Finance officials pledge to aid growth
Confronting rising backlash against globalization
World finance leaders pledged Saturday to use more resources to try to bolster economic gains as they confront stubbornly slow growth and a rising backlash against globalization. The policy committee for the 189-nation International Monetary Fund said the world has “benefited tremendously from globalization” but that protectionism is a threat. Increasing anger over globalization dominated the annual meetings of the IMF and its sister lending agency, the World Bank.
The unhappiness is evident in Britain’s vote in June to leave the European Union and in the U.S. presidential campaign of Republican Donald Trump. Trump has said millions of Americans have lost jobs or seen wages stagnate because of unfair trade practices of countries such as China and Mexico. He is vowing to impose penalty tariffs if those practices are not halted.
The British vote sent shockwaves through financial markets this summer, and there were further troubles Friday when the British pound plunged by 6 percent against the dollar before recovering. Investors worry whether there will be more turbulence if the British exit proves to be messy and prolonged. IMF Managing Director Christine Lagarde said “growth has been too low for too long, benefiting too few,” and that’s what officials need to address.
French Finance Minister Michel Sapin said global leaders must address concerns of inequality and injustice caused by globalization, such as tax evasion by big corporations and job losses by workers. “We must fight against this immorality of globalization, this inequality, to again give our people the taste for openness and multilateralism,” Sapin told reporters. “There can be an unhappy globalization and we must fight against it.”
Technological change
In their statement, IMF officials committed to designing and putting in place policies “to address the concerns of those who have been left behind and to ensure that everyone has the opportunity to benefit from globalization and technological change.” The IMF, however, did not spell out what actions countries would be willing to take. In an era of budgetary constraints, it is unclear how governments will find the resources to expand education and job training programs and strengthen social safety nets.
Mario Draghi, the head of the European Central Bank, told reporters that even with the turbulence linked to Britain’s exit vote, he felt the short-term consequences had not been as dramatic as some had predicted but “to think that there won’t be any consequences would be probably too hopeful.”
Draghi said a lot will depend on how prolonged the post-Brexit uncertainty lasts as Britain and the EU negotiate next year over the terms of separation. “It’s a matter of this political uncertainty that clouds the outlook for growth,” Draghi said.
US Treasury Secretary Jacob Lew urged the IMF to “more boldly and forcefully” push member countries to pursue all economic policy options to spur growth. The Obama administration has appealed to countries such as Germany, which are running budget or trade surpluses, to increase spending and stimulate global demand. “We must not close ourselves off to the world, but rather redouble our commitment to ensuring shared growth,” Lew said.
Trade barriers
Various finance officials said the decadeslong effort to tear down trade barriers had lifted millions of people in poor nations out of poverty. But they said not enough has been done to protect workers who have lost jobs due to increased global competition. Japanese Finance Minister Taro Aso told reporters that free trade is crucial to driving global growth. “If we really want jobs and higher income, if we care about poverty reduction and economic fairness ... if we care about growth, then we need to be serious about fostering global trade and about making sure that global trade works for all,” Lagarde said.
World Bank President Jim Yong Kim noted the “tremendous anger against trade.” But, he said, “We are here because we believe in our mission of ending extreme poverty,” Kim said. “We are not going to do it without more robust trade.” Kim said support also needs to be increased for countries that are welcoming refugees fleeing conflict zones. He cited Lebanon and Jordan, which are taking in refugees from Syria. —AP