## fd-june24

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---

### Costs of reversing globalization and key projections
- "0.2 to 7 percent of GDP. The costs may be higher when accounting for technological decoupling."
- "Reversing globalization would almost certainly reverse its gains, increase poverty, and result in a costly transition."
- IMF activity since crises: "Just since the pandemic, we have provided about $1 trillion in liquidity and financing to our 190 member countries."
- SDR history and allocations:
  - Initial annual allocations began in 1969.
  - Second allocation authorized for "1979–81."
  - $250 billion allocated in 2009.
  - $650 billion allocated in 2021.
  - Current share of SDRs in members’ holdings of SDR reserves and currencies is "roughly 7 percent."
  - Proposal: "an annual allocation of $100 billion to $200 billion in SDRs."

### Policy prescriptions to preserve and extend globalization’s benefits
- Strengthen the global trade rules framework under the WTO to maintain trade openness, stability, and predictability.
- Accelerate WTO reforms to:
  - strengthen transparency and rules, including on subsidies;
  - restore a fully functioning dispute-settlement system;
  - update the rule-book for the growing share of services and digital trade.
- Use plurilateral agreements among subsets of WTO members to advance e-commerce and investment facilitation without excluding others.
- Strengthen domestic policies to share benefits of trade, globalization, and technological advances, including:
  - sound macroeconomic governance;
  - financial regulation and supervision to avoid buildup of risk from financial globalization;
  - a tax system geared toward efficient revenue mobilization;
  - labor market and fiscal policies to address worker dislocations and inequality, and to counter disruptions from new technologies (especially artificial intelligence);
  - provision of high-quality basic public services, including education and health and social safety nets.
- Role for international organizations: act as a buffer in uncertain times, promote commonly agreed rules, and facilitate dialogue and cooperation.

### IMF legitimacy, governance, and operational reform proposals
- Legitimacy challenge: historical Western alliance control of the IMF is now contested as global economic power shifts (examples cited: Japan’s "6.47 percent quota exceeds China’s 6.4 percent"; India’s quota is less than those of the United Kingdom and France).
- Risks identified:
  - Political fragmentation could lead to blocs blocking lending decisions.
  - If quotas shift without governance reform, potential outcomes include relocation of IMF headquarters under Articles of Agreement.
- Proposed governance changes:
  - Redistribute quotas to reflect relative economic size while simultaneously reforming governance.
  - Professionalize and depoliticize operational decision making:
    - Executive board to set broad objectives, governance, and operational mandates;
    - Independent professional management to make day-to-day operational decisions and lending programs;
    - Board to focus on governance similarly to corporate boards, possibly using the Independent Evaluation Office to assess outcomes.
  - Reexamine Keynes’s idea of a nonresident, nonoperational board given modern communication and travel.
  - Board to select top IMF officials based on broad consensus and set basic qualifications for appointees.

### SDRs (Special Drawing Rights): fundamentals and recommended reforms
- SDR fundamentals:
  - Allocated in proportion to IMF members’ quotas.
  - Interest-bearing reserve asset with corresponding long-term liability.
  - Value based on a basket of currencies; interest rate is a weighted average of short-term government rates for constituent currencies.
  - Provide unconditional liquidity and remain permanently in the global stock of international reserves.
- Recommended SDR reforms:
  - Resume regular annual allocations to maintain and increase SDR share in reserve holdings (target via "an annual allocation of $100 billion to $200 billion in SDRs").
  - Raise the interest rate on SDRs by incorporating a blend of long-term as well as short-term government security rates in the SDR basket to:
    - slightly reduce the subsidy on perpetual loans to countries that mobilize their SDRs;
    - offer compensation to countries that facilitate mobilization by reducing their currency reserves and increasing their SDR holdings.
  - Encourage members with excess SDR holdings to mobilize them for global challenges (e.g., climate change, pandemics) by:
    - lending to the IMF’s Poverty Reduction and Growth or Resilience and Sustainability Trusts;
    - purchasing SDR-denominated securities issued by those entities;
    - using similar mechanisms while avoiding unnecessary liquidity restrictions on SDR-denominated claims.

### Broader IMF role, resources, and agenda for reform
- IMF evolution and crisis response:
  - The IMF has adapted repeatedly (examples: 1990s low-income lending reforms; 2008–14 global financial crisis response; 2020–22 COVID-19 pandemic actions including "$650 billion worth of SDRs" and two emergency financing additions: "2020–22: plus $21.98bn emergency financing" and "2020–22: plus $9.14bn emergency financing" in charts).
- Four vital elements urged to make the IMF and IFIs work better:
  - Radically improve treatment of unserviceable sovereign debt, including coordination across Paris Club, Chinese institutions, and private lenders; note that "nearly $200 billion flowed out of developing countries to private creditors in 2023."
  - Mobilize far more resources so the IMF and IFIs can provide insurance against shocks and catalyze development and global public goods (including a stable climate).
  - Adjust voting shares to reflect changes in global economic influence (current imbalances cited: Japan’s quota share bigger than China’s; the UK’s bigger than India’s).
  - End the custom of reserving IMF managing director and World Bank president posts by geographic convention; search globally for the best candidates.
- Warnings and outlook:
  - Incrementalism without substantive governance reform risks degradation of IMF legitimacy and reduced global influence.
  - A reformed, trusted IMF could shape new rules for international exchange and better advise on macroeconomic and external sustainability.

