Finance & Development - January 2022

74 Pages·2022·14.4 MB·English

DECEMBER 2021
Pandemic
economics P.10
Going the
last mile P.17
Measuring the
essence of the
FINANCE AND DEVELOPMENT
good life P.32
Safeguarding
the World’s Health and Well-being
I N T E R N A T I O N A L M O N E T A R Y F U N D
Contents
The COVID-19
crisis has
made it
clear that
pandemic
policy is
economic
policy.
4
SAFEGUARDING HEALTH AND WELL-BEING
4 Rethinking Multilateralism 20 Reflections on a Healthy Society
for a Pandemic Era S ix thinkers explore lessons learned from the
I ncremental changes to existing mechanisms have pandemic to cultivate a more resilient world
failed; a fundamental reset is needed M ichelle Bachelet, Jeffrey Sachs, K.K. Shailaja, Christian
N gozi Okonjo-Iweala, Tharman Shanmugaratnam, Happi, Kate Soper, and María del Rocío Sáenz
and Lawrence H. Summers
24 Financing Health Systems
10 Pandemic Economics for the Future
A broad-based economic recovery requires W e must view universal health coverage as a
an end to the pandemic public policy goal and an investment
Ruchir Agarwal and Gita Gopinath Tedros Adhanom Ghebreyesus
12 Accelerating Vaccinations 26 A Life Well Lived
E xpanded production and more money Th ree countries provide lessons for improving
for research will get shots into arms faster health and promoting happiness
Arthur Baker, Esha Chaudhuri, and Michael Kremer Analisa R. Bala, Adam Behsudi, and Anna Jaquiery
17 Going the Last Mile 32 Measuring National Well-Being
I mproving sub-Saharan Africa’s logistics could be Th e search continues for a better gauge
the key to successful vaccine delivery of prosperity than GDP alone
Eugene Bempong Nyantakyi and Jonathan Munemo D aniel Benjamin, Kristen Cooper, Ori Heffetz,
and Miles Kimball
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FINANCE & DEVELOPMENT
A Quarterly Publication of the International Monetary Fund
December 2021 | Volume 58 | Number 4
DEPARTMENTS
40 People in Economics
Data-Driven
Chris Wellisz profiles MIT’s Amy Finkelstein, who
tests economic models with large data sets
54 44 Picture This
The Journey of the COVID-19 Vaccine
Th e development of COVID-19 vaccines has been
ALSO IN THIS ISSUE
miraculous, but the path to inoculating the world
presents many obstacles
37 Listening to Social Silence
Andrew Stanley
Anthropology is vital for building back better
62 Back to Basics
Gillian Tett
What Are Global Public Goods?
46 Toward Better
G lobal institutions must coordinate to preserve the
Pandemic Preparedness
goods that benefit us all
Infectious disease outbreaks are inevitable—but we
Moya Chin
can mitigate their effects by investing in prevention
Jay Patel and Devi Sridhar 67 Book Reviews
50 Pandemic Lessons T umultuous Times: Central Banking in an Era of
R uchir Agarwal interviews the Global Fund's Crisis, Masaaki Shirakawa
Peter Sands on why economists should pay more The Future of Money: How the Digital Revolution
attention to global health Is Transforming Currencies and Finance,
Eswar S. Prasad
52 A New Public Health Order for Africa
W here Credit Is Due: How Africa’s Debt Can Be a
R egional solutions are what we
Benefit, Not a Burden, Gregory Smith
need to get us through the next pandemic
John Nkengasong
54 Dementia Storm on the Horizon
Th e rising incidence of dementia around
the world calls for global collaboration
and decisive financing
N athaniel Counts, Arindam Nandi,
Benjamin Seligman, and Daniel Tortorice
58 The African Century
Th e right actions today will ensure that
sub-Saharan Africa thrives in a post-COVID world
Abebe Aemro Selassie
64 Quantum Computing's
Possibilities and Perils
Q uantum computers could crack the cryptography
that underpins financial stability
40
J osé Deodoro, Michael Gorbanyov, Majid Malaika,
and Tahsin Saadi Sedik
December 2021 | FINANCE & DEVELOPMENT 1
EDITOR'S LETTER FINANCE & DEVELOPMENT
A Quarterly Publication of the
International Monetary Fund
EDITOR-IN-CHIEF:
Gita Bhatt
MANAGING EDITOR:
Maureen Burke
DEPUTY MANAGING EDITOR:
Peter Walker
SENIOR EDITORS:
Analisa Bala
Adam Behsudi
ASSISTANT EDITOR:
The Real Andrew Stanley
ONLINE EDITOR:
Lijun Li
Wealth
PRODUCTION MANAGER:
Melinda Weir
JUST AS GOOD HEALTH—mental and physical—is fundamental to individual COPY EDITOR:
Lucy Morales
well-being, public health is fundamental to stable, cohesive societies. That
ADVISORS TO THE EDITOR:
is the lesson we must take from the COVID-19 pandemic.
