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Scaling up the economic response to the COVID-19 disruption

ImpactAlpha, Apr. 1 – It’s hard to think big enough or fast enough when it comes to responses to the economic fallout of the coronavirus pandemic. 

A growing chorus of voices are calling for government relief efforts that are both bigger and more local. 

Marshall Plan for emerging markets

Development finance institutions are scraping together billions in relief packages for healthcare and small businesses. The U.N. is calling for a $2.5 trillion package to backstop emerging market economies. The package would include a $1 trillion liquidity injection from the International Monetary Fund, massive debt relief and a $500 billion “Marshall Plan” for health recovery.

Developed countries could cover the cost by meeting their foreign-aid target of 0.7% of national income, says the U.N. conference on trade and development. Even before COVID-19 arrives in full, developing economies are facing capital flight, rising interest rates, currency devaluation and lost export earnings.

Top up Main Street funds

The New Localism co-author Bruce Katz, along with Drexel’s Nowak Metro Finance Lab and Accelerator for America are calling on the federal government to appropriate $25 billion to dozens of local emergency funds that have popped up to support small businesses in cities and states across the country. That amount is roughly 50 times the current size of the funds (about $500 million) and should be in addition to the $800 billion in Small Business Association and Federal Reserve efforts to reach businesses directly, say proponents.

One advantage of the local funds is their ability to reach microbusinesses owned by people of color that operate outside the mainstream banking system. The city and state funds were envisioned as a stop-gap until the larger federal relief packages arrived. “Rather than giving way to federal relief, local efforts will need to persist and grow substantially as the crisis unfolds.”

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