### Global progress, remaining challenges, and scenarios for the next 100 years
- Major gains:
  - "1.5 billion people lifted themselves out of poverty, and hundreds of millions entered the middle class."
  - Improvements in life expectancy, infant mortality rates, literacy rates, and education levels—especially for girls.
- Drivers of progress: technology, capital accumulation, and economic integration.
  - Global trade expanded "six-fold" over the past 40 years.
  - Global capital flows rose "more than tenfold."
- Distributional shortfalls:
  - "Some three-quarters of the world’s wealth today is owned by just one-tenth of the population."
  - "More than 780 million people face hunger."
  - Many developing economies are "no longer catching up to advanced economy income levels."
- Two IMF staff scenarios:
  - Low-ambition scenario:
    - "Global GDP would be about three times larger and global living standards twice as high as they are today."
  - High-ambition scenario:
    - "Global GDP would be 13 times larger, and living standards would be 9 times higher."
- Policy foundation required for higher-growth path:
  - Price stability, sustainable public debt levels, financial stability.
  - Opening trade and entrepreneurship.
  - Better international cooperation and more sustainable and equitable growth.
  - IMF research assertion: "lower income inequality can be associated with higher and more durable growth."

### Three priority areas for capital allocation
- First: The climate economy
  - Need to mobilize "trillions of dollars in climate investments—for mitigation, adaptation, and transition."
  - Market failure: "The average price per ton of carbon dioxide emissions today is only $5, way below the $80 we need to reach by 2030."
  - "Carbon pricing programs now cover a quarter of global emissions, which represents a doubling since 2015."
  - Investment shift: "for every $1 spent on fossil fuels, $1.70 is now spent on clean energy—compared with a ratio of 1:1 five years ago."
- Second: Investment in the next industrial revolution (technology)
  - Examples: quantum computing, nanotechnology, nuclear fusion, virtual reality, new vaccines, gene therapy, and artificial intelligence (AI).
  - AI specifics:
    - "IMF research shows that, in advanced economies, about 60 percent of jobs could be affected by AI."
    - "Half of them may see benefits from AI tools, but the other half may simply be rendered obsolete."
  - Policy responses: scale up digital infrastructure, expand retraining and reskilling, and establish global principles/guardrails for responsible AI.
- Third: Investment in people
  - Focus on health, education, stronger social safety nets, and empowering women economically.
  - Demographic contrast:
    - Africa: "By the end of this century, Africa’s share of the global population is set to reach close to 40 percent."
  - Fiscal capacity finding: "by building tax capacity, low-income countries could boost their annual budget revenues by up to 9 percent of GDP."

### Multilateralism, cooperation, and the IMF's evolving role
- Bretton Woods legacy and call for "21st century multilateralism":
  - More representative governance with a better balance between advanced economies and emerging market and developing economies.
  - Update multilateral institutions, including the IMF.
- IMF operational achievements since the pandemic:
  - "Just since the pandemic, we have injected about $1 trillion in liquidity and financing into our 190 member countries."
  - Introduced emergency financing programs and direct debt relief for poorest members.
  - Expanded macroeconomic work to include climate, gender, and digital money.
- IMF as a global "transmission line" for policies, financial resources, and knowledge—an impartial analyst and advisor in polarized information environments.

### Surveillance, risk management, and institutional adaptation
- Surveillance functions and historical pivots:
  - Periodic Article IV consultations and multilateral surveillance to identify risks and recommend policies.
  - 1978 Articles of Agreement change expanded IMF mandate to monetary, fiscal, and financial policies.
  - Post-2008 reforms: spillover reports, mandatory discussion of risks in Article IV, integration of financial stability analysis, mandatory FSAPs for systemically important financial sectors (2010).
  - 2020 Integrated Policy Framework: jointly considers monetary, exchange rate, macroprudential, and capital flow management policies.
- Immediate surveillance priorities:
  - Achieve sustained disinflation, implement adequate fiscal consolidation, safeguard monetary stability, and address postpandemic debt overhangs and financial sector vulnerabilities.
  - Reinvigorate growth: IMF work shows prioritizing removal of binding constraints could "boost global output effects by about 4 percent in just two years."
  - Integrate climate into surveillance (strategy adopted in 2021) and assess AI’s macroeconomic impacts and spillovers.
  - Assess effects and spillovers of industrial policies in a more fragmented world.