Bernardin Akitoby Hamid Faruqee
The inextricable link between human and economic health is another
Celine Allard Davide Furceri
lesson. The pandemic plunged the world into the deepest economic con- Steven Barnett Deniz Igan
traction in generations, slowing progress on education, poverty eradication, Nicoletta Batini Kenneth Kang
Helge Berger Subir Lall
and inclusive development. Overcoming the pandemic is a prerequisite
S. Pelin Berkman Raphael Lam
to restoring jobs, livelihoods, and economic growth, say the IMF’s Gita Paul Cashin Christian Mumssen
Gopinath and Ruchir Agarwal. This makes it critical for global economic Martin Čihák Papa N’Diaye
Alfredo Cuevas Mahvash Qureshi
and financial stability, and therefore of fundamental importance to the IMF.
Era Dabla-Norris Uma Ramakrishnan
That is why we focus this issue of F&D on global health and well-being. Mame Astou Diouf Daria Zakharova
Our authors explore future global health threats and countries’ vulnerabil- Rupa Duttagupta
ities to them. They examine gaps in health care capacities within nations
© 2021 by the International Monetary Fund. All rights reserved.
and the global health security system. And they consider the role of prudent
For permission to reproduce any F&D content, submit a request
public policy and responsible politics in health care. via online form (www.imf.org/external/terms.htm) or by e-mail
Ngozi Okonjo-Iweala, Tharman Shanmugaratnam, and Larry Summers to [email protected]. Permission for commercial purposes also
available from the Copyright Clearance Center
call for rethinking international collaboration, with additional investments
(www.copyright.com) for a nominal fee.
of at least $15 billion a year to avert future pandemics. Rather than viewing
Opinions expressed in articles and other materials are those of
support for global health security as “aid for other nations,” they suggest the authors; they do not necessarily reflect IMF policy.
treating it as a strategic investment that benefits every nation—rich or poor.
Subscriber services, changes of address, and
Tedros Adhanom Ghebreyesus underscores the need for public financing advertising inquiries:
to provide universal health care. Michael Kremer and coauthors offer IMF Publication Services
Finance & Development
ideas to speed vaccinations in the next pandemic, including investments
PO Box 92780
in manufacturing capacity and supply chains and research in areas with Washington, DC 20090, USA
high social value. In a special feature, Miles Kimball and colleagues discuss Telephone: [phone]
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their development of an index of national well-being to complement GDP.
