Free trade agreements often transcend the transfer of goods and services to include chapters and clauses pertaining to social issues such as gender equality, racial equality, labour rights and climate change.

However, these chapters regularly lack suitable enforcing mechanisms and are seldom legally binding. In a recent report, Women’s Budget Group (WBG) called for gender considerations to be mainstreamed throughout trade agreements so that trade can best facilitate positive social change. Can a similar approach be applied to other issues of social concern?

This panel discusses how policymakers can balance international trade and economic growth with social and human rights responsibilities to reduce gender, racial and income inequality, strengthen labour rights and address the climate crisis. Is international trade inhibiting meaningful progress towards realizing national commitments to socioeconomic equality? What do commitments to progressive trade policies mean in practice?

And, in its present geopolitical position, how well is the UK placed to lead the way in establishing international best practice in the negotiation and formation of progressive trade agreements?

Global trade policy is not going back to the consensus that prevailed over the past few decades. Even if the growing cycle of tariffs and trade threats is tamed in 2020, the economic consensus that underpinned broad support for open trade is breaking down, and escalation in trade tensions is likely.

What next for the US and China?

The US and China are currently at the centre of these tensions. The equity and bond markets started 2020 off euphorically as news of a ‘phase one’ trade deal between the two dominated headlines. Such a deal involves the US reducing some previously imposed tariffs and tabling another round of threatened ones, while China agrees to buy more US goods, including agriculture. This represents a détente of sorts, but don’t expect it to last; trade between the two countries is not actually at the heart of their trade war.

The question instead is which country will have the biggest economy, based on excellence in industries such as artificial intelligence, machine learning and quantum computing. There is a national security component to this issue as well, given how much these high-tech industries feed into military and national security operations. This has increasingly become a concern for the United States as China has adopted a more aggressive regional stance, particularly in the South China Sea.

Tariffs have been used as a tool by both countries to try to prevent the other from dominating the global economy, and while they have dented both economies, they aren’t a particularly effective tool. In particular, tariffs do nothing to address US concerns about intellectual property rights in China, forced technology transfers and state subsidies for high tech industries. The phase one deal, therefore, is a superficial one that fails to get at the heart of the matter.

US–EU tensions

However, with a temporary US-China détente, the US may turn its attention to Europe. The EU and US are in the midst of negotiating a trade deal, but obstacles have been present from the start.

Last July, France adopted a 3% digital tax that applies to firms with global revenues over €750 million per annum generated from digital activities, of which €25 million are made in its territory. A US investigation determined that the digital tax discriminates against US companies such as Google, Amazon, Apple and Facebook, and so the US has threatened France with 100% tariffs on luxury exports, including wine.

The long-standing tensions between the US and EU over their aircraft manufacturing behemoths, Boeing and Airbus, make reaching a US–EU trade deal more complicated. They also risk undermining US–EU collaboration on some joint concerns regarding China’s trade policies and practices.

The United States recently threatened to increase its punitive measures against European goods as retaliation for Airbus subsidies. The World Trade Organization (WTO) gave the US the green light to impose tariffs of up to 100% on $7.5 billion of EU exports last October, but the US had limited them to 10% on aircraft and 25% on industrial and agricultural products. Now, the US is threatening to escalate.

Finally, the US has repeatedly threatened to impose tariffs on imported cars from the EU. This threat looms large for Germany in particular, which is a significant producer of automobiles and whose industry is still recovering from the diesel emissions scandal. Germany has for the past two decades been the powerhouse economy in the EU, but has more recently seen sclerotic growth.

US election implications

It is an election year in the United States, and while it is too early to call the election (or even guess who the Democratic candidate might be), the ballot could bring about change on trade. Protectionism has historically been more of a Democrat policy than a Republican one, so there won’t be a complete reversal of Trump’s trade policy if a Democrat were to win. But there might be some changes.

If a Democrat controlled the White House, the US would still want to pressure China, but it might adopt a more international approach in that effort. The US might also reverse the steel and aluminium tariffs that kicked off these heightened trade tensions.