### Debt sustainability, IMF lending framework, and middle-income country concerns
- Surcharge framework (GRA) specifics:
  - Level-based surcharge of 2 percent on GRA borrowing that exceeds 187.5 percent of quota.
  - Additional 1 percent "time-based" surcharge on portion of GRA credit above this threshold outstanding for more than 36 months (or 51 months in the case of the EFF).
- Context and evolution:
  - IMF precautionary balances: $6.2 billion as of April 1999 to approximately $33 billion as of April 2024.
  - Scale of IMF lending increased; as of April this year, 21 middle-income countries had borrowed above 187.5 percent of quota.
  - Compared with a decade ago, the average per capita income of countries with active EFFs has fallen by a factor of 4.
- Current cost impact (as of June this year):
  - Minimum all-in interest rate payable on GRA disbursements: 5.1 percent a year.
  - Sovereigns pay 7.1 percent on portion of drawings that exceeds 187.5 percent of quota.
  - GRA liabilities outstanding for three years or more (four for the EFF) now have a record interest rate of 8.1 percent.
- Portfolio statistics:
  - Current portfolio: $112 billion spread across 90 countries.
  - Just over $1.2 billion per borrower.
  - Excluding Argentina ($32 billion), figure falls to $900 million per borrower.
  - Further excluding top three borrowers (Argentina, Egypt, and Ukraine), figure falls to just under $700 million per borrower.
  - Top three borrowers account for 46 percent of the portfolio.
- Critique and reform proposals:
  - Surcharge regime exposes fragile sovereign borrowers to rising world interest rates and needs urgent reform—either radical overhaul with caps that account for the interest rate cycle or scrapping it outright.
  - Tenor issues: EFF disburses over only three or four years and must be repaid in seven (weighted average), ill-suited for multi-year structural reform and climate-related investments.
  - Positive innovations to build on:
    - Rapid rollout of RFI and Rapid Credit Facility during pandemic.
    - Allocation of $650 billion-equivalent in SDRs.
    - Introduction of the Resilience and Sustainability Facility, final maturity of 20 years and carries no surcharges.

### Regional, governance, and vulnerability perspectives
- Humanitarian and climate impacts:
  - El Niño deluge claimed over 250 lives in Kenya, Tanzania, and Burundi; displaced thousands; caused severe damage to property, crops, and infrastructure.
  - In East Africa and the Horn of Africa, worst drought in half a century resulted in the loss of an estimated 9.5 million head of livestock.
- Demographic projections:
  - Sub-Saharan Africa expected to double its share of the global workforce from about 13 percent today to 25 percent by 2050.
- Emerging consensus areas for IMF reform:
  - Lending instruments: decouple lending from quota systems and unbundle instruments so each has tailored eligibility criteria.
  - SDRs issuance.
  - Addressing debt distress.
  - Governance reforms.
- Recommended approach: recalibrate financial instruments to flexibly address climate-induced disasters and pandemics; tailor instruments to country-specific needs rather than tying all instruments to standard macroeconomic programs.

### Climate vulnerability, Resilience and Sustainability Facility (RSF), and SDR allocation patterns
- RSF access constraint: To access the RSF, a country must have an IMF program already in place, posing a challenge for climate-vulnerable countries with sound economic management that wish to build resilience.
- SDR allocation pattern and implications:
  - Low-income countries received 2.4 percent of the 2021 allocation of SDRs.
  - The entire African continent received 5.2 percent of the 2021 allocation.
  - Developed economies received 64 percent of the 2021 allocation.
  - Wealthier nations have pledged to redirect $100 billion in SDRs to support vulnerable countries.
  - Assessment: pledges have augmented IMF capacity and provided seed financing for the RSF, but slow deployment underscores inefficiencies.

### Sovereign debt distress, systemic risks, and recommended responses
- Evidence of rising sovereign distress:
  - World Bank report: sovereign defaults in 10 countries in the past three years, surpassing the total for the preceding two decades.
  - Number of emerging market economies with bond yield spreads in distress territory (1,000 basis points or more over comparable US Treasury bonds) rose tenfold, from 2 to 20 since 2020.
- Pressure point: rising interest rates compounding debt-servicing challenges.
- Recommendation: urgent need for comprehensive debt-refinancing programs, analogous to the Brady Plan response to the Latin American debt crisis of the 1980s, to provide relief and support sustainable development.

### Political economy of sovereign borrowing: theory, evidence, and policy implications
- Present-bias and borrowing:
  - Governments may borrow due to present bias—political incumbents prefer spending while in office—leading to excess borrowing without strong political checks and balances.
  - Empirical patterns: countries that had external public savings (foreign reserves exceeding external debt) experienced faster growth, while those that borrowed stagnated.
- Volatility and welfare:
  - Sovereign borrowing associated with greater volatility in government expenditure and private consumption; contrary to neoclassical smoothing prediction.
  - Structural models show default when debt is high and output is low; lenders price debt to break even on average, generating procyclical borrowing.
  - Simple calculations show citizens might be better off if the government were denied access to debt markets under modest disagreement about discounting.
- Lender-of-last-resort trade-offs:
  - A third-party promise to lend can eliminate run-driven panics but may enable excessive borrowing by present-biased governments, potentially worsening welfare.
- Policy implications:
  - Proceed with extreme caution in facilitating borrowing in developing and emerging markets.
  - Possible actions: raise the threshold for interventions in a crisis or reconsider the welfare costs of direct lending.
  - Research agenda: more research into costs and consequences of sovereign borrowing is needed.