E-mail: [email protected]
The depth of the pandemic’s shock—and the lessons from it—will perhaps
Postmaster: send changes of address to Finance & Development,
spur individual countries and the international community to treat health International Monetary Fund, PO Box 92780, Washington, DC
as a public policy priority that will make for happier and more productive 20090, USA.
societies. As Mahatma Gandhi said, “Health is the real wealth…” The English e dition is printed at Dartmouth Printing Company,
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GITA BHATT, editor-in-chief Finance & Development is published quarterly by the International
Monetary Fund, 700 19th Street NW, Washington, DC 20431, in
English, Arabic, Chinese, French,
DECEMBER 2021 Russian, and Spanish. English edition
Pecaonndoemmiiccs P.10
Glaositn mg itlhee P .17 ISSN 0145-1707
FINANCE AND DEVELOPMENT Megsoesoaedsn ulcirfeien o Pgf. 3 tt2hhee
ON THE COVER
Our December 2021 cover features the original artwork “Heal” by Bahamian artist
Ben Ferguson Jr. Inspired by traditional “bush medicine” and the healing properties
Safeguarding of nature, Ferguson says he portrayed the mind “in a state of achieving wholeness,
the World’s Health and Well-being healing, and a sense of well-being.”
INTERNATIONAL MONETARY FUND
CC11--3399__IIMMFF__DDEECC2211__FFOOBB__PP44..iinndddd 11 1111//1111//2211 22::5555 PPMM
2 FINANCE & DEVELOPMENT | December 2021
Timely.
Topical.
Free.
Read the latest macroeconomic research and analysis from the IMF.
IMF.org/pubs
Mul tilateralism
4 FINANCE & DEVELOPMENT | December 2021
Rethinking
Mul tilateralism
for a
Pandemic
Era
IncrementalN cghoazin Ogkeo nwjoit-Ihwinea elax,i Tshtianrgm amne Schhaanmniusgmarsa htnaasm fa, ailnedd L; awwere nnecee dH. a S ufumnmdearms ental reset PHOTO OR ART: STOCKHOUSE / CONTRIBUTORART: ISTOCK / FINAL09; VECTARAY
December 2021 | FINANCE & DEVELOPMENT 5
e are nowhere near the on pledges to donate their projected substantial
end of the pandemic. surplus vaccines, along with grants to bridge the
Delta will not be the $23 billion shortfall needed to get jabs into arms
last highly transmissible and provide test kits and other medical supplies.
variant. Large unvacci- All that is a very small price to shorten the pan-
nated groups and the demic everywhere.
unchecked spread of But we also need a more fundamental reset to
the virus around the world raise the prospect avoid blundering into pandemics again and again
of further mutations, possibly evading today’s with enormous human and economic costs. The
vaccines, that will create new waves everywhere. current system of global health security is not fit
Yet COVID-19 is also a forerunner of more, and for purpose. It is too fragmented, overly dependent
possibly worse, pandemics to come. Scientists have on discretionary bilateral aid, and dangerously
repeatedly warned that without greatly strengthened underfunded. We must repair the system with
proactive strategies, global health threats will emerge urgency. The next pandemic could strike at any
more often, spread more rapidly, and take more lives. time, whether from a deadly influenza strain or
Together with the world’s dwindling biodiversity and another pathogen that jumps from animals to
climate crisis, to which they are inextricably linked, humans. It may even strike while the world con-
infectious disease threats represent the primary tinues to struggle with COVID-19.
international challenge of our times. We cannot avoid outbreaks altogether. But we
Recognizing this new reality of a pandemic era can sharply reduce the risk that they will blow
is not fearmongering but rather prudent public up into pandemics. The world has the scientific
policy and responsible politics. We must organize and technological capabilities and the financial
ourselves on a whole-of-society basis within nations resources to do so. However, to mobilize these
and rethink how we collaborate internationally to resources, we need a new way of thinking about
mitigate its profound consequences for livelihoods, international cooperation.
social cohesion, and global order. Rather than financing global health security
COVID-19’s only benefit has been to put the under the mantle of “aid for other nations,” we must
case beyond doubt. Our collective failure to heed treat it as a strategic investment in global public
scientific advice and invest in pandemic preven- goods that benefit every nation—rich or poor.