Most importantly, the US might stop hindering the WTO by appointing judges to the appellate body (without which the WTO cannot address rulings that are being appealed) and would likely work with other countries to reform the WTO. The focus would shift from confrontation to negotiation. This, of course, depends on which Democrat is in the White House.

In the meantime, President Trump has a difficult balancing act. Being tough on China and bringing home American jobs were successful slogans in his first presidential bid. He will want to indicate he has delivered on both and will continue to do so. At the same time, tariffs have sparked dips in the markets that have caused the president to de-escalate trade tensions. As the 2020 election approaches, expect the administration to balance these two concerns.

Looking beyond the vote, there may be some changes to the US approach to trade over the next decade, depending on which party is in government. The most pernicious aspect of the trade tensions on the global economy has been the uncertainty they have caused; businesses have deferred and delayed investment as they wait to see what the new rules of the global order are. They know the old consensus on trade won’t come back, but don’t yet know what the new consensus is.

As long as the limbo persists, and it probably will for at least a few more years, trade issues will remain a risk for the global economy.

This article is the first in a series of publications and roundtable discussions, part of the Chatham House Global Trade Policy Forum.

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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The coronavirus outbreak comes at a difficult time for China’s ruling party. A tumultuous 2019 saw the country fighting an economic slowdown coupled with an increasingly hostile international environment. As authorities take assertive steps to contain the virus, the emergency has - at least temporarily - disrupted global trade and supply chains, depressed asset prices and forced multinational businesses to make consequential decisions with limited information. 

Against this backdrop, panellists reflect on the country’s nascent economic transition from 2020 onward. What has been China’s progress towards a sustainable innovation-led economy so far? To what extent is the ruling party addressing growing concerns over job losses, wealth inequality and a lack of social mobility? And how are foreign investors responding to these developments in China?

Ample evidence exists that China was caught off guard by the Trump administration's onslaught of punishing acts—the trade war being a prime, but far from the only, example. This article, in addition to contextualizing their earlier optimism about the relations with the United States under President Trump, examines why Chinese leaders and analysts were surprised by the turn of events. It argues that three main factors contributed to the lapse of judgment. First, Chinese officials and analysts grossly misunderstood Donald Trump the individual. By overemphasizing his pragmatism while downplaying his unpredictability, they ended up underprepared for the policies he unleashed. Second, some ingrained Chinese beliefs, manifested in the analogies of the pendulum swing and the ‘bickering couple’, as well as the narrative of the ‘ballast’, lulled officials and scholars into undue optimism about the stability of the broader relationship. Third, analytical and methodological problems as well as political considerations prevented them from fully grasping the strategic shift against China in the US.

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.

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.

COVID-19 is a sharp reminder of why trade and climate policy matters. How can governments maintain access to critical goods and services, and ensure global supply chains function in times of crisis?

The timing of many trade negotiations is now increasingly uncertain, as are the UK’s plans to host COP26 in November. Policy work continues, however, and the EU has released its draft negotiating text for the new UK-EU trade deal, which includes a sub-chapter specifically devoted to climate. 

This is a timely reminder both of the pressing need for the UK to integrate its trade and climate policymaking and to use the current crisis-induced breathing space in international negotiations - however limited - to catch up on both strategy and priorities on this critical policy intersection.

The UK government has moved fast to reset its external trade relations post-Brexit. In the past month it formally launched bilateral negotiations with the EU and took up a seat at the World Trade Organization (WTO) as an independent member. Until the COVID-19 crisis hit, negotiations were also poised to start with the US.

The UK is also in the climate spotlight as host of COP26, the most important international climate negotiation since Paris in 2015, which presents a vital opportunity for the government to show leadership by aligning its trade agenda with its climate and sustainability commitments in bold new ways.

Not just an empty aspiration

This would send a signal that ‘Global Britain’ is not just an empty aspiration, but a concrete commitment to lead.

Not only is concerted action on the climate crisis a central priority for UK citizens, a growing and increasingly vocal group of UK businesses committed to decarbonization are calling on the government to secure a more transparent and predictable international market place that supports climate action by business.

