Today, a new chapter may have opened. In the wake of financial crises unprecedented since the Great Depression, persistent economic inequality, migratory pressures on Europe and the United States intensifying in the mid-2010s, Brexit, the norm-breaking U.S. Trump administration of 2017-21, the first global pandemic in a century, an accelerating climate crisis, the Russian invasion of Ukraine, and the newest Israel-Gaza war, the world looks to have moved into a distinct era echoing many of the interwar tensions that the post-World War II settlement sought to overcome. And unlike in the 1920s and 1930s when radio first became widely available, modern media display global stresses to everyone visually and in real time and amplify them in a way undreamed of then. How much reversion toward the troubled past is likely, and to what extent will that reversion undermine the global community’s ability to address common challenges, some inconceivable before World War II?

As an economist, I will focus mainly on issues related to commerce and finance, but the nature of the current malaise underscores the inherent inseparability of geopolitics, domestic politics, and economics. The destabilizing potential of this interplay was less salient for parts of the postwar period, especially in the quarter-century or so from the collapse of the Soviet bloc over 1989-91 to the mid-2010s. After that brief belle époque, however, history has indeed returned, with a vengeance.

In this paper, I start by briefly summarizing challenges the Bretton Woods system’s monetary, financial, and commercial arrangements were meant to overcome, and factors that led to the system’s unraveling by 1973. I then describe how economic globalization exploded under the newer floating exchange rate arrangements, and how the Global Financial Crisis years 2008-09 appear under various metrics to be a watershed for global economic integration. Geopolitical developments in recent years may have accentuated the disintegrative forces in the global economy—it is still early days. I therefore turn to the links between geopolitics, domestic politics, and economics and the prospects for future multilateral global cooperation on a range of macro-critical common threats.

Maurice Obstfeld, C. Fred Bergsten Senior Fellow at the Peterson Institute for International Economics, is the Class of 1958 Professor of Economics emeritus at the University of California, Berkeley, where he taught between 1991 and 2023.

To read the abstract published by the Peterson Institute for International Economics, click here.

To read the full working paper, click here.

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As a signatory member of the WTO agreements, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy as defined in the AoA. Since the WTO was established on January 1, 1995, the United States has generally met its WTO commitments with respect to allowable spending on market-distorting types of farm program outlays.

What Is the Issue?

The U.S. government provided up to $60.4 billion in ad hoc payments to agricultural producers cumulatively in 2018, 2019, and 2020, in addition to existing farm support. These payments have raised concerns among some U.S. trading partners, as well as market watchers and policymakers, that U.S. domestic farm subsidy outlays might exceed its annual WTO spending limit of $19.1 billion in one or more of those three years.

Compliance with WTO commitments is based on the total spending under all U.S. farm support programs for each crop year, but subject to certain exemptions (described below). From 1995 through 2017, the United States has met its WTO commitments; however, this compliance has relied on use of the available exemptions in several years to exclude certain domestic support spending from counting against the spending limit.

The United States notified an average of $15.4 billion in annual domestic farm support (prior to exemptions)—or cumulatively, $46.1 billion—during the recent three-year period from 2015 to 2017. New spending of up to $60.4 billion under U.S. government ad hoc payment programs— that the United States may have to report, and which would be in addition to the traditional farm support programs—could more than double the amount of annual domestic support subject to the spending limit in 2018 through 2020. This new ad hoc spending includes the 2018 Market Facilitation Program (MFP), valued at $8.6 billion; the 2019 MFP, valued at $14.5 billion; the two 2020 Coronavirus Food Assistance Programs(CFAP-1 and CFAP-2), valued at up to $16.0 billion and up to $14.0 billion, respectively; and the 2020 Paycheck Protection Program’s (PPP’s) forgivable loans to agricultural interests, valued at $7.3 billion.

CRS analysis (described in this report and based on available data) indicates that U.S. domestic farm support outlays were likely within the agreed-to WTO spending limit of $19.1 billion in 2018, but could exceed the limit in 2019 depending on the U.S. Department of Agriculture’s (USDA’s) notification strategy. In 2020, U.S. non-exempt domestic support outlays appear likely to surpass the spending limit if a typical notification strategy is used by USDA.

To download the full report, please click here. 

Randy Schnepf is a Specialist in Agricultural Policy at the Congressional Research Service. 

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At the onset of COVID-19, the Bank Group took broad, decisive action in delivering a fast-track facility to help countries respond quickly to this crisis. We expect to deploy up to $160 billion in the 15 months ending June 30, 2021, through new operations and the restructuring of existing ones to help countries address the wide range of needs arising from the pandemic. This will include over $50 billion of IDA resources on grant and highly concessional terms.

By May, we reached the milestone of emergency health operations in 100 countries. Our initial projects focused on limiting the pandemic’s spread and boosting the capacity of health services. We helped countries access essential medical supplies and equipment through support for procurement and logistics, including negotiations with suppliers on their behalf. Many developing countries are dependent on imports for supplies, making them highly exposed to price fluctuations and trade restrictions. Through IFC and MIGA, we provided vital working capital and trade finance for the private sector in developing countries, particularly firms in core industries, and helped financial sectors continue lending to viable local businesses.

