A no-brainer for global growth and American jobs
Published: 04:01 PM,Jan 14,2025 | EDITED : 08:01 PM,Jan 14,2025
Exports of US goods and services to developing countries total around $1 trillion.
Mark Weisbrot
The writer is Co-Director of the Center for Economic and Policy Research, is the author of Failed: What the “Experts” Got Wrong about the Global Economy
In August 2021, the International Monetary Fund issued $209 billion to developing countries in the form of special drawing rights (the IMF’s reserve asset). SDRs are much like cash, because recipient governments can convert them to hard currency. As such, they are a highly effective tool, and the IMF can and should make greater use of them.
While the 2021 issuance helped billions of people around the world, hundreds of thousands of Americans also benefitted — and would do so again. Exports of US goods and services to developing countries total around $1 trillion, 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 $740 billion 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 per cent in 2021 to half that today.).
Nor is this the only compelling reason to favor 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 3.3 billion people live in countries that spend more on interest payments than on healthcare, while 2.1 billion 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 per cent of the votes, and any decision to authorise a new SDR issuance requires 85 per cent 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, 282 million people are at risk of starvation, up from 135 million before the pandemic, and from 258 million 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 $209 billion 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 towards creating hundreds of thousands of US jobs and saving countless lives around the world. @Project Syndicate, 2025
The writer is Co-Director of the Center for Economic and Policy Research, is the author of Failed: What the “Experts” Got Wrong about the Global Economy
In August 2021, the International Monetary Fund issued $209 billion to developing countries in the form of special drawing rights (the IMF’s reserve asset). SDRs are much like cash, because recipient governments can convert them to hard currency. As such, they are a highly effective tool, and the IMF can and should make greater use of them.
While the 2021 issuance helped billions of people around the world, hundreds of thousands of Americans also benefitted — and would do so again. Exports of US goods and services to developing countries total around $1 trillion, 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 $740 billion 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 per cent in 2021 to half that today.).
Nor is this the only compelling reason to favor 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 3.3 billion people live in countries that spend more on interest payments than on healthcare, while 2.1 billion 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 per cent of the votes, and any decision to authorise a new SDR issuance requires 85 per cent 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, 282 million people are at risk of starvation, up from 135 million before the pandemic, and from 258 million 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 $209 billion 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 towards creating hundreds of thousands of US jobs and saving countless lives around the world. @Project Syndicate, 2025