas as it relates to rent payments or mortgage payments. There have been significant mortgage holidays being introduced for many sectors of our community. I think the British government has been quite thoughtful about it without doing the whole hog of potentially getting rid of our transaction system for two months or beyond.

You know, this may well be something that has to be considered if, God forbid, there is a second peak of the virus. If countries come out of a lockdown and all that results in is a dramatic rise in infections and then death again, we're going to end up right back where we are. Policymakers may have to implement more generous versions of what we've done already, despite what the long term debt consequences could be.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act in the US has been criticized as a corporate bailout while offering little to the American people. It was recently reported that hedge fund managers are applying for bailouts as ‘small businesses.’ Do you think more oversight is needed in how the stimulus funds are allocated? 

The speed at which many countries have responded and introduced policies means that there's going to be some gaping holes which allow people to unfairly benefit from the system. And if indeed, that were to be the case, I cannot see why a hedge fund should benefit from government generosity.

A true hedge fund is supposed to be a form of investment manager that thrives in times of great volatility, and knows how to better navigate such financial markets than more conventional funds. So this shouldn’t be an environment where hedge funds seek the same kind of help as small businesses. That is certainly something the government should be very careful about.

Some economists argue that central banks are not independent as they finance fiscal spending through purchase of government bonds. Do the strong measures taken by central banks in response to the crisis undermine the argument for central bank independence? 

In my view, an effective central bank has to do whatever is necessary, including doing very unconventional things, when the society in which that central bank operates needs it. 

Most of the time, central banks are pretty boring places, but they really become crucial organizations when we go through times like the 1920s, 1930s, 2008, and of course, this current crisis. If they want to maintain their legitimacy, whatever the true parliamentary or congressional legal standing is, they have to do things quickly and as we've seen in this case, differently than the convention in order to do what our societies need. 

Somebody was asking me just last week whether the Fed buying high grade debt was legal or not. I think that’s a pretty irrelevant conversation because if it’s not legal now, it will be made legal tomorrow. So, I think central banks have to keep their legitimacy and they have to do what is necessary when the time requires it. In that sense, I think most central banks have handled this crisis so far pretty well.

Using the UK as a case study, this book provides the first systematic exploration of how accountability is understood inside the secret world. It is based on new interviews with current and former UK intelligence practitioners, as well as extensive research into the performance and scrutiny of the UK intelligence machinery.

The result is the first detailed analysis of how intelligence professionals view their role, what they feel keeps them honest, and how far external overseers impact on their work.

The UK gathers material that helps inform global decisions on such issues as nuclear proliferation, terrorism, transnational crime, and breaches of international humanitarian law. On the flip side, the UK was a major contributor to the intelligence failures leading to the Iraq war in 2003, and its agencies were complicit in the widely discredited U.S. practices of torture and 'rendition' of terrorism suspects. UK agencies have come under greater scrutiny since those actions, but it is clear that problems remain.

Secrets and Spies is the result of a British Academy funded project (SG151249) on intelligence accountability.

Open society is increasingly defended by secret means. For this reason, oversight has never been more important. This book offers a new exploration of the widening world of accountability for UK intelligence, encompassing informal as well as informal mechanisms. It substantiates its claims well, drawing on an impressive range of interviews with senior figures. This excellent book offers both new information and fresh interpretations. It will have a major impact.

Richard Aldrich, Professor of International Security, University of Warwick, UK

Gaskarth’s novel approach, interpreting interviews with senior figures from the intelligence world, brings fresh insight on a significant yet contested topic. He offers an impressively holistic account of intelligence accountability—both formal and informal—and, most interestingly of all, of how those involved understand it. This is essential reading for those wanting to know what accountability means and how it is enacted.

Rory Cormac, Professor of International Relations, University of Nottingham

About the author

Jamie Gaskarth is senior lecturer at the University of Birmingham, where he teaches strategy and decision-making. His research looks at the ethical dilemmas of leadership and accountability in intelligence, foreign policy, and defence. He is author/editor or co-editor of six books and served on the Academic Advisory panel for the 2015 UK National Security Strategy and Strategic Defence and Security Review.

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Insights: Critical Thinking on International Affairs

Six years after the annexation of Crimea and the start of the armed conflict in Donbas, the process of coalescing the Ukrainian society around a common civic identity remains complex. Ukraine comprises many ethno-linguistic identities, and various internal and external actors have been able to exploit old and new grievances to increase tensions at the regional and local level.

The panellists will discuss the conflict dynamics along parts of Ukraine’s international border and the line of contact with Crimea. The speakers will review the internal political, social and economic trends that cause friction and suggest ways to strengthen cohesion.

The event will build upon key findings from International Alert’s analysis of the south of Odesa, Kherson and Zakarpattia oblasts and on the reintegration of veterans in Ukraine.

This event is organized in partnership with International Alert, supported by UK aid from the UK government as part of the Peace Research Partnership programme.