WASHINGTON: As the global recovery gathers pace, the 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 today, 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 managing director Christine Lagarde said Thursday night. “What better than more growth, more equitably shared, in order to respond.” The fund for years has been calling for countries to drive towards 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 European Union. 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.
Former India central bank chief and IMF chief economist Raghuram Rajan said the legitimate concerns 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. That echo of US President Donald Trump’s campaign promises means helping the majority white male community as well as the inner cities, by bring economic activity, he said.
“Industrial countries have large areas that need development,” Rajan said. But this “requires 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 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 fund said. But for the moment the Trump administration is focused on aggressive rhetoric, attacking individual countries that have trade surpluses with the United States, such as Germany, China and Mexico.
White House economic adviser Gary Cohn said Thursday the United States was only seeking fair treatment. “We treat our trading partners the way they treat us,” said Cohn, a former Goldman Sachs banker who now chairs the new National Economic Council. Tariffs on US exports would be met by a tariff on imports from that country, Cohn said at a forum held by the Institute of International Finance. “We treat you in reciprocal fashion. That is fair,” he said. – AFP