With COP26, the UK has a unique responsibility to push governments to ratchet up ambition in the national contributions to climate action – and to promote coherence between climate ambition and wider economic policymaking, including on trade. If Britain really wants to lead, here are some concrete actions it should take.

At the national level, the UK can pioneer new ways to put environmental sustainability – and climate action in particular - at the heart of its trade agenda. Achieving the government’s ambitious Clean Growth Strategy - which seeks to make the UK the global leader in a range of industries including electric cars and offshore wind – should be a central objective of UK trade policy.

The UK should re-orient trade policy frameworks to incentivize the shift toward a more circular and net zero global economy. And all elements of UK trade policy could be assessed against environmental objectives - for example, their contribution to phasing out fossil fuels, helping to reverse overexploitation of natural resources, and support for sustainable agriculture and biodiversity.

In its bilateral and regional trade negotiations, the UK can and should advance its environment, climate and trade goals in tandem, and implementation of the Paris Agreement must be a core objective of the UK trade strategy.

A core issue for the UK is how to ensure that efforts to decarbonise the economy are not undercut by imports from high-carbon producers. Here, a ‘border carbon adjustment (BCA)’ - effectively a tax on the climate pollution of imports - would support UK climate goals. The EU draft negotiating text released yesterday put the issue of BCAs front and centre, making crystal clear that the intersection of climate, environment and trade policy goals will be a central issue for UK-EU trade negotiations.

Even with the United States, a trade deal can and should still be seized as a way to incentivize the shift toward a net zero and more circular economy. At the multilateral level, as a new independent WTO member, the UK has an opportunity to help build a forward-looking climate and trade agenda.

The UK could help foster dialogue, research and action on a cluster of ‘climate and trade’ issues that warrant more focused attention at the WTO. These include the design of carbon pricing policies at the border that are transparent, fair and support a just transition; proposals for a climate waiver for WTO rules; and identification of ways multilateral trade cooperation could promote a zero carbon and more circular global economy.  

To help nudge multilateral discussion along, the UK could also ask to join a critical ‘path finder’ effort by six governments, led by New Zealand, to pursue an agreement on climate change, trade and sustainability (ACCTS). This group aims to find ways forward on three central trade and climate issues: removing fossil fuel subsidies, climate-related labelling, and promoting trade in climate-friendly goods and services.

At present, the complex challenges at the intersection of climate, trade and development policy are too often used to defer or side-step issues deemed ‘too hard’ or ‘too sensitive’ to tackle. The UK could help here by working to ensure multilateral climate and trade initiatives share adjustment burdens, recognise the historical responsibility of developed countries, and do not unfairly disadvantage developing countries - especially the least developed.

Many developing countries are keen to promote climate-friendly exports as part of wider export diversification strategies  and want to reap greater returns from greener global value chains. Further, small island states and least-developed countries – many of which are Commonwealth members – that are especially vulnerable to the impacts of climate change and natural disasters, need support to adapt in the face of trade shocks and to build climate-resilient, trade-related infrastructure and export sectors.

As an immediate next step, the UK should actively support the growing number of WTO members in favour of a WTO Ministerial Statement on environmental sustainability and trade. It should work with its key trading partners in the Commonwealth and beyond to ensure the agenda is inclusive, supports achievement of the UN Sustainable Development Goals (SDGs) and helps developing countries benefit from a more environmentally sustainable global economy.

As the UK prepares to host COP26, negotiates deals with the EU and US, and prepares for its first WTO Ministerial meeting as an independent member, it must show it can lead the way nationally, bilaterally, and multilaterally. And to ensure the government acts, greater engagement from the UK’s business, civil society and research sectors is critical – we need all hands on deck to forge and promote concrete proposals for aligning UK trade policy with the climate ambition our world needs.

As tentative evidence emerges that Italy and Spain may have reached - or are close to - the peak of the curve, this could demonstrate that not only can Asian countries get to grips with COVID-19, but so can western democracies. And, if so, this offers a path for the rest of us.