In March, the World Bank and IMF called for official bilateral creditors to suspend debt payments from IDA countries. In April, G20 leaders issued a historic agreement suspending official bilateral debt service payments from May 1 through the end of 2020 and called for comparable treatment by commercial creditors— a powerful example of international cooperation to help the poorest countries. Beyond immediate health concerns, the Bank Group is supporting countries as they reopen their economies, restore jobs and services, and pave the pathway to a sustainable recovery. Many of our client countries have enhanced their transparency and attractiveness to new investment with fuller disclosure of their public sector’s financial commitments. The Bank is helping the most vulnerable countries evaluate their debt sustainability and transparency, which are both essential to good development outcomes.

The Bank Group is supporting countries’ efforts to scale up their social safety nets. This includes cash transfer operations through both in-person and digital options so that governments can efficiently deliver this critical support to their most vulnerable people. We are also engaging with governments to eliminate or redirect costly and environmentally harmful fuel subsidies and reduce trade barriers for food and medical supplies.

In fiscal 2020, IBRD’s net commitments rose to $28 billion, while disbursements remained strong. IDA’s net commitments were $30.4 billion, 39 percent higher than the previous year. The 19th replenishment of IDA was approved in March, securing a three-year $82 billion financing package for the world’s 76 poorest countries. This will increase our support to countries affected by fragility, conflict, and violence (FCV) and strengthen debt transparency and sustainable borrowing practices. Over the last year, we realigned the Bank’s staff and management to drive coordinated country programs and put high-quality knowledge at the center of our operations and development policy. We are increasing our global footprint to be closer to our operations on the ground. We also strengthened our focus on Africa by creating
two Bank vice presidencies, one focusing on Western and Central Africa and the other on Eastern and Southern Africa, to take effect in fiscal 2021. I appointed four new senior leaders: Anshula Kant as Managing Director and Chief Financial Officer, Mari Pangestu as Managing Director of Development Policy and Partnerships, Hiroshi Matano as Executive Vice President of MIGA, and Axel van Trotsenburg as Managing Director of Operations on the departure of Kristalina Georgieva to head the IMF. In addition to these appointments, there were 12 vice-presidential appointments or reassignments over the last year. Together, the strong leadership team and a highly dedicated and motivated staff are striving to build the world’s most effective development institution, with a resilient and responsive business model that can help each country and region achieve better development outcomes.

At our Annual Meetings in October, we presented a new index to track learning poverty—the percentage of 10-year-olds who cannot read and understand a basic story. Reducing learning poverty will require comprehensive reforms, but the payoff—equipping children with the skills they need to succeed and achieve their potential as adults—is vital for development.

By helping countries leverage new digital technologies, we are expanding access to low-cost financial transactions, particularly for women and other vulnerable groups. Digital connectivity is one of many key steps in helping women unleash their full economic potential. The Women Entrepreneurs Finance Initiative (We-Fi), hosted by the Bank Group, works to remove regulatory and legal barriers that women face and help them gain access to the financing, markets, and networks they need to succeed. Bank operations also focus on providing women with greater agency and voice in their communities, working to ensure that girls can learn effectively and safely in schools, and promoting quality health care for mothers and children.

We help countries strengthen their private sectors, which are central to creating jobs and boosting economic growth. In fiscal 2020, IFC’s long-term finance commitments increased to $22 billion, which includes $11 billion of its own commitments and $11 billion in mobilization, commitments from private investors, and others. In addition, IFC extended $6.5 billion in short-term finance. MIGA’s commitments totaled $4 billion, with an average project size of $84 million. Looking forward, MIGA’s product line, staffing, and upstream efforts are well suited to help in the Bank Group’s COVID-19 response, including a focus on smaller projects in IDA-eligible countries and countries affected by FCV.

None of these achievements would have been possible without our staff’s hard work and successful adjustment to home-based work during the pandemic. Working around the world and at all levels, staff continued to deliver solutions to address countries’ most urgent needs. I am deeply grateful for their dedication and flexibility, especially amid these difficult circumstances.

As people in developing countries worldwide grapple with the pandemic and deep recessions, the World Bank Group remains committed to their future, providing the support and assistance they need to overcome this crisis, and achieve a sustainable and inclusive recovery.

DAVID MALPASS
President of the World Bank Group and Chairman of the Board of Executive Directors

To download the full report, please click here.

World Bank. 2020. World Bank Annual Report 2020. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1619-2 . License: Creative Commons Attribution–NonCommercial–NoDerivatives 3.0 IGO (CC BY-NC-ND 3.0 IGO).

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According to a poll conducted in December 2016 by the Program for Public Consultation at the University of Maryland, most Americans (59.3 percent) support the statement that “when giving foreign aid, it is best for the U.S. to participate in international efforts, such as through the United Nations. This way it is more likely that other countries will do their fair share and that these ef- forts will be better coordinated.”

However, a majority of Republican voters disagree, believing that it is better for the U.S. to provide aid on its own, to ensure control over how money is spent and to gain recognition for its generosity.This America First sentiment is most concerning because multilateral institutions are uniquely equipped to respond to today’s development challenges.

They can coordinate among multiple de- velopment actors; conduct a coherent policy dialogue with government; build partnerships with non-state actors; blend aid and loans with private capital; play an honest broker role, especially in government-business dealings; ensure transparency, consultation, and the application of best- practice safeguards in projects; and provide accountable administrative structures on finance, data, and results-evaluation.

To view the full report, click here.

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