tion and preparedness has inflicted a catastrophic The Group of 20 major advanced and devel-
toll. Official data put the number of deaths at over oping economies (G20) established a high-level
5 million; credible unofficial estimates are a multiple independent panel (HLIP) to conduct a full review
of that number. Many more people have survived of the gaps in global public goods. It was aided
serious illness, with long-term consequences for their by extensive consultation with experts, the global
well-being and nations’ human capital that have yet health organizations, and the Global Preparedness
to be determined. The world has experienced the Monitoring Board, an independent group estab-
deepest economic contraction since World War II lished by the World Health Organization (WHO)
and a significant rollback in progress in education, and World Bank. The gaps the HLIP identified
poverty eradication, and inclusive development for a are large.
large swath of its population. The IMF has projected We need a massively scaled-up network of genomic
large cumulative losses in global GDP by 2025, with surveillance, integrating national, regional, and global
particular impact on the developing world. capabilities. Such a network is critical to detecting
and instantly sharing information on pathogens that
From aid to strategic investment could cause infectious disease outbreaks, identifying
Overcoming today’s pandemic remains the their genome sequences, and accelerating the devel-
immediate task. Rich nations must make good opment of medical countermeasures.
6 FINANCE & DEVELOPMENT | December 2021
HEALTH AND WELL-BEING
We must also close long-standing gaps in core and ensure that
healthcare capacities within nations to thwart both export restric-
emerging and endemic infectious diseases and tions and trade
mitigate comorbidities. These capacities benefit bottlenecks are
individual nations in normal times but are also tackled quickly.
critical to pandemic prevention and preparedness To plug these key gaps
globally. They therefore require both domestic in global public goods, we
and international financing. This, coupled with must invest collectively on a
a broader strengthening of public health systems, scale much larger than we have been willing to
will require many developing economies to spend in the past. Using the best cost estimates by the
an additional 1 percent of GDP, at least over the WHO, McKinsey & Co., and other sources, the
next five years. The additional spending must be G20 HLIP estimated that the world needs, at an
complemented by enhanced external grant support absolute minimum, additional international invest-
for investments in lower-income countries that are ments of $15 billion a year in these global public
in the nature of global public goods. goods to avoid future pandemics. This is a doubling
of current levels, but COVID-19 demonstrates
Global supply capacity that the costs of a pandemic are several hundred
Crucial too is building the global capacity needed times greater. The expected social returns on these
to radically speed up supplies of vaccines and other collective investments are immense.
vital materials to avoid prolonging a pandemic and
repeating the staggering inequalities of access that
To plug these key gaps in global
COVID-19 has revealed. We need a globally dis-
tributed development, manufacturing, and delivery
public goods, we must invest
ecosystem that is kept in use in normal times and
can pivot swiftly to provide the medical counter- collectively on a scale much
measures specific to each pandemic.
In the absence of a larger global supply capac- larger than we have been willing
ity ready early in a pandemic, producing nations
to in the past.
will remain prone to prioritize the needs of their
own populations over global needs. The private
sector currently has little incentive to invest in this
ever-warm supply capacity on the scale required However, to succeed in averting the next pan-
ahead of a pandemic, even if there is scope for demic, we must strengthen multilateralism. That
dual uses to meet ongoing needs in normal times. cannot be achieved with incremental changes to
We can therefore build the necessary supply eco- existing mechanisms, which have failed to prevent
system only through a major public-private invest- and respond decisively to the current pandemic.
ment initiative. That will require a tightly coor- We need major renovation and replenishment of
dinated network of global health organizations both individual institutions and the global health
and national and regional agencies—such as the architecture. The G20 panel has advocated three
Biomedical Advanced Research and Development strategic shifts to enable proper and proactive
Authority (BARDA) in the United States, the financing of global health security.
