Reconstruction time. In this Thursday’s speech, the managing director of the International Monetary Fund (IMF), Bulgarian Kristalina Georgieva, asked the international community to face the problems of the hour with the spirit of the Bretton Woods Conference.
That was the big deal made in 1946 in this tiny New Hampshire state, in the United States, in which 44 representatives from the main countries led by the United States defined the economic bases for reconstruction.
In 1944, the world economy was prostrate as a result of two huge devastations: that of the Great Depression of the 1930s and that of the Second World War, from 1939 to 1945.
Bretton Woods restored the global monetary order, still based on the gold standard. It also created the International Monetary Fund, to help countries in cases of inability to pay in the international market, and the world Bank, to help finance the economic development of poor countries.
The timing, said Georgieva, is for a new Bretton Woods. And she lists the damage of a year of pandemic: “More than 1 million dead, a shrinkage of 4.4% in global GDP and another drop of US $ 11 trillion in production next year”. And he adds that, this year, poverty has increased for the first time in decades.
Despite the proportions of the disaster, reconstruction tasks are immeasurably smaller than those that existed in the second half of the 1940s, when a large extent of infrastructure and production capacity was destroyed by bombings in Europe and Asia.
I can’t say that help is lacking. Georgieva herself celebrates the injection of $ 12 trillion in tax resources by the national treasuries and another $ 7.5 trillion by the large central banks.
If the moment is one of extensive reconstruction, there will be no need to rebuild factories, ports, railways and roads and recover so many devastated fields. But more investment is needed, whose function will be to help increase the production of wealth and create jobs.
If the moment is for a new Bretton Woods, it is also for a message, which at the time was given by the greatest economist of the 20th century, John Maynard Keynes. In 1944, he called for a major global cooperation effort, capable of laying the foundations for a new brotherhood among peoples.
One of the fields that can leverage the new times is the forwarding of projects to replace fossil energy with renewable energy. The world today faces an economic disaster of an environmental nature of the order of US $ 1.3 trillion. But “we can reach 2050 with zero carbon dioxide emissions and help create millions of jobs,” suggests Georgieva.
The biggest limitations are in the fiscal field. In 2021, advanced countries will have an accumulated debt of 125% of GDP and emerging countries, 65% of GDP. Brazil’s gross debt is rapidly moving towards 100% of GDP. But these constraints must be faced not as an unavoidable problem, but as additional obstacles to overcome. Time will tell if these calls are echoed.
»The size of the resumption
The recovery of production in August, of 1.06% over July, shows that the bottom of the well is being exceeded. This is what the Central Bank’s Economic Activity Index (IBC-Br) advances, an indicator whose function is to anticipate the pace of the economy that will only be confirmed within a few months by the National Accounts (GDP figures). But this result should not produce any illusions. It was compared to a very low base, that of the sharp fall in production and income at the height of the pandemic.