### Historical perspectives, institutional legacies, and industrial policy lessons
- Harry Dexter White and Bretton Woods:
  - White’s role: Treasury chief economist by 1941; architect of postwar plan leading to Bretton Woods; first US executive director of the IMF in 1946; died in 1948.
  - White proposed "trade dollars," a prototype for SDRs.
  - Evolution: IMF charter initially discouraged open capital flows and authorized capital controls when necessary; stance shifted over time as private capital markets developed.
  - Governance note: early concentration of control with major creditor countries; despite expanded membership (40 in 1946 to 190 today), small-member voting power has been "eviscerated."
- The new economics of industrial policy:
  - Revival to address green transition, geopolitical competition, and supply-chain resilience.
  - Political economy constraints: industrial policy produces concentrated benefits and diffused costs; success depends on political environment and state capacity.
  - Examples of success: South Korea’s Heavy and Chemical Industry push; postwar Italy’s place-based policies; smaller-scale successes in Latin America and Ethiopia.
  - Lessons and recommendations:
    - Evaluate alignment with domestic political environment and beneficiaries/losers.
    - Tailor policies to state administrative and fiscal capacity.
    - Invest in administrative capacity and bureaucratic competence.
    - Pursue smaller-scale, context-sensitive policies where large-scale replication is infeasible.
    - Emphasize empirical measurement and evaluation.

### Cultural and historical note: National Numismatic Collection
- Collection size and scope:
  - 1.6 million forms of physical money and transactional objects.
  - Items represent every inhabited continent and span more than 3,000 years of human history.
- Notable items:
  - A tiny electrum coin from 7th–6th century BCE Lydia.
  - A 2,000-year-old example of "knife money" from China.
  - A 14th century Ming Dynasty–era banknote from China.
  - Early American colonial banknotes, checks signed by early US presidents, and the Yap stone ring.
- Insights:
  - Imagery and material quality reflect civic identity, societal values, and economic conditions.
  - As the world becomes more digital, the collection offers lessons about values, trust, artistic beauty, and collective identity.
- Access and display:
  - Vault accessible to researchers by appointment.
  - Collection being gradually digitized; selected items on display in "The Value of Money" and "Really BIG Money."

*Finance & Development (June 2024) — "An IMF for Tomorrow" and related chapters in fd-june24.*

### 0.2 to 7 percent of GDP. The costs may be

### fd-june24 - 0.2 to 7 percent of GDP. The costs may be

### Costs of reversing globalization and key projections
- "0.2 to 7 percent of GDP. The costs may be higher when accounting for technological decoupling."
- "Reversing globalization would almost certainly reverse its gains, increase poverty, and result in a costly transition."
- IMF activity since crises: "Just since the pandemic, we have provided about $1 trillion in liquidity and financing to our 190 member countries."
- SDR history and allocations:
  - Initial annual allocations began in 1969.
  - Second allocation authorized for "1979–81."
  - $250 billion allocated in 2009.
  - $650 billion allocated in 2021.
  - Current share of SDRs in members’ holdings of SDR reserves and currencies is "roughly 7 percent."
  - Proposal: "an annual allocation of $100 billion to $200 billion in SDRs."

### Policy prescriptions to preserve and extend globalization’s benefits
- Strengthen the global trade rules framework under the WTO to maintain trade openness, stability, and predictability.
- Accelerate WTO reforms to:
  - strengthen transparency and rules, including on subsidies;
  - restore a fully functioning dispute-settlement system;
  - update the rule-book for the growing share of services and digital trade.
- Use plurilateral agreements among subsets of WTO members to advance e-commerce and investment facilitation without excluding others.
- Strengthen domestic policies to share benefits of trade, globalization, and technological advances, including:
  - sound macroeconomic governance;
  - financial regulation and supervision to avoid buildup of risk from financial globalization;
  - a tax system geared toward efficient revenue mobilization;
  - labor market and fiscal policies to address worker dislocations and inequality, and to counter disruptions from new technologies (especially artificial intelligence);
  - provision of high-quality basic public services, including education and health and social safety nets.
- Role for international organizations: act as a buffer in uncertain times, promote commonly agreed rules, and facilitate dialogue and cooperation.

### IMF legitimacy, governance, and operational reform proposals
- Legitimacy challenge: historical Western alliance control of the IMF is now contested as global economic power shifts (examples cited: Japan’s "6.47 percent quota exceeds China’s 6.4 percent"; India’s quota is less than those of the United Kingdom and France).
- Risks identified:
  - Political fragmentation could lead to blocs blocking lending decisions.
  - If quotas shift without governance reform, potential outcomes include relocation of IMF headquarters under Articles of Agreement.
- Proposed governance changes:
  - Redistribute quotas to reflect relative economic size while simultaneously reforming governance.
  - Professionalize and depoliticize operational decision making:
    - Executive board to set broad objectives, governance, and operational mandates;
    - Independent professional management to make day-to-day operational decisions and lending programs;
    - Board to focus on governance similarly to corporate boards, possibly using the Independent Evaluation Office to assess outcomes.
  - Reexamine Keynes’s idea of a nonresident, nonoperational board given modern communication and travel.
  - Board to select top IMF officials based on broad consensus and set basic qualifications for appointees.

