Oxfam calls for $1 trillion of global money creation in order to provide cash transfers for everyone who needs them
Oxfam International is calling for the International Monetary Fund (IMF) to create $1 trillion worth of 'Special Drawing Rights' (SDRs) - the IMF's global currency - to provide cash transfers to every person in the world who needs them. The aim is to stave off a massive increase in global poverty, which Oxfam's new report predicts could return to the shocking levels of thirty years ago.
The report states, "In countries like Kenya and Cambodia, tens of thousands of factory and farm workers are being told to go home. Women workers will be among the hardest hit, as they are more likely to be engaged in informal and precarious work... Today only one in five of all unemployed workers has access to unemployment benefits."
Oxfam highlight the urgent need for an international response: "Developing countries are also doing their best to respond. Namibia has given a one-off Emergency Income Grant to informal and formal workers who have lost their jobs. But the financial firepower of such countries is far from sufficient and they need as much help as they can get, as soon as possible... This is the time to take bold steps towards universal social protection that is responsive to shocks."
The international response to the crisis has, so far, been deeply inadequate. The COVID19 Global Humanitarian Response Plan aims to raise just $2bn, and has so far managed to pull in only a fifth of that paltry target. This is a minute drop in the ocean compared to the $2.5 trillion that Oxfam calculate is needed (made up of IMF money creation, as well as aid and tax measures).
Oxfam's proposal for global money creation therefore holds exciting potential, especially as it has been used before to help the world through a crisis. In the wake of the 2008 financial crash, the IMF created a quarter of a trillion dollars in SDRs to help boost the world economy. National governments use similar mechanisms to support their economies during crises, such as the UK's policy of Quantitative Easing. These solutions can't be used too often (as that could cause inflation) but they are a vital way of keeping economies working when times are hard.
If this money can be generated immediately, we must ask how it can best be used. Oxfam propose giving it to governments, who they hope would then use it for cash grants to their people. However, they acknowledge that this just won't happen in some countries: "Sadly in a number of developing countries leaders have been failing their citizens, providing poor governance and engaging in corruption. Many more have not acted to deliver universal healthcare or protect their citizens with cash payments."
A better way could be for the money to be distributed directly from the IMF or the UN to people everywhere. This would ensure that everyone could receive it, even if their government is corrupt or their country is at war. Global provision could be especially important to protect asylum-seekers, refugees and migrant workers, who often have very few rights once they leave their home countries.
Online registration systems could be created to enable people to sign up directly, based on national identifiers such as social security numbers or on biometric or peer-to-peer ID systems. The money could be distributed using bank accounts, mobile money accounts (as are hugely popular across Africa), payment cards that could be posted to people worldwide, or any of the other systems already used to get cash to people in remote situations. Oxfam explain how in their own cash transfer programmes, they successfully get money to people in any situation 'from conflict settings to refugee camps', in countries as diverse as Yemen, Columbia and the Democratic Republic of Congo.
A response of this kind to the COVID19 crisis would be groundbreaking. It would prevent a huge increase in poverty, and ensure that people don't have to choose between dying from hunger or the virus. It could also lay the groundwork for a longer-term initiative, where cash grants are continued beyond the pandemic to support the 50% of people worldwide who were already living in poverty. Once the crisis funding runs out, a world basic income of this kind could be funded through global taxation, such as an international carbon tax or a levy on financial transactions. By eradicating extreme poverty in the long-term, we would also make the world better prepared for the next crisis, as it is clear from coronavirus and many other disasters that it is the poorest who suffer the most.
By Laura Bannister, Co-Director, World Basic Income