Observing that the long-awaited global recovery is taking roots, International Monetary Fund chief Christine Lagarde on Friday called for seizing this opportunity of the upswing to secure the economic recovery and create a more inclusive economy that works for all.
Referring to IMF research which have shown that reforms are more potent and easier to implement when economies are healthier, Lagarde said that the international community need to use this time frame to lifting incomes, creating jobs, investing in people’s futures and fostering inclusive growth.
“The long-awaited global recovery is taking root,” she said in an address at the Harvard University.
“Can the world seize the opportunity of the upswing to secure the recovery and create a more inclusive economy that works for all?” she asked.
She also said empowering women is an economic no-brainer.
“If women participated in the labor force in the same numbers as men, GDP could increase by as much as five per cent in the US, 27 per cent in India, and 34 per cent in Egypt, to name just three examples,” Lagarde said in her speech.
Her remarks came a week before the annual meeting of the International Monetary Fund and the World Bank. Union Finance Minister Arun Jaitley would represent India at the meeting.
“In the largest economies, overall productivity growth — a measure of how efficient we are — has dropped to 0.3 per cent, down from a pre-crisis average of about one per cent. This means that, despite technological advances, wages in many places are only inching up,” she said.
Boosting productivity, a factor in lifting wages, requires, among other things, cutting red tape, increasing spending on research and development, and investing in infrastructure, she added.
“Of course, each country will tailor policies for its needs, but we know that taking advantage of the current momentum can make these types of reforms more affordable and more effective,” Lagarde said.
Every finance minister and every treasury secretary eventually realizes that all policy changes are made a little easier with growth, she said ahead of the gathering of international financial leaders.
Calling for investing in people’s futures and fostering inclusive growth, Lagarde said over the past three decades economic inequality between countries has declined sharply, led by the rise of emerging markets such as China and India.
“However, if we look at inequality within specific countries, especially some advanced economies, we see widening gaps and an increased concentration of wealth among the top earners,” she said, adding that IMF research has shown that excessive inequality hinders growth and hollows out a country’s economic foundation.
It erodes trust within society and fuels political tensions, she added.
“We know that inequality is often cemented through disparities in schools and access to health care,” she said.
But the good news is that many countries are working to change that narrative, she added.
For instance, in India, health care access has been expanded with clear benefits for the poorest citizens.
“Policymakers should use all tools at their disposal to act now, and take advantage of this period of global growth. And to truly be successful, they should act together. Cooperation remains the best way to create a more prosperous future for every nation,” Lagarde said.