### SDRs (Special Drawing Rights): opportunities and reforms recommended
- SDR fundamentals:
  - Allocated in proportion to IMF members’ quotas.
  - Interest-bearing reserve asset with corresponding long-term liability.
  - Value based on a basket of currencies; interest rate is a weighted average of short-term government rates for constituent currencies.
  - Provide unconditional liquidity and remain permanently in the global stock of international reserves.
- Recommended SDR reforms:
  - Resume regular annual allocations to maintain and increase SDR share in reserve holdings (target via "an annual allocation of $100 billion to $200 billion in SDRs").
  - Raise the interest rate on SDRs by incorporating a blend of long-term as well as short-term government security rates in the SDR basket to:
    - slightly reduce the subsidy on perpetual loans to countries that mobilize their SDRs;
    - offer compensation to countries that facilitate mobilization by reducing their currency reserves and increasing their SDR holdings.
  - Encourage members with excess SDR holdings to mobilize them for global challenges (e.g., climate change, pandemics) by:
    - lending to the IMF’s Poverty Reduction and Growth or Resilience and Sustainability Trusts;
    - purchasing SDR-denominated securities issued by those entities;
    - using similar mechanisms while avoiding unnecessary liquidity restrictions on SDR-denominated claims.

### Broader IMF role, resources, and agenda for reform
- IMF evolution and crisis response:
  - The IMF has adapted repeatedly (examples: 1990s low-income lending reforms; 2008–14 global financial crisis response; 2020–22 COVID-19 pandemic actions including "$650 billion worth of SDRs" and two emergency financing additions: "2020–22: plus $21.98bn emergency financing" and "2020–22: plus $9.14bn emergency financing" in charts).
- Four vital elements urged to make the IMF and IFIs work better (as outlined):
  - Radically improve treatment of unserviceable sovereign debt, including coordination across Paris Club, Chinese institutions, and private lenders; note that "nearly $200 billion flowed out of developing countries to private creditors in 2023."
  - Mobilize far more resources so the IMF and IFIs can provide insurance against shocks and catalyze development and global public goods (including a stable climate).
  - Adjust voting shares to reflect changes in global economic influence (current imbalances cited: Japan’s quota share bigger than China’s; the UK’s bigger than India’s).
  - End the custom of reserving IMF managing director and World Bank president posts by geographic convention; search globally for the best candidates.
- Warnings and outlook:
  - Incrementalism without substantive governance reform risks degradation of IMF legitimacy and reduced global influence.
  - A reformed, trusted IMF could shape new rules for international exchange and better advise on macroeconomic and external sustainability.

*fd-june24 - 0.2 to 7 percent of GDP. The costs may be — Finance & Development (June 2024), IMF.*

### 1.5 billion people lifted themselves out of poverty,

### 1.5 billion people lifted themselves out of poverty,

### Global progress and remaining challenges
- Major gains noted: "1.5 billion people lifted themselves out of poverty, and hundreds of millions entered the middle class."
- Improvements documented in life expectancy, infant mortality rates, literacy rates, and education levels—especially for girls.
- Drivers of progress highlighted: technology, capital accumulation, and economic integration.
  - Global trade expanded "six-fold" over the past 40 years.
  - Global capital flows rose "more than tenfold."
- National example: "In my own country, Bulgaria, per capita income has quadrupled since the fall of the Iron Curtain."
- Key distributional and development shortfalls:
  - "Some three-quarters of the world’s wealth today is owned by just one-tenth of the population."
  - "More than 780 million people face hunger."
  - Many developing economies are "no longer catching up to advanced economy income levels."
- Social and geopolitical risks from inequality and fragmentation:
  - High inequality corrodes social capital and trust.
  - Geopolitical tensions risk fragmenting the global economy into rival blocs, reducing prosperity and security.

### Scenarios for the next 100 years
- Two IMF staff scenarios:
  - Low-ambition scenario:
    - "Global GDP would be about three times larger and global living standards twice as high as they are today."
    - Based on the lower-growth experience of the 100 years before 1920.
  - High-ambition scenario:
    - "Global GDP would be 13 times larger, and living standards would be 9 times higher."
    - Based on average growth rates from 1920 until now.
- Policy foundation required for higher-growth path:
  - Price stability, sustainable public debt levels, financial stability.
  - Opening trade and entrepreneurship.
  - Better international cooperation and more sustainable and equitable growth.
  - IMF research assertion: "lower income inequality can be associated with higher and more durable growth."