The last few weeks does demonstrate there is a role for governments to intervene in society, whether it be health, finance or any walk of life, as they have had to implement social distancing. Some have been forced, and the interventions are almost definitely only temporary, but perhaps some others may be less so.

Governments of all kinds now realise there is a connection between our health system quality and our economic capability. On an index of global economic sustainability that I presided over creating when I was at Goldman Sachs, the top ten best performing countries on growth environment scores includes eight of the best performing ten countries - so far- in handling the crisis in terms of deaths relative to their population.

Health system quality

The top three on the index (last calculated in 2014) were Singapore, Hong Kong and South Korea, all of which are exemplary to the rest of us on how to deal with this mess. This suggests that once we are through this crisis, a number of larger populated countries - and their international advisors such as the IMF - might treat the quality of countries' health systems just as importantly as many of the other more standard indicators in assessing ability to deal with shocks.

Policymakers have also been given a rather stark warning about other looming health disasters, especially antimicrobial resistance, of which antibiotic resistance lies at the heart. An independent review I chaired recommended 29 interventions, requiring $42 bn worth of investment, essentially peanuts compared to the costs of no solution, and the current economic collapse from COVID-19. It would seem highly likely to me that policymakers are going to treat this more seriously now.

As a clear consequence of the - hopefully, temporary - global economic collapse, our environment suddenly seems to be cleaner and fresher and, in this regard, we have bought some time in the battle against climate change. Surely governments are going to be able to have a bigger influence on fossil fuel extractors and intense users as we emerge from this crisis?

For any industries requiring government support, the government can make it clear this is dependent on certain criteria. And surely the days of excessive use of share buy backs and extreme maximisation of profit at the expense of other goals, are over?

It seems to me an era of 'optimisation' of a number of business goals is likely to be the mantra, including profits but other things too such as national equality especially as it relates to income. Here in the UK, the government has offered its strongest fiscal support to the lower end of the income earning range group and, in a single swoop, has presided over its most dramatic step towards narrowing income inequality for a long time.

This comes on top of a period of strong initiatives to support higher levels of minimum earnings, meaning we will emerge later in 2020, into 2021, and beyond, with lower levels of income inequality.

The geographic issue of rural versus urban is also key. COVID-19 has spread more easily in more tightly packed cities such as London, New York and many others. More geographically remote places, by definition, are better protected. Perhaps now there will be some more thought given by policymakers to the quality and purpose of life outside our big metropolitan areas.

Lastly, will China emerge from this crisis by offering a mammoth genuine gesture to the rest of the world, and come up, with, unlike, in 2008, a fiscal stimulus to its own consumers, that is geared towards importing a lot of things from the rest of the world? Now that would be good way of bringing the world back together again.

This is a version of an article originally published in The Article

As the COVID-19 crisis roars on, so have debates about China’s role in it. Based on what is known, it is clear that some Chinese officials made a major error in late December and early January, when they tried to prevent disclosures of the coronavirus outbreak in Wuhan, even silencing healthcare workers who tried to sound the alarm.

China’s leaders will have to live with these mistakes, even if they succeed in resolving the crisis and adopting adequate measures to prevent a future outbreak. What is less clear is why other countries think it is in their interest to keep referring to China’s initial errors, rather than working toward solutions.

For many governments, naming and shaming China appears to be a ploy to divert attention from their own lack of preparedness. Equally concerning is the growing criticism of the World Health Organization (WHO), not least by Donald Trump who has attacked the organization - and threatens to withdraw US funding - for supposedly failing to hold the Chinese government to account.

Unhelpful and dangerous

At a time when the top global priority should be to organize a comprehensive coordinated response to the dual health and economic crises unleashed by the coronavirus, this blame game is not just unhelpful but dangerous.

Globally and at the country level, we all desperately need to do everything possible to accelerate the development of a safe and effective vaccine, while in the meantime stepping up collective efforts to deploy the diagnostic and therapeutic tools necessary to keep the health crisis under control.

Given there is no other global health organization with the capacity to confront the pandemic, the WHO will remain at the center of the response, whether certain political leaders like it or not.

