We cannot just spend our way out of the coronavirus crisis

Corruption is the sickness that has undermined world economies for years. Now is the time to root it out

How much money do governments around the world intend to spend on the coronavirus-induced economic crisis?

America is set to pass a $2tn stimulus bill, through Congress with it having already made it through the Senate. There is also a push to send each American a cheque for around $1000. Britain has pledged £330bn in support for business and an unlimited fund to cover 80 per cent of the wages of at-risk workers.

The International Monetary Fund (IMF) announced earlier this month that it is ready to mobilise its credit potential of $1tn to help member countries amid the Coronavirus pandemic. IMF managing director Kristalina Georgieva wrote in her official blog:

“As a first line of defence, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs. These instruments could provide in the order of $50 billion to emerging and developing economies. Up to $10 billion could be made available to our low-income members through our concessional financing facilities, which carry zero interest rates...

“In the end, our answers to this crisis will not come from one method, one region, or one country in isolation. Only through sharing, coordination, and cooperation will we be able to stabilise the global economy and return it to full health”.

However, these steps to pump economics full of unsecured liquidity is, as the doctors would say, palliative medicine. It helps to alleviate the suffering of the patient, but does not cure the disease at its root. It is clear that the pandemic was only a trigger for the crisis that has gripped the global financial system.

The fundamental reason for this new financial crisis is this cosmic a bubble that has been growing, when where the cost of goods and services is only a tiny fraction of futures and other derivatives wound from above, and the capitalisation of business entities has nothing to do with its real results in terms of production of material goods. In this bubble, which for many years was inflated by the international financial oligarchy, parasitic operators proliferated like viruses.

These executives imagine themselves to be the “managerial elite” appropriating the fruits of other people's labour. The reality is an inverted pyramid of labour. When, for example, there is a crowd of speculators for one farmer: some sell his future crops to each other, others offer IPO shares in his farm via an initial public offering (IPO) and hedge risks on financial markets, others sit in banks issuing bonded loans. Due to the inexorable laws of physics, sooner or later the bubble was supposed to burst, and the pyramid - to collapse.

Today the IMF is comparable to a fireman who is trying to extinguish the building enveloped in flames, by filling it with kerosene. Meanwhile, every year, more than $1tn is siphoned off by corrupt elites and fraudulent schemes from the economies of the world.

These illegally acquired assets are placed on the accounts of banks, investment companies and funds, invested in various assets: real estate, blue chip stocks and luxury goods. The criminals themselves move to the West, where they declare themselves “victims of repression” and claim political asylum, although they have never been seen to engage in opposition politics at home.

One trillion dollars is the same amount that the IMF is now trying to grant by issuing another batch of virtual sheets of paper called Special Deposit Rights, or SDRs.

How much money do governments around the world intend to spend on the coronavirus-induced economic crisis?

America is set to pass a $2tn stimulus bill, through Congress with it having already made it through the Senate. There is also a push to send each American a cheque for around $1000. Britain has pledged £330bn in support for business and an unlimited fund to cover 80 per cent of the wages of at-risk workers.

The International Monetary Fund (IMF) announced earlier this month that it is ready to mobilise its credit potential of $1tn to help member countries amid the Coronavirus pandemic. The IMF Managing Director Kristalina Georgieva wrote in her official blog:

“As a first line of defence, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs. These instruments could provide in the order of $50 billion to emerging and developing economies. Up to $10 billion could be made available to our low-income members through our concessional financing facilities, which carry zero interest rates...

“In the end, our answers to this crisis will not come from one method, one region, or one country in isolation. Only through sharing, coordination, and cooperation will we be able to stabilise the global economy and return it to full health”.

However, these steps to pump economics full of unsecured liquidity is, as the doctors would say, palliative medicine. It helps to alleviate the suffering of the patient, but does not cure the disease at its root. It is clear that the pandemic was only a trigger for the crisis that has gripped the global financial system.

The fundamental reason for this new financial crisis is this cosmic a bubble that has been growing, when where the cost of goods and services is only a tiny fraction of futures and other derivatives wound from above, and the capitalisation of business entities has nothing to do with its real results in terms of production of material goods. In this bubble, which for many years was inflated by the international financial oligarchy, parasitic operators proliferated like viruses.

These executives imagine themselves to be the “managerial elite” appropriating the fruits of other people's labour. The reality is an inverted pyramid of labour. When, for example, there is a crowd of speculators for one farmer: some sell his future crops to each other, others offer IPO shares in his farm via an initial public offering (IPO) and hedge risks on financial markets, others sit in banks issuing bonded loans. Due to the inexorable laws of physics, sooner or later the bubble was supposed to burst, and the pyramid - to collapse.

Today the IMF is comparable to a fireman who is trying to extinguish the building enveloped in flames, by filling it with kerosene. Meanwhile, every year, more than $1tn is siphoned off by corrupt elites and fraudulent schemes from the economies of the world.

These illegally acquired assets are placed on the accounts of banks, investment companies and funds, invested in various assets: real estate, blue chip stocks and luxury goods. The criminals themselves move to the West, where they declare themselves “victims of repression” and claim political asylum, although they have never been seen to engage in opposition politics at home.

One trillion dollars is the same amount that the IMF is now trying to grant by issuing another batch of virtual sheets of paper called Special Deposit Rights, or SDRs.

The threat from the coronavirus pandemic is a good time to break the vicious circle of corruption. Therefore, emergency quarantine measures announced by many Western countries, including a ban on entry for travellers, must also be extended to the financial system.

For a start, the West should stop welcoming corruption “super spreaders”. It should use its Unexplained Wealth Order powers to quarantine individuals who may have stolen large sums of money from developing economies, and it should work towards eliminating tax havens.

I have long called for a special international court on corruption, international fraud and money laundering. Establishment of this court could be one of the topics for new conference, similar to the one at Bretton Woods in 1944, that helped agree upon a series of new rules for the post-Second World War international monetary system. But instead it would be geared towards the challenges of the 21st century.

The task of the court would be to organise the repatriation of illegal capital. If poor countries that become involuntary donors of “dirty money” retrieve just a portion of the stolen assets, it will give them significant firepower to combat the coronavirus outbreak, and to ensure sustainable development.

Moreover, this development will be without handouts from the IMF, the World Bank and other international institutions designed to camouflage the foundations of our current system of financial apartheid. That is a crisis we cannot spend our way out of.

Alexander Lebedev is the publisher of The Independent and Evening Standard titles