### Three priority areas for capital allocation
- Overarching point: "My grandchildren’s prospects will hinge on whether we can allocate capital to where it is needed most and will have the greatest positive impact."
- First: The climate economy
  - Need to mobilize "trillions of dollars in climate investments—for mitigation, adaptation, and transition."
  - Market failure: polluters damage the planet free of charge; "pricing carbon is the most efficient way to accelerate decarbonization."
  - Numeric facts:
    - "The average price per ton of carbon dioxide emissions today is only $5, way below the $80 we need to reach by 2030."
    - "Carbon pricing programs now cover a quarter of global emissions, which represents a doubling since 2015."
    - Investment shift: "for every $1 spent on fossil fuels, $1.70 is now spent on clean energy—compared with a ratio of 1:1 five years ago."
  - Benefits cited: millions of green jobs, increased innovation, accelerated green technology transfer, and decoupling growth from emissions.
- Second: Investment in the next industrial revolution (technology)
  - Examples: quantum computing, nanotechnology, nuclear fusion, virtual reality, new vaccines, gene therapy, and artificial intelligence (AI).
  - AI specifics and risks:
    - "IMF research shows that, in advanced economies, about 60 percent of jobs could be affected by AI."
    - "Half of them may see benefits from AI tools, but the other half may simply be rendered obsolete."
    - Potential labor-market impacts: unemployment increases and wage pressures unless managed.
  - Policy responses needed: scale up digital infrastructure, expand retraining and reskilling, and establish global principles/guardrails for responsible AI.
- Third: Investment in people
  - Focus on health, education, stronger social safety nets, and empowering women economically as "the greatest dividends."
  - Demographic contrast:
    - Africa: "By the end of this century, Africa’s share of the global population is set to reach close to 40 percent."
    - Europe and East Asia: populations rapidly aging or shrinking.
  - Connecting Africa’s human resources with global capital:
    - Attract long-term investors and ensure stable trade flows.
    - For countries with strained budgets and high debt, better growth and revenue can create room for vital social spending.
    - IMF research example: "by building tax capacity, low-income countries could boost their annual budget revenues by up to 9 percent of GDP."
  - Potential outcomes: more jobs in Africa, less outward migration, higher returns on capital, more sustainable pension systems, and a more dynamic global economy.

### Multilateralism, cooperation, and the IMF's evolving role
- Historical framing: Bretton Woods and post-1945 multilateral cooperation helped sustain prosperity and peace.
- Call for "21st century multilateralism":
  - More representative governance with a better balance between advanced economies and emerging market and developing economies.
  - Update multilateral institutions, including the IMF.
- IMF operational achievements since the pandemic:
  - "Just since the pandemic, we have injected about $1 trillion in liquidity and financing into our 190 member countries."
  - Introduced emergency financing programs and direct debt relief for poorest members.
  - Expanded macroeconomic work to include climate, gender, and digital money.
- The IMF as a global "transmission line" for policies, financial resources, and knowledge—an impartial analyst and advisor in polarized information environments.
- Emphasis on short-run policy action: referencing Keynes’ view that policymakers should act rather than wait for long-run market fixes.

### Lessons from history and risk management
- Evolution of IMF functions in response to crises:
  - 1956 Suez/1950s liquidity concerns; 1960s reform debates; 1970s remaking after par value system breakdown.
  - 1982 debt crisis led IMF to a lender-of-last-resort role and coordination of bank bail-ins.
  - 1994–95 Mexican crisis and 1997–98 Asian crisis shaped modern rescue apparatus and the Global Financial Stability Net.
  - 2009 Group of Twenty summit restructured financial coordination (FSF → FSB).
- Key lessons about risk management and surveillance:
  - Threats to stability can originate anywhere; IMF surveillance focused earlier on periphery but missed the 2007 US-origin shock.
  - Extent of threats depends on linkages that are hard to measure precisely—microprudential vs macroprudential data gaps.
  - Long-term challenges (e.g., climate change) can generate immediate threats and need accurate measurement and costing.
  - Security challenges can cause financial destabilization; recent example: IMF agreement adaptations for Ukraine under "exceptionally high uncertainty."
- Surveillance must integrate cross-border spillovers and system linkages; multiple institutions now share overlapping roles.

