Note: The views and opinions expressed in blog/editorial posts are those of the author. They do not purport to reflect the views or opinions of Misbar.
On the very day that President Joe Biden was inaugurated, the White House released details of what it referred to as the “American Rescue Plan.” While it is apt to give the legislative package this title, its reach extends much further than the USA.
In the days following the passage of The American Rescue Plan Act of 2021, Americans started to feel the direct benefits. Stimulus money began arriving in bank accounts. Vaccination and coronavirus testing measures gained significant amounts of funding. Naturally, a $1.9 trillion relief bill will impact not just the U.S. economy, but also the global economy. What will happen? It is impossible to accurately predict the future; yet, a range of economic experts have stated what they believe the new laws will mean for people all over the world.
On the day that the final version of The American Rescue Plan Act of 2021 passed through congress, Barron’s reported that the global economy was expected to grow by 1.1%. 1.1% may sound small, but if this prediction becomes a reality, it is a significant boost for the entire world. The International Monetary Fund (IMF) estimated that the global economy shrank by 4.4% in 2020. This was the worst decline since The Great Depression – and yet the global economy is set to grow in 2021, as the world overcomes the pandemic. The existence of The American Rescue Plan Act and its potential 1.1% increase may give this growth a much needed boost.
Barron’s stated that the USA’s growth due to The American Rescue Plan Act will accelerate by 4%. America’s neighbors, Canada and Mexico, will see 1% economic boosts thanks to the act.
However, developing countries will also be boosted thanks to the new legislation. Voice Of America noted that the bill includes $11 billion in international aid. This money will be targeted to fight not just coronavirus in developing nations but also HIV/AIDS, malaria and tuberculosis. $7.5 billion of this aid will be administered via the Centers for Disease Control and Prevention. $580 million will go to the United Nations’s humanitarian efforts in fighting coronavirus.
However, the American Rescue Plan Act has not met with universal international praise. The South China Morning Post has noted that government officials in China are fearing that legislation will cause financial market turmoil and inflation across the world. The source also notes that the Chinese stock market suffered as a result of the act. On the flip side of the argument, the demand for Chinese exports is likely to rise thanks to the legislation.
Additionally, Barron’s notes that financial volatility in other countries could dampen the global impact of the American Rescue Plan Act. The source notes that in the fourth quarter of 2020, the European Union’s (EU) Gross Domestic Product (GDP) shrank by 0.5% in the fourth quarter of 2020. This stood in contrast to a 1% rise in the American GDP. The source notes that this could indicate a major economic disparity between the US economy and the EU economy, which is significant, as these represent the two largest economic blocks in the world.
The reason for the uncertainty in the future of the global economy is obvious. Reuters puts it bluntly: “Significant risks loom over the improved outlook, notably in the form of how fast authorities get vaccine shots to people, how soon restrictions are lifted and whether new variants of the coronavirus are kept in check.” Like Barron’s, this source cites Europe as a risk to economic growth.
These are the basic facts of how The American Rescue Plan Act will and may affect the global economy. It is certain that $11 billion in international aid will go to developing nations. The U.S. economy will definitely have the largest economic benefit as a result of the legislation. America’s neighbors will also benefit from this growth. The impacts on China and Europe are unknown – and all of this growth is dependent on how well the world can contain the coronavirus pandemic in 2021.
However, it is worth noting what the American Government can do for the world if The American Rescue Plan is derailed by a slow response to coronavirus. Unless a Democratic senator retires suddenly or dies in office, the Democratic Party will have full control of the White House, the US Senate and the US House of Representatives until January 3rd 2023. This party’s platform for 2020 was to build a stronger, fairer economy, or to “build back better.” It also had the goal of “Renewing American Leadership.” The American Rescue Plan Act was the first step in that process. The next steps to implement such an approach will depend on how the legislation stimulates the US and the global economy.
Despite what happens as a result of The American Rescue Plan Act, the US Government will undoubtedly be heavily involved in the global economy until 2023. This will mean greater participation in international organizations and efforts like The World Health Organization and The Paris Climate Agreement. After the midterm elections, a potentially divided US government may result in America backing away from the world stage. By the year 2023, the world will have changed significantly. Hopefully, the interventions of the US government will have succeeded in improving the lives of not just Americans but also people across the globe.