Having dealt with the WHO to a modest degree during my time as chairman of the UK’s independent Review on Antimicrobial Resistance (AMR), I can say that it is similar to most large, bureaucratic international organizations.

Like the International Monetary Fund (IMF), the World Bank, and the United Nations, it is not especially dynamic or inclined to think outside the box. But rather than sniping at these organizations from the sidelines, we should be working to improve them.

In the current crisis, we all should be doing everything we can to help both the WHO and the IMF to play an effective, leading role in the global response. As I have argued before, the IMF should expand the scope of its annual Article IV assessments to include national public-health systems, given that these are critical determinants in a country’s ability to prevent or at least manage a crisis like the one we are now experiencing.

I have even raised this idea with IMF officials themselves, only to be told that such reporting falls outside their remit because they lack the relevant expertise. That answer was not good enough then, and it definitely isn’t good enough now.

If the IMF lacks the expertise to assess public health systems, it should acquire it. As the COVID-19 crisis makes abundantly clear, there is no useful distinction to be made between health and finance. The two policy domains are deeply interconnected, and should be treated as such.

In thinking about an international response to today’s health and economic emergency, the obvious analogy is the 2008 global financial crisis which started with an unsustainable US housing bubble, fed by foreign savings owing to the lack of domestic savings in the United States.

When the bubble finally burst, many other countries sustained more harm than the US did, just as the COVID-19 pandemic has hit some countries much harder than it hit China.

And yet not many countries around the world sought to single out the US for presiding over a massively destructive housing bubble, even though the scars from that previous crisis are still visible. On the contrary, many welcomed the US economy’s return to sustained growth in recent years, because a strong US economy benefits the rest of the world.

So, rather than applying a double standard and fixating on China’s undoubtedly large errors, we would do better to consider what China can teach us. Specifically, we should be focused on better understanding the technologies and diagnostic techniques that China used to keep its - apparent - death toll so low compared to other countries, and to restart parts of its economy within weeks of the height of the outbreak.

And for our own sakes, we also should be considering what policies China could adopt to put itself back on a path toward 6% annual growth, because the Chinese economy inevitably will play a significant role in the global recovery.

If China’s post-pandemic growth model makes good on its leaders’ efforts in recent years to boost domestic consumption and imports from the rest of the world, we will all be better off.

This article was originally published in Project Syndicate

Illicit finance not only threatens financial stability and inclusion but also provides support for terrorism and is a primary incentive for human trafficking, the illegal wildlife trade and narcotics smuggling. Frequently, actors capitalize on loopholes and inefficiencies resulting from the lack of a coordinated response to financial crime and an underpowered global system for tracking illicit financial flows. Enhanced public-private partnerships, in addition to investment in tackling financial crime from governments, international bodies and private industries, are necessary to develop regulatory frameworks, effective responses and valuable coordination between law enforcement, policymakers, regulators and financial institutions. But how should businesses structure their efforts so that their business interests are protected and the work they do is of use to others fighting financial crime?

This webinar will explore solutions to enable public-private partnerships to work together to combat financial crime. What do successful partnerships need from each side to ensure that the work being done is efficient and effective? How can the industry’s internal effectiveness impact the ‘real-world’ victims? And what barriers impede public-private partnerships operating as a force for good? 

This event is part of a fortnightly series of 'Business in Focus' webinars reflecting on the impact of COVID-19 on areas of particular professional interest for our corporate members and giving circles.

Not a corporate member? Find out more.

The outbreak of COVID-19 has demonstrated the wide-ranging and immediate impact a systemic shock can have on the global economy including the financial loss caused by the emergency shutdown of many retail operations, the loss of income for individuals who are forced to stay indoors and the major disruption to supply chains. The longer term impacts are still being realized and depend heavily on the ability of industry and the government to respond effectively to the direct economic shock caused by the pandemic.