### IMF surveillance today: priorities and adaptations
- Surveillance functions:
  - Periodic Article IV consultations (bilateral surveillance) and multilateral surveillance to identify risks and recommend policies.
  - Role in promoting information sharing and analyzing cross-border spillovers from systemic economies.
- Historical pivots and methodological upgrades:
  - 1978 Articles of Agreement change: expanded IMF mandate to monetary, fiscal, and financial policies.
  - Post-1990s crises: early-warning models, exchange-rate and financial-sector surveillance, Vulnerability Exercise (2001).
  - Post-2008 reforms: spillover reports, mandatory discussion of risks in Article IV, integration of financial stability analysis, mandatory FSAPs for systemically important financial sectors (2010).
  - 2020 Integrated Policy Framework: jointly considers monetary, exchange rate, macroprudential, and capital flow management policies.
- Current immediate surveillance priorities:
  - Help members achieve sustained disinflation, implement adequate fiscal consolidation, safeguard monetary stability, and address postpandemic debt overhangs and financial sector vulnerabilities.
  - Reinvigorate growth amid low productivity and deteriorating medium-term prospects; IMF work shows prioritizing removal of binding constraints could "boost global output effects by about 4 percent in just two years."
  - Integrate climate into surveillance (strategy adopted in 2021) and assess AI’s macroeconomic impacts and spillovers.
  - Assess effects and spillovers of industrial policies in a more fragmented world, remaining a "ruthless truth teller."
- Surveillance gains and the future:
  - Most emerging market economies have shown greater resilience to recent turmoil than during the global financial crisis, aided by sound policies consistent with IMF advice.
  - Surveillance must remain agile, forward-looking, and coordinate with other international institutions to manage transitions.

### Institutional design and policy recommendations for the IMF
- Preserve and prioritize IMF core macroeconomic mission: crisis lending with conditionality, surveillance of cross-border spillovers, and management of international monetary system vulnerabilities.
- Advocate for greater operational independence, akin to central banks, while maintaining member-set goals and external evaluation.
  - Narrowing of IMF mandate to core functions in exchange for more autonomy recommended.
  - Suggestion to enhance executive board’s ability to pass decisions by qualified majority voting to limit veto power of the largest shareholder except on long-term or quasi-constitutional issues.
- Maintain technocratic evenhandedness and consistency in substance and process across member engagements to preserve legitimacy, especially for vulnerable members.
- IMF should call the big three economies (China, the EU, and the US) to account through surveillance of policies that impose spillovers and restrict market access for political reasons.
- Proposals to limit politicization:
  - Adopt stricter and more consistent rules limiting IMF lending to economies at war to avoid perception of taking sides while conflict is ongoing.
  - Encourage other institutions (World Bank, OECD, G20, regional arrangements) to take lead on non-core mandates while IMF focuses on cross-border macroeconomic stability.
- For members beyond the big three, enhanced IMF operational independence should be paired with continued accountability and board-level evaluation of policy execution and goal setting.

*From "An IMF for Tomorrow" (Finance & Development, June 2024). Lecture “The Economic Possibilities for My Grandchildren,” delivered March 14, 2024.*

### references

### references

### Cited works
- Budina, Nina, Christian Ebeke, Florence Jaumotte, Andrea Medici, Augustus J. Panton, Marina M. Tavares, and Bella Yao. 2023. “Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies.” IMF Staff Discussion Note 23/007, International Monetary Fund, Washington, DC.
- Ilyina, Anna, Ceyla Pazarbasioglu, and Michele Ruta. 2024. “Industrial Policy Is Back but the Bar to Get It Right Is High.” IMF Blog, April 12.

### The IMF’s climate change debate (Masood Ahmed) — key findings and arguments
- Executive board position (2021 strategy paper): “Climate change has emerged as one the most critical macroeconomic and financial policy challenges that the IMF’s membership will face in the coming years and decades.”
- Core framing:
  - Emphasis on “macroeconomic and financial stability” as the lode-star guiding the Fund’s activities.
  - “Macro-criticality” is the prevailing test for IMF engagement.
- Two schools of thought:
  - Restrictive camp: limit IMF focus to implications of climate change for fiscal, monetary, financial, and external accounts; avoid assessing countries’ mitigation commitments or mobilizing private mitigation finance; caution against mission creep and dilution of core capacity.
  - Activist camp: climate change poses existential threat; IMF should evolve its focus, business models, and skill sets; build state-of-the-art tools to assess climate risks and integrate large transition investments into macro fiscal and financial frameworks.
- Mobilizing climate financing — numeric estimates and institutional assessments:
  - Independent High-Level Expert Group on Climate Finance estimate: emerging market and developing economies other than China will have to spend about $2.4 trillion a year by 2030; about $1 trillion a year of that will have to come from external sources.
  - IMF’s Resilience and Sustainability Trust (RST) disbursements so far: just $1.4 billion.
  - Pandemic-era SDR issuance: equivalent to $650 billion; 67 percent went to rich countries.
- Policy and operational issues highlighted:
  - RST seen as too small and its requirement for an accompanying regular IMF financing program reduces attractiveness because of conditionality and reputational stigma.
  - RST and regular IMF financing add debt (though RST over a much longer maturity), limiting some countries.
  - Calls for reexamining policies for issuing and deploying SDRs, including large and regular distributions, changing allocation rules to target countries in need and/or link allocations to climate spending.
  - IMF’s convening power could be used to coordinate macroeconomic and financial policy responses; “climate change mitigation is a global public good and requires an unprecedented level of cross-country policy cooperation and coordination.”
- Recommended path forward:
  - Do not retreat from advances already made integrating climate change into analytical, surveillance, and capacity-building work.
  - Deepen focus on analytical, surveillance, and capacity-building aspects as countries seek IMF help.
  - Expand RST to become a more significant source of IMF financing.
  - Continue strengthening partnerships with the World Bank and other institutions and recruit specialists linking climate agenda to IMF core skills.
  - Adopt a stepwise approach: “cross the river by feeling the stones.”

