WASHINGTON: Globalization has largely benefited the world but must be “different” in the future, with world governments working more to prevent persistent inequality, IMF chief Christine Lagarde said Thursday.
“We know that globalisation has worked over the years that it has delivered great benefits to many people,” Lagarde, the International Monetary Fund’s managing director, told reporters on Thursday at the opening of joint annual meetings with the World Bank.
“We don’t think it’s time to push against it,” said Lagarde, pointing specifically to the rising debate over free trade.
“It needs to be slightly different, it cannot be the same push for trade as we have seen it historically.”
Both the IMF and the World Bank, longtime supporters of free trade, face a political climate in which trade liberalisation is increasingly unpopular.
The failure to support displaced workers and others affected by globalisation has encouraged protectionist sentiment in the developed world, according the IMF.
Voters in Britain this year voted to secede from the European Union and both US presidential nominees have said they oppose the White House’s signature Pacific Rim trade pact.
Lagarde called on member states to make the forces of economic globaliztion “work for all and to pay attention to those that are at risk of being left out, whether it is as result of technology digital economy or international trade.”
Also addressing reporters on Thursday, World Bank President Jim Yong Kim likewise acknowledged the need for inclusive economic development.
“Our research shows that inequality is still far too high, both globally and within countries, constraining growth and breeding instability,” he said.
“We need to focus on growth and continue to reduce inequality — and we have to make growth more equitable, and more sustainable.”
Lagarde called strongly for action around the world to revive growth and tackle inequality, singling out Germany, Canada and South Korea to provide stimulus.
“What is key is now action, so my message to the members of the IMF tomorrow will be, ‘Action, please,’” Lagarde told reporters.
The IMF this week forecast “subdued” global growth of 3.1 per cent in 2016, rising to 3.4 per cent next year, with the developing world expected to outpace advanced economies.
“My hope at the end of the annual meeting is that each finance minister, each governor of a central bank, will go back home thinking, ‘What can I do in order to propel that growth which is currently too low, for too long benefiting too few?’” said Lagarde.
Lagarde pointed to three leading economies as examples of states that have the financial wherewithal to spend more to accelerate growth.
“We believe that some countries have fiscal space. Well if so, the should use it,” she said. “We are certainly including in that category countries like Canada, like Germany, like Korea.”
Deutsche Bank must re-examine model: Lagarde
Lagarde, meanwhile, said Deutsche Bank needs to re-examine its business model to maintain its long-term profitability in a very low-interest rate environment, but other banks also need to do it as well.
Lagarde told Bloomberg Television at the IMF and World Bank fall meetings that Deutsche Bank must “decide what size it wants to have and how it wants to strengthen its balance sheet. But it’s not the only one in the banking basket that has to do that job. We believe that many banks have to look and to do a bit of introspection into how they want to be.”