Health Emergency Preparedness and Response First, we must put the finances of the WHO on a
Authority (HERA) in Europe, and the African more secure multilateral footing and empower it to
Vaccine Alliance—collaborating closely with perform its core roles more effectively. There is no
the private sector. Equally, we need clear global solution to pandemic security that does not involve
rules to keep supply chains open in a pandemic a reformed and strengthened WHO at its center.
December 2021 | FINANCE & DEVELOPMENT 7
resources more optimally to support investments
in global public goods.
The IFIs must also play lead roles in interna-
It plays the tional financing of the response to pandemics. The
lead role in IMF and World Bank have designed programs and
the surveillance of streamlined processes during COVID-19 to enable
global health emergen- more flexible disbursement of funds. Following the
cies and in identifying gaps in recent $650 billion general allocation of Special
the national core capacities set out in the Drawing Rights (SDRs) among its members, the
International Health Regulations. It is also integral IMF is also actively working with wealthier coun-
to the international coalition of health partners that tries to channel excess SDRs to those that are more
must develop a globally distributed, end-to-end vulnerable via the Poverty Reduction and Growth
supply ecosystem for medical countermeasures. Trust, among other ways. However, the whole pro-
Second, we must repurpose the international finan- cess for an SDR allocation to be approved, and
cial institutions (IFIs) for a new era. The IMF and subsequently deployed to countries most in need,
World Bank were created at the end of World War takes time. Several other mechanisms were also
II to assist countries with economic reconstruc- developed or enhanced in the midst of the pandemic.
tion or when they ran into financial difficulties The IFIs must now improve and formalize them
of their own. The World Bank’s success led to as part of their crisis-response toolkits so they can
the establishment of the other regionally based deploy resources at a much larger scale and more
multilateral development banks. Collectively, the swiftly when necessary.
IFIs are unique international institutions with the The shareholders of these key institutions must
ability to multiply the impact of finance in ways themselves adapt to the challenges of a new era.
that will be critical in the decades ahead. They They must make timely replenishments of the
leverage the resources of their shareholders in the grants and capital needed by the IFIs and ensure
capital markets, induce domestic funding and that the greater focus on global public goods does
policy reforms by governments, and help catalyze not come at the expense of spending on education,
private sector investments. social protections, and other development priori-
Yet the mandates of the Bretton Woods institu- ties. They must also enable the IFIs to put out much
tions must be updated for an era when the largest more money in a pandemic, much faster and with
challenges facing countries lie in threats to the less elaborate conditions, just as their treasuries and
global commons, even as poverty alleviation and central banks became major lenders and investors
inclusive growth remain critical priorities. The IMF of first resort in their own countries.
and World Bank must work closely with regional Shareholders should also support a new capital
development banks and other international players, adequacy framework for the multilateral develop-
including global health organizations, to incentiv- ment banks, one that recognizes their preferred
ize lower-income countries and regions to invest in creditor status and very low default experience and
the public goods needed to address these threats. enables enhanced leverage without compromising
The business models of the World Bank and their triple-A ratings. Recommendations for doing
other multilateral development banks must also so were made by an earlier G20 eminent persons
pivot toward mitigating risk rather than direct group. The recent review initiated by the Italian G20
lending, so as to mobilize private capital and trans- presidency is an important step in the right direction.
form global savings into development finance.
The potential for doing so has long been recog- Overcoming fragmentation
nized, given the banks’ triple-A credit ratings Third, besides strengthening the WHO and repur-
and scope for using risk guarantees and other posing the IFIs, we must establish a new multilat-
credit-enhancement tools and that most develop- eral financing mechanism for global health secu-
ing economies now have access to capital markets rity. Currently, fundraising for this purpose is
to finance infrastructure. However, progress in fragmented, based on the different mandates
moving away from a lending-based model has been of the various global health organizations, and
slow. A bolder move is now required to use their largely dependent on discretionary bilateral and
8 FINANCE & DEVELOPMENT | December 2021