The world may be climbing out of the global crisis but the coast is not yet clear, the managing director of the International Monetary Fund told a packed audience April 4 at a presentation sponsored by GWSB. Dominique Strauss-Kahn said there is too much economic imbalance in the world, unemployment must be brought down in developed countries, the U.S. culture of “reckless risk-taking” continues and old approaches to managing economies are ineffective.
“The crisis is not over,” he said at the “Global Challenges, Global Solutions” presentation. “The recovery is fragile and very uneven. We shouldn’t rejoice too early. The downside risks are still too high.”
Strauss-Kahn made the comments less than two weeks before the spring meeting of the IMF and the World Bank Group. At the spring meeting, he noted, the multilateral organizations and the G-20 countries will discuss the economic impact of the earthquake and tsunami in Japan, foreign debt problems in Europe and political upheaval in the Middle East.
The IMF must look at fresh economic theories and become more diversified as an institution if it is to remain effective, according to Strauss-Kahn. He said globalization had a dark side – a growing gap between rich and poor – even as sustainable long-term growth requires more equitable income distribution. Financial institutions needed more than regulation, he added, they need supervision.
“Before the crisis we, the economists, thought we knew how to manage economies,” Strauss-Kahn said. “We believed the rising tide of globalization would lift all boats.”
He went through a list of guiding “mantras” that proved false for the IMF. They included the notion that deregulation and privatization would unleash prosperity and the belief that financial markets would correctly channel resources where needed.
Strauss-Kahn called for a new approach to economic policy, one that embraces social inclusion and encourages greater cross-border cooperation. He said the economic power of emerging market nations must be better reflected within the IMF and that “we need to have more diversity of people at the IMF.”
“The challenge we’re facing is a huge challenge and the result of what we can do will have a lot of consequences on the world,” he added.
Posted by gwsb on April 6, 2011 | Filed under: GWSB News.