IMF, World Bank Chiefs Call for Addressing Inequality, Protectionism At Annual Meetings
Issues relating to inequality will be high on the agenda at this weekend’s Annual Meetings of the International Monetary Fund (IMF) and World Bank Group, being held from 7-9 October in Washington.
The meetings held between the two Bretton Woods institutions are expected to focus on how to build a stronger case for closer integration and trade openness, in a climate where globalisation is widely being blamed for generating and perpetuating inequities in the global community.
The meetings are expected to explore ways of handling the impact of globalisation and technology, harnessing digital development, encouraging inclusion and integration, deploying finance for development, managing migration, and stimulating economic growth, among other topics.
The Annual Meetings are held every autumn to give the Board of Governors from each institution the chance to discuss policy issues of global concern, including poverty reduction, economic development, and the effectiveness of aid efforts, and provide an overview of the world economic outlook as well as on global financial markets.
During this process, the IMF’s International Monetary and Finance Committee (IMFC) and the joint World Bank-IMF Development Committee also meet to steer the direction of the two organisations and advise the Boards accordingly. The Annual Meetings are complemented by Spring Meetings, which took place this year during the week of 11-17 April in Washington and also focused heavily on flagging global growth rates. (See Bridges Weekly, 21 April 2016 and 14 April 2016)
Various other constituencies are also slated to hold ministerial-level meetings on the sidelines, such as the G-20, G-24 and the Commonwealth, as in previous years.
Global extreme poverty as well as income inequality both across and within many countries has been decreasing, according to the inaugural study in a new World Bank series on Poverty and Shared Prosperity. However, there is still much to be done, according to World Bank President Jim Yong Kim, who spoke at the Brookings Institution on Monday.
Kim was recently reappointed to a second five-year term at head of the bank, to commence 1 July 2017, following a unanimous decision on behalf of the Board of Executive Directors.
“Today’s report identifies strategies to address inequality that even the poorest nations can adopt – whether through conditional cash transfer, connecting farmers to markets, or rural electrification. The lesson is that inequality is not an unsolvable mystery,” he said.
As part of a pathway towards ending extreme poverty by 2030 and further minimising inequality, Kim has singled out inclusive and sustainable economic growth through private sector investment in infrastructure, where emerging and low-income economies currently face a gap of US$1.5 trillion dollars a year in financing.
In addition, he encouraged renewed investment in human capital and attention to matters of health, education, and skills development to help countries to compete in the economy. Kim added that mechanisms should be put in place to withstand global shocks, such as those that incurred the financial crisis in 2008.
Keeping protectionist pressures at bay
Mounting frustrations with globalisation and its role in exacerbating inequalities is causing a backlash against integration and rising pressure against entering into trade agreements.
Rising populist pressures have most recently been manifested in the result of the June UK referendum, with nationalistic sentiments echoing across the European continent, as well as the ongoing battle between presidential candidates in the United States over how to approach economic and trade policy in a way that responds to these concerns – an effort that has led both to publicly distance themselves from the Trans-Pacific Partnership (TPP) Agreement, a 12-country deal negotiated under the outgoing Obama Administration. (See Bridges Weekly, 29 September 2016)
Ahead of the upcoming meetings, IMF Managing Director Christine Lagarde has encouraged policymakers in attendance to avoid lending their backing to protectionist policy approaches.
Addressing Northwestern University on 28 September, she focused specifically on the importance of trade – and the risks of turning inward.
“If we were to turn our backs on trade now, we would be choking off a key driver of growth,” she said, referring to trade restrictions as a “clear form of economic malpractice.” The IMF chief cited blockage of access to important economic opportunities, disruption of supply chains, and inflated prices on basic goods as among the consequences that would ensue.
Lagarde harkened back to the history of cooperation in trade and to the 1944 Bretton Woods conference itself to vouch for continued trade openness.
“Since World War Two, trade has been the engine that has propelled economic progress,” she said.
Kim similarly affirmed the message that inward-looking approaches – whether in policy or in partnerships – would prove a hindrance to global growth.
“We need more cooperation, greater economic integration, and stronger partnerships than ever before,” he said, arguing that these would help boost economic growth, while noting that greater emphasis must be put on ensuring that growth is equitable and inclusive.
ICTSD reporting; “Backlash to World Economic Order Clouds Outlook at IMF Talks,” BLOOMBERG, 4 October 2016.