WASHINGTON: World Bank and IMF leaders on Thursday confronted the rising unpopularity of globalization while urgently calling on countries to stimulate more equal economic growth.
“My message to the members of the IMF tomorrow will be, ‘Action, please,’” Lagarde told reporters in Washington at the opening of the annual meetings of International Monetary Fund and World Bank.
But, faced with a surge of anti-free trade sentiment in the United States, Europe and elsewhere, Lagarde warned that now was not the time to close the door on globalization, which she said had benefitted so many.
“We don’t think it’s time to push against it,” she said.
With the US presidential elections a month away, the annual meetings kicked off this week in Washington with amid stern warnings against protectionism.
World Bank President Jim Yong Kim echoed Lagarde’s call to stimulate growth while tackling persistent inequality.
“We need to focus on growth and continue to reduce inequality,” he said in a news conference. “And we have to make growth more equitable, and more sustainable.”
IMF members pledge bilateral loans of $344 billion so far; will help maintain IMF lending capacity of close to $1 trillion. pic.twitter.com/52EyEaiJX2
— Christine Lagarde (@Lagarde) October 6, 2016
Long promoted by the major international development institutions and leading economies, the message of trade liberalization faces an increasingly unreceptive audience.
In the United States, Republican presidential nominee Donald Trump has rallied supporters by promising a trade war with China and retaliatory import duties on Mexico.
Across the Atlantic, the British vote to secede from the European Union threatens to spur other countries to roll back European economic integration. The free-trade pact currently under negotiation with the United States, the Transatlantic Trade and Investment Partnership (TTIP) faces stiff resistance in Europe.
Globalization finds itself accused of depressing wages, causing industrial decline and keeping low-skilled workers unemployed.
Against a backdrop of sluggish global trade, these accusations extend far beyond the insular clique of activist NGOs and are starting to threaten established dogma. But US and German officials are toughly defending the push for more free trade.
“We are committed to build an open world economy, reject protectionism, promote global trade and investment,” German Finance Minister Wolfgang Schaeuble said in a statement to the IMF Wednesday.
US Treasury Secretary Jacob Lew steadfastly defended his administration’s two big trade projects, the TTIP and the Trans Pacific Partnership.
— World Bank (@WorldBank) October 5, 2016
But worries over the anti-globalization movement and a reset of free-trade thinking is setting in amongst the world’s financial centers. Lew tried his hand at the growth-equality balancing act.
“If you win the argument that a trade agreement grows the economy, you’re most of the way there,” he said at the Peterson Institute for International Economics.
“There’s a broad sense of anxiety that growing economies don’t necessarily get to people where they live,” he added.
The IMF and World Bank now more openly concede that global growth benefits too few and globalization’s losers should receive dedicated support.
In an opinion piece published Wednesday in The Wall Street Journal, Lagarde, Kim and World Trade Organization chief Roberto Azevedo said global trade should benefit everyone, but the doors should not be closed.
“Despite the tremendous benefits of trade, too many people feel it has left them behind,” they said. “Transforming trade into an engine of growth for all… requires reinvigorating trade integration, not rolling it back.”
Oxfam International on Wednesday said the IMF and World Bank were acknowledging the reality of social injustice in the current globalized economic regime.
“By saying that globalization needs to work for all, Lagarde has recognized that it currently works predominantly for an elite minority. This has to change,” said Max Lawson, head of inequality policy at Oxfam International.
According to Paulo Nogueira Batista, vice president at the New Development Bank, the rise of protectionism is a sign of “a fundamental distrust of the financial elites.”
“The problems that arose in the banking sectors, the multiple instances of fraud, misconduct, the failure of the organizations in Washington to face up to the challenges… this all created a mixture of resentment, a feeling that this system doesn’t represent the people,” he told AFP.