Spread benefits of growth to marginalized groups: Lagarde
WASHINGTON: As the global recovery gathers pace, the International Monetary Fund (IMF) is turning up the volume on its call for wealthy countries to address popular anger over the impact of globalization and head off the threat of protectionism.
The renewed push comes as finance ministers from 189 countries gather for the fund’s semiannual meeting Friday and Saturday, in a tense atmosphere of rising anti-trade rhetoric in many advanced economies.
“This sentiment of populism in the views of many is fueled by the feeling of being excluded or being left out,” IMF chief Christine Lagarde said Thursday night.
“What better than more growth, more equitably shared, in order to respond.”
The IMF for years has been calling for countries to drive toward what it calls more inclusive growth with programs to help those hurt by globalization and trade — but typically it has centered on developing nations.
Now the focus is on advanced economies and the message has taken on greater urgency, amid anti- internationalist sentiment evident in the election of US President Donald Trump, as well as in the bitter French election campaign and last summer’s British vote to leave the EU.
Lagarde has repeatedly stressed that giving in to protectionism will not help those on the margins and in fact will make matters worse by driving up prices and eroding global growth.
But as the IMF raised its forecast for global economic growth to 3.5 percent for this year — a rare upward revision — Lagarde said it is time to address these concerns from “an economic point of view,” to help spread the benefits of growth to marginalized groups while preserving international cooperation.
Raghuram Rajan, former governor of the Reserve Bank of India (RBI), said the legitimate concern in advanced economies “reflects a cry of anger and for help.”
Governments should respond with “broad-based rehabilitation” of communities hurt by lost manufacturing — a situation nearly entirely due to technological advances rather than trade, even though trade is blamed, he said.
“We need to think seriously about rebuilding these communities... to lift up the forgotten man,” Rajan said in a lecture at the IMF entitled “Popular Insurrections,” which Lagarde attended.
“Industrial countries have large areas that need development,” Rajan said. But this “requires (a) certain amount of funding, and new thinking.”
It also may mean returning decision-making on some issues like trade and climate rules back to national governments, rather than leaving them in the hands of multilateral institutions — which have drawn the ire of many US, British and French voters.
The IMF said “hundreds of millions” of people have been lifted out of poverty through economic integration and technological progress, “helping to reduce global income inequality.”
The fund is calling for governments to use “well-targeted initiatives” to help workers adversely affected by free trade and other economic changes to find jobs in new industries.
In addition, they should direct spending toward establishing social safety nets to help with the loss of income, as well as improving education and training, the IMF said.