While the 2021 issuance helped billions of people around the world, hundreds of thousands of Americans also benefited – and would do so again. Exports of US goods and services to developing countries total around $1tn, and if these countries get an infusion of reserves, they will import even more.
This effect can be quite significant. An SDR distribution the size of the 2021 issuance would be expected to create about as many jobs in the United States in one year as the $740bn Inflation Reduction Act did in its first year. We are talking, conservatively, about 111,000-191,000 new jobs, most of which would be in export-related areas such as manufacturing, transportation, and warehousing.
In fact, the total number of jobs created could be substantially more, since we also must account for the role of SDRs – as reserves – in stabilising developing economies. This effect would be even more important if the world economy slowed, as it seems to be doing now. (The global growth rate has declined sharply since the last SDR distribution, from a record 6.6% in 2021 to half that today.).
Nor is this the only compelling reason to favour another SDR issuance. With so many countries facing tight budgetary constraints in the aftermath of the Covid-19 pandemic, it could help countries make the investments needed to mitigate climate change.
And even if one puts these considerations aside, it is obvious that the world needs another SDR issuance. Many countries are facing debt crises, with the result that some 3.3bn people live in countries that spend more on interest payments than on health care, while 2.1bn people live in countries that spend more on interest than on education.
So why hasn’t a new issuance already happened? It turns out that the US Treasury Department is the biggest hurdle. Under IMF rules (which were written in 1944), the 190-member organisation does not follow the principle of “one country, one vote.” Instead, the US has 16.5% of the votes, and any decision to authorise a new SDR issuance requires 85% approval. The Treasury Department, which represents the US at the IMF, thus wields a veto, and as long as it brings along other high-income countries, it can push through almost any measure it wants.
What is needed for another SDR issuance, then, is America’s support. Though the Treasury Department would be required to give Congress a 90-day notice, a 2021-size issuance would not actually require a congressional vote. The outgoing Biden administration could start the process today, and Donald Trump’s incoming administration need only concur with the decision.
Would Trump go along with this? It is certainly possible, considering that a new issuance would create jobs in the US. If it happens quickly, without any slowdown in Congress, it could even be distributed as early as April.
While US organised labour has already voiced support for a new issuance, Wall Street also has a big stake in the matter. US financial firms are holding tens of billions of dollars in debt-distressed developing countries’ sovereign bonds, and a fresh infusion of cash into those economies could save them from potentially massive losses on their investments. As global economic growth has slowed, the bonds they are holding are more at risk than they were three years ago. Moreover, like the 2021 issuance, a new one would have zero cost to the US budget.
Of course, the biggest impact would be on the developing world. Globally, 282mn people are at risk of starvation, up from 135mn before the pandemic, and from 258mn in 2022. The additional reserves created by new SDRs would enable more imports of food and medicine, as well as investments in badly needed public-health equipment and infrastructure.
In 2021, the $209bn SDR issuance exceeded all official development aid that developing countries received that year. Issuing SDRs can save hundreds of thousands of lives around the world, and, unlike most aid, it comes with no debt and no strings attached. For all of these reasons, the Catholic Church and other religious organisations have consistently supported new SDR allocations.
No economists, including at the US Treasury, have offered any plausible argument that a new issuance would carry significant downside risks. The IMF’s own assessment concluded that the last issuance “contributed to global financial stability,” with “no evidence that allocation materially contributed to global inflation.”
The Biden administration should take the advice of virtually all the economists who have looked at this question and initiate a new issuance of SDRs. Doing so would steer the IMF onto a path toward creating hundreds of thousands of US jobs and saving countless lives around the world. — Project Syndicate
• Joseph E Stiglitz, a former chief economist of the World Bank and former chair of the US President’s Council of Economic Advisers, is University Professor at Columbia University, a Nobel laureate in economics, and the author, most recently, of The Road to Freedom: Economics and the Good Society.
•Mark Weisbrot, co-director of the Center for Economic and Policy Research, is the author of Failed: What the ‘Experts’ Got Wrong About the Global Economy.
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