Systemic shocks like the COVID-19 pandemic demand immediate responses, but should also encourage governments and industries to re-examine their recovery processes, their resilience and their forward planning. In this webinar, the panellists will discuss the short and long-term impacts of the current crisis and explore how industry can help ensure that the global economy is able to recover from, and build resilience to, future systemic shocks. How do business leaders move from making decisions to reimagining a ‘new normal’ and reforming their practices? What are the critical decisions that businesses should consider when planning for this 'new normal'? And how far can these decisions be based on expected changes to governmental or intergovernmental regulation of different sectors?   

This event is part of a fortnightly series of 'Business in Focus' webinars reflecting on the impact of COVID-19 on areas of particular professional interest for our corporate members and giving circles.

Not a corporate member? Find out more.

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.

There were several notable achievements during last week’s Spring meetings. The Fund’s frank set of forecasts for world GDP growth are a grim but valuable reminder of the scale of the crisis we are facing, and the Fund’s richer members will finance a temporary suspension on payments to the IMF for 29 very poor countries.

Most importantly, a boost to the Fund’s main emergency facilities - the Rapid Credit Facility and the Rapid Financing Instrument - now makes $100bn of proper relief available to a wide range of countries. But the core problem is that the vast bulk of the Fund’s firepower is effectively inert.

This is because of the idea of 'conditionality', which underpins almost all of the IMF’s lending relationships with member states. Under normal circumstances, when the IMF is the last-resort lender to a country, it insists that the borrowing government tighten its belt and exercise restraint in public spending.

This helps to achieve three objectives. One is to stabilise the public debt burden, to ensure that the resources made available are not wasted. The second is to limit the whole economy’s need for foreign exchange, a shortage of which had prompted a country to seek IMF help in the first place. And the third is to ensure that the IMF can get repaid.

Role within the international monetary system

Since the IMF does not take any physical collateral from countries to whom it is lending, the belt-tightening helps to act as a kind of collateral for the IMF. It helps to maximise the probability that the IMF does not suffer losses on its own loan portfolio — losses that would have bad consequences for the Fund’s role within the international monetary system.

This is a perfectly respectable goal. Walter Bagehot, the legendary editor of The Economist, established modern conventional wisdom about managing panics. Relying on a medical metaphor that feels oddly relevant today, he said that a panic 'is a species of neuralgia, and according to the rules of science you must not starve it.' 

Managing a panic, therefore, requires lending to stricken borrowers 'whenever the security is good', as Bagehot put it. The IMF has had to invent its own form of collateral, and conditionality is the result. The problem, though, is that belt-tightening is a completely inappropriate approach to managing the current crisis.

Countries are stricken not because they have indulged in any irresponsible spending sprees that led to a shortage of foreign exchange, but because of a virus beyond their control. Indeed, it would seem almost grotesque for the Fund to ask countries to cut spending at a time when, if anything, more spending is needed to stop people dying or from falling into a permanent trap of unemployment.

The obvious solution to this problem would be to increase the amount of money that any country can access from the Fund’s emergency facilities well beyond the $100bn now available. But that kind of solution would quickly run up against the IMF’s collateral problem.

The more the IMF makes available as 'true' emergency financing with few or no strings attached, the more it begins to undermine the quality of its loan portfolio. And if the IMF’s senior creditor status is undermined, then an important building block of the international monetary system would be at risk.

One way out of this might have been an emergency allocation of Special Drawing Rights, a tool last used in 2009. This would credit member countries’ accounts with new, unconditional liquidity that could be exchanged for the five currencies that underpin the SDR: the dollar, the yen, the euro, sterling and the renminbi. That will not be happening, though, since the US is firmly opposed, for reasons bad and good.

So in the end the IMF and its shareholders face a huge problem. It either lends more money on easy terms without the 'collateral' of conditionality, at the expense of undermining its own balance sheet - or it remains, in systemic terms, on the sidelines of this crisis.

And since the legacy of this crisis will be some eye-watering increases in the public debt burdens of many emerging economies, the IMF’s struggle to find a way to administer its medicine will certainly outlive this round of the coronavirus outbreak.

This article is a version of a piece which was originally published in the Financial Times

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