## CONFRONTING A PERFECT LONG STORM ## Source details **Canonical URL:** [CONFRONTING A PERFECT LONG STORM](https://www.imf.org/-/media/files/publications/fandd/article/2022/june/tharman.pdf) ## Other formats - [Markdown version](/-/media/files/publications/fandd/article/2022/june/tharman.pdf.md) - [Structured JSON version](/-/media/files/publications/fandd/article/2022/june/tharman.pdf.json) --- ### Overview - The world faces a "perfect long storm": a confluence of lasting structural insecurities—geopolitical, economic, and existential—that reinforce each other. - These are not random one-off shocks; events such as COVID-19 and the war in Ukraine illustrate how problems in one part of the world rebound globally. - Restoring optimism requires recognizing the gravity and collective nature of threats and organizing more effective domestic and multilateral responses. ### Major risks identified - Geopolitical - The risk of escalating geopolitical conflict is greater than it has been in over three decades. - The unprovoked invasion of Ukraine has ramifications that could be catastrophic and extend beyond previous ruptures in the system. - Economic (stagflation and distributional effects) - Prospect of stagflation: higher inflation and stalled growth for a period of time. - Advanced economies’ central banks face a more complex task than at any time in living memory; chances of taming inflation while achieving a soft landing are getting slimmer. - The war in Ukraine has disrupted energy, food, and other critical commodity markets, complicating policy choices. - Prolonged high inflation will erode political capital needed to respond to larger challenges, including the climate crisis. - Existential commons and health security - Climate change, shrinking biodiversity, water scarcity, polluted oceans, congested outer space, and spread of infectious diseases are worsening and interact with each other. - Recurring pandemics are "already baked into the system" with scientists warning the next could be more lethal. - Two years into COVID-19, the world is still "flying blind" into the next pandemic. - Divergences within and across countries - Higher prices for basic foods, livestock feed, fertilizer, and energy hit poorer countries hardest; more than half are already in or near debt distress. - Risk of rollback of economic and social gains; potential permanent scarring of the young and disempowerment of women. - Before COVID-19, more than half of the children in low- and middle-income countries had not achieved basic literacy by age 10; the figure is now estimated to be as high as 70 percent. - Girls suffered large learning losses, with many not returning to school and millions being pushed into early marriage. ### Financing global public goods and investments needed - Urgent need to mainstream preparedness for threats into public policy and collective thinking. - Significant sustained investment is required across many areas, from clean water and trained teachers to upgraded logistics infrastructure. - Opportunity to spur innovation in low-carbon materials, advanced batteries, hydrogen electrolyzers, and combination vaccines. - Scale of investment to achieve net zero carbon emissions: - Estimated $100 to $150 trillion over the next 30 years. - Equivalent to $3 to $5 trillion annual cost. - World’s capital markets size referenced as $100 trillion, which grow by about that amount each year. - Private finance exists, but channeling it to the global commons requires proactive public sector involvement and well-designed risk-sharing frameworks. - Almost half the technologies needed to reach net zero by mid-century are still being prototyped; governments must "put skin in the game" to leverage private sector R&D and promote demonstration projects. - Example: immunizing the world’s population even six months earlier would save trillions of dollars and countless lives—illustrating high social returns that justify public risk-sharing. ### Multilateralism: reorientation and priorities - A more effective multilateralism is essential; UN Secretary-General’s Our Common Agenda proposes a vision that is more inclusive, networked, and outcome-focused. - Do not require entirely new institutions, but urgent reorientation of existing ones, new mechanisms for networked cooperation, and pooled resources to meet collective and national interests. - New framing: spending on strengthening the global commons is an investment benefiting both rich and poor nations. - G20 High Level Independent Panel on financing pandemic security showed additional international investment to plug preparedness gaps is affordable and would avoid costs several hundred times larger if action is not taken. ### Repurposing Bretton Woods institutions - Historical context: IMF and World Bank were set up almost 80 years ago for a different financial era. - Required changes: - IMF: given a mandate to manage a stronger and more effective global financial safety net, more akin to leading central banks injecting stability at home. - World Bank: place the global commons at the core of its mandate alongside poverty alleviation; play a much bolder role as a multiplier of development finance. - Pivot toward mobilizing private capital using risk guarantees and credit-enhancement tools rather than relying on direct lending alone. - Better resourcing and empowerment by shareholders to allow larger and swifter interventions. - Join up operations with other international financial institutions and development partners to overcome fragmented efforts and build convergence around core standards such as on debt sustainability and procurement. ### Safeguarding the digital commons - Positive agenda: build infrastructure and policy frameworks to close the digital divide and digital literacy gaps. - Need for global guardrails to make the internet safe for democracy and align online platforms with the public interest. - No global rules yet to counter industrial-scale disinformation or systematic efforts to spread distrust. - The European Union’s new Digital Services Act is cited as a major step; similar approaches are being taken in the United Kingdom, Singapore and Australia. - Cybersecurity: countries have adopted norms for responsible state behavior in cyberspace; the challenge is implementing them sustainably, even during geopolitical tension. ### Avoiding polarization and managing great-power relations - A fresher strategic understanding, especially between the United States and China, is essential as the world shifts toward multipolarity. - Overarching common interests to shape that understanding: climate and pandemic security, peace, and avoidance of global financial crises. - Need for geostrategic skill and domestic strategies to create good jobs and broad-based opportunities to rebuild political foundations for economic openness. - Update rules to ensure fair competition and resilient supply chains without retreating from an open and integrated order. - Economic interdependence—outside sectors impinging on national security—reduces the likelihood of conflict more than a world of decoupled markets, technologies, payment systems, or data. - Overriding priority: accommodate a multipolar world without increasing polarization, since fragmentation weakens all nations and undermines shared human interests in a safe, sustainable, and prosperous world. ### Policy recommendations and actions - Treat investments in the global commons as high-return strategic investments, not mere aid. - Scale up public investment and mobilize private finance through public-private collaboration on an unprecedented scale. - Implement clear policy frameworks for the low-carbon transition, including predictable schedules for carbon pricing and fossil fuel subsidy phase-outs, and direct assistance to vulnerable groups to preserve energy security. - Use public sector risk-sharing (risk guarantees, credit enhancements) to leverage private capital for innovation and infrastructure. - Accelerate deployment of proven clean energy technologies and incentivize large-scale investments in smart transmission and distribution grids to cut emissions by 2030. - Governments should support R&D and demonstration projects for prototyped technologies needed for net zero by mid-century. - Reorient and resource the IMF and World Bank to respond to globalized financial crises and the economic challenges of a deteriorating global commons. - Build global digital guardrails, implement cybersecurity norms consistently, and promote digital inclusion. *Tharman Shanmugaratnam is senior minister, Singapore. He is a member of the UN Secretary-General’s High-Level Advisory Board on Effective Multilateralism and co-chairs the recently launched Global Commission on the Economics of Water. He chaired the G20 Eminent Persons Group on Global Financial Governance and co-chaired the G20 High Level Independent Panel on financing pandemic security.* --- _Source: https://www.imf.org/-/media/files/publications/fandd/article/2022/june/tharman.pdf_