Global growth has benefited “too few” people for “too long” and inequality remains high in many countries as trade has increasingly become a “political football”, IMF chief Christine Lagarde has said calling on world leaders to focus on an inclusive development strategy.
“The first priority for inclusive growth is to escape the ‘new mediocre’ of low growth, low employment, and low wages. That means using all policy tools – monetary, fiscal, and structural: to maximise the synergies within countries — and amplify the impact though coordination across countries,” she said at the annual fall meetings of the IMF and the World Bank here yesterday.
“Putting it simply: growth has been too low, for too long, and benefiting too few,” the International Monetary Fund Managing Director said.
“The social and political consequences are becoming all too apparent. Inequality remains too high in too many countries. Conflict and migration exert a terrible toll. Trade has become a political football. And supporters of economic integration – and cooperation – are on the defensive,” she said.
Lagarde said the world needs a “transition to the digital age – but a transition that benefits everyone. And we need to accelerate now,” she said.
The IMF has projected global growth at 3.1 per cent this year, with only a modest acceleration to 3.4 per cent next year, she said.
With interest rates at historic lows, there is no better time for public investment: to expand access to high-speed internet, promote energy-efficient transport, and build climate-friendly infrastructure, Lagarde asserted.
“Even where fiscal space is unavailable, governments can reallocate funds into R&D by offering tax credits and supporting public research institutions. Remember: all the technologies that make our mobile phones ‘smart’ have benefited from public funding – wireless networks, GPS, touch screens. This shows that good public policies can boost growth for decades to come,” she added.
Lagarde said the second priority for inclusive growth is providing everybody with a level playing field. For this, she called for increasing the equality of opportunity, promote fair burden-sharing and preserve competition and market access.
“This is especially important for the digital economy, where network effects can lead to increases in market concentration – which harms innovation and concentrates wealth at the top. By injecting more—and fairer—competition, we can ensure that the vast potential of the digital age can be managed for the benefit of all,” she said.