United Nations Secretary General
The East-West divide risks what I have called the Great Rift: the disassociation of the world’s two largest economies. A tectonic rift that would create two different sets of trading rules, two dominant currencies, two internets, and two competing AI strategies, that’s the last thing we need.
The International Monetary Fund reported that dividing the world economy into two blocs could reduce world GDP by a staggering $1.4 trillion. Now, there are many aspects in which relations between the United States and China will inevitably diverge, especially in matters of human rights and in some areas of regional security. But despite this, it is possible (and I would argue essential) for both countries to maintain meaningful engagement on climate, trade, and technology to avoid decoupling the economies or even the possibility of a future confrontation.
The North-South divide is deepening. I am not convinced that the richer world and its leaders really understand the degree of frustration and even anger that exists in the global south. Frustration and anger at the huge inequality in the distribution of vaccines in the recent past. Frustration and anger over the recovery from the pandemic, with support overwhelmingly concentrated in the richest countries that could print money.
The dilemma of today’s world.
And trillions were printed in the Global North, and of course developing countries couldn’t print money because their currencies would go down the drain. There is frustration and anger over a climate crisis that is paralyzing the countries that contributed the least to global warming. There is a lack of financial resources to respond to the challenge. There is frustration and anger over a morally bankrupt financial system, in which systemic inequalities are amplifying social inequalities.
We have a system that continues to systematically deny debt relief and concessional financing to vulnerable middle-income countries that desperately need it, because the rules are not made to allow it.
We have a system in which most of the world’s poorest countries have seen debt service payments skyrocket 35 percent in the last year alone. Now we have to overcome all these divisions and restore trust. How can we do it? First, by reforming and introducing equity in the global financial system. Developing countries need access to finance to reduce poverty and hunger and progress towards the Sustainable Development Goals (SDGs). I have urged the G20 to agree on an SDG Stimulus Plan that provides support to countries in the Global South, including vulnerable middle-income ones.
The necessary liquidity, debt relief and restructuring, as well as long-term loans are needed to invest in sustainable development. In short, we need a new debt architecture. And the multilateral development banks must change their business model.
Beyond their own operations, which are, of course, very important, they must focus on multiplying their impact, massively leveraging private financing in a systematic way, providing guarantees, accepting to be the first to take risks in coalitions of financial institutions to support developing countries.
Unless the conditions are created for a massive influx of private finance at a reasonable cost to the developing world, there is simply no solution. International financial institutions are too small and the capacity to increase ODA is not in sight in the short term. Second, overcoming divisions and rebuilding trust requires significant climate action, and immediate climate action.