Treasury Secretary Janet Yellen on Monday warned that a failure of rich nations to help developing countries respond to the coronavirus pandemic would trigger “a deeper and longer-lasting crisis” that could also harm the U.S. economy.
In a Monday speech, Yellen said that the developing world would be wracked by “mounting problems of indebtedness, more entrenched poverty, and growing inequality” without more medical and economic aid from well-off nations.
“Unless we act now, the world is susceptible to the emergence of a deepening global divergence between rich and poor countries,” Yellen said in prepared remarks before The Chicago Council on Global Affairs.
“This would be a profound economic tragedy for those countries, one we should care about. But, that’s obvious. What’s less obvious — but equally true — is that this divergence would also be a problem for America,” she said.
The U.S. and other rich countries are on track for strong growth and a return to normal activity before the end of the year. Even so, developing nations are lagging woefully behind due to a much smaller capacity to provide economic aid and procure vaccines.
While the U.S. is on track to vaccinate every adult before the end of summer, many developing nations may not be able to acquire sufficient doses to do so until 2023 or 2024.
Yellen also warned Monday that the economic toll of the pandemic will push 150 million people into extreme poverty this year without a substantial increase in support for developing countries.
“It is too early for advanced economies to declare victory,” Yellen said, warning that prolonged economic suffering could make U.S. adversaries more hostile and exacerbate “the human crisis of refugees and migrants.”
Yellen’s speech — her first major address as Treasury secretary — comes at the start of the annual spring meetings of the World Bank and International Monetary Fund (IMF), where the primary focus will be responding to the uneven toll of the COVID-19 pandemic.
Like within the U.S., the pandemic and its economic fallout have fallen the hardest on countries and populations least equipped to handle it. The IMF last month approved another $650 billion in aid for developing countries, but Yellen said Monday that rich nations must go further.
“More work and funding are needed to secure vaccine purchases, address manufacturing shortages, and finance and facilitate the domestic rollout in low-income countries,” she said.
Yellen added that wealthy nations should help poorer ones “pursue sustainable and inclusive growth and strengthen long-term resilience,” in part by empowering women and girls with full legal rights and more opportunities.
“Speaking from my own experience, we need to do better at reducing barriers for women’s economic empowerment, even unconscious ones, in nearly every country in the world, including the United States,” Yellen said.
Yellen is the first woman to serve as Treasury secretary and was the first woman to chair the Federal Reserve Board of Governors.