Institutions matter, especially in a period of economic, political, and social fluidity, when they shield countries from frequent volatility and reduce the risk of costly shocks. The longer it takes to restore confidence in them, the greater the impediments to our wellbeing and that of our children.
The upcoming IMF and World Bank annual meetings offer a critical opportunity to start a serious discussion on how to arrest the lose-lose dynamics that have been gaining traction in the global economy. The longer it takes for the seeds of reform to be sown, the less likely they will be to take root.
When the global financial crisis began ten years ago this month, policymakers in advanced economies treated it as a cyclical shock rather than an epochal event. Because they misdiagnosed the sickness, they administered the wrong medicine, and advanced economies have struggled to achieve strong, inclusive growth ever since.
In recent weeks, policymakers on both sides of the Atlantic have affirmed the financial system’s soundness and stability. And yet, it would be premature to declare victory: while some financial risks have been eliminated, others have migrated into less regulated non-bank activities.
The IMF has resurrected an old technique – commonly used in the 1980s during the Latin American debt crisis – that will allow Greece to avoid a payment default next month on debt owed to European creditors. But the Fund’s elegant compromise still leaves Greece under the shadow of an enormous debt overhang.
The rise of anti-globalization political movements and the threat of trade protectionism have led some people to wonder whether a stronger multilateral core for the world economy would reduce the risk of damaging fragmentation. If so, enhancing the role of the IMF's incipient global currency may be the best option.
While financial markets seem convinced that the recent surge in business and consumer confidence in the US economy will soon be reflected in hard data, such as GDP growth, economists and policymakers remain unsure. Whether their doubts are vindicated will matter for both the US and the world economy.
South Africa will need much more than improved economic governance if it is to reduce inequality and achieve strong growth. In particular, the private sector must deepen its efforts to improve economic inclusion, and capitalize on the well-known benefits of greater diversity in the workforce and the boardroom.
The retreat of the advanced economies from regional and global institutions has received a lot of attention lately. But while the destabilization of multilateral economic and financial structures could be particularly devastating for developing countries, the entire global economy will be adversely affected if the trend continues.
With Republicans holding majorities in both houses of Congress, US President-elect Donald Trump should have a relatively clear road ahead to implement his domestic economic agenda. But if Trump is to deliver the high growth he has promised, he will have to overcome external barriers as well.