IMF Lagarde calls for “growth friendly fiscal policies” and warns on automation
The International Monetary Fund managing director Christine Lagarde said that to get the global economy moving at a faster pace it was necessary to share the benefits of capitalism, more global regulation and more action to protect workers against automation and robots.
Speaking at an event by Bruegel, an economic think tank, Ms Lagarde said the global economy once again “has a spring in its step” but that countries need to pursue “growth-friendly fiscal policies.”
Lagarde’s call was an anticipation to the annual discussions between the world’s central bankers and finance ministers that will take place in Washington, at the IMF’s so-called Spring Meetings and a meeting of G20 finance ministers. And in a swipe at the Trump administration, Lagarde said “we need an approach that encourages countries to support strong international cooperation.”
And referencing Brexit and the upcoming French presidential election, Lagarde said now is not the time to trash the architecture underpinning the global economy for seven decades.
Lagarde’s warning stressed that aging populations, political instability and “the sword of protectionism” all threaten “self-inflicted wounds” on economies across the globe.
Strong national economies should not expect to be immune from the problems of their neighbors, Lagarde said, promising “major spillovers across borders” if these problems are not addressed head on.
Lagarde singled out the EU for failing to enforce its own single market rules. She said that EU directives would unleash growth if they were simply “properly enforced.” Lagarde said the unenforced rules covered “barriers to entry in retail and professional services.”
On financial services, Lagarde said “financial stability requires that we complete the reform of global financial regulations.” Additionally, “restricting trade would be a ‘self-inflicting wound’ that disrupts supply chains, hurts global output and inflates the prices of production materials and goods,” she continued.
“We are not goody-goody about trade. We know that trade brings with it negative side-effects,” Lagarde conceded to critics of globalization.
However, she warned that automation as much as trade is the root cause of social dislocation in many Western economies. Trade is “not a dominant factor,” Lagarde said.