### Debt sustainability and IMF lending framework (Mia Amor Mottley) — key findings and arguments
- Overarching premise: debt will remain a critical component of funding for sustainable development and climate resilience; need to “lend and borrow ‘better’.”
- Fundamental rule cited: rates of interest likely to exceed the rate of future nominal growth cannot be considered sustainable.
- Flawed surcharge framework for middle-income countries:
  - Surcharge structure (General Resources Account, GRA):
    - Level-based surcharge of 2 percent on GRA borrowing that exceeds 187.5 percent of quota.
    - Additional 1 percent “time-based” surcharge on portion of GRA credit above this threshold outstanding for more than 36 months (or 51 months in the case of the EFF).
  - Historical rationale: introduced at start of millennium to discourage large and prolonged borrowing and protect IMF resources.
  - Contextual changes since introduction:
    - IMF precautionary balances: $6.2 billion as of April 1999 to approximately $33 billion as of April 2024.
    - Scale of IMF lending increased; as of April this year, 21 middle-income countries had borrowed above 187.5 percent of quota.
    - Compared with a decade ago, the average per capita income of countries with active EFFs has fallen by a factor of 4.
- Current cost impact (as of June this year):
  - Minimum all-in interest rate payable on GRA disbursements: 5.1 percent a year.
  - Sovereigns pay 7.1 percent on portion of drawings that exceeds 187.5 percent of quota.
  - GRA liabilities outstanding for three years or more (four for the EFF) now have a record interest rate of 8.1 percent.
- Critique and reform proposals:
  - The surcharge regime has exposed fragile sovereign borrowers to rising world interest rates and needs urgent reform—either radical overhaul with caps that account for the interest rate cycle or scrapping it outright.
  - Tenor issues: EFF disburses over only three or four years and must be repaid in seven (weighted average), which is ill-suited for multi-year structural reform and climate-related investments.
  - Result: many middle-income countries locked into perpetual programs, borrowing from IMF to repay IMF.
  - Historical note: 45 years since the EFF was last reformed (1979).
  - Positive innovations to build on:
    - Rapid rollout of RFI and Rapid Credit Facility during pandemic.
    - Allocation of $650 billion-equivalent in SDRs.
    - Introduction of the Resilience and Sustainability Facility (funded by rechanneling portion of new SDRs), designed to help finance climate resilience and adaptation for countries with an IMF upper-credit-tranche arrangement; final maturity of 20 years and carries no surcharges.
- IMF portfolio and borrower concentration statistics:
  - Current portfolio: $112 billion spread across 90 countries.
  - Just over $1.2 billion per borrower.
  - Excluding Argentina ($32 billion), figure falls to $900 million per borrower.
  - Further excluding top three borrowers (Argentina, Egypt, and Ukraine), figure falls to just under $700 million per borrower.
  - Top three borrowers account for 46 percent of the portfolio.

### Regional and governance perspectives — selected statistics and context (William Ruto and contextual excerpts)
- Humanitarian and climate impacts cited:
  - El Niño deluge claimed over 250 lives in Kenya, Tanzania, and Burundi; displaced thousands; caused severe damage to property, crops, and infrastructure.
  - In East Africa and the Horn of Africa, worst drought in half a century resulted in the loss of an estimated 9.5 million head of livestock.
- Global South demographic and growth projection:
  - Sub-Saharan Africa expected to double its share of the global workforce from about 13 percent today to 25 percent by 2050.
- Emerging consensus areas for IMF reform:
  - Lending instruments: decouple lending from quota systems and unbundle instruments so each has tailored eligibility criteria.
  - SDRs issuance.
  - Addressing debt distress.
  - Governance reforms.
- Recommended approach: recalibrate financial instruments to flexibly address climate-induced disasters and pandemics; tailor instruments to country-specific needs rather than tying all instruments to standard macroeconomic programs.

*Source: fd-june24 - references*

### 2.4 million in Kenya alone. Currently, we are experi-

### An IMF for Tomorrow

### Climate vulnerability, resilience financing, and recent shocks
- Finding: Devastating floods are occurring, described as the worst since 1997; one fragment references "2.4 million in Kenya alone."
- Observation: The Resilience and Sustainability Facility (RSF) recognizes climate change vulnerability as a driver of economic fragility.
- Constraint: To access the RSF, a country must have an IMF program already in place, which poses a challenge for climate-vulnerable countries with sound economic management that wish to build resilience.
- Contextual note: william ruto is president of Kenya.

### Special drawing rights (SDRs) — allocation pattern and implications
- Finding: Low-income countries received 2.4 percent of the 2021 allocation of SDRs.
- Finding: The entire African continent received 5.2 percent of the 2021 allocation.
- Finding: Developed economies received 64 percent of the 2021 allocation.
- Action pledged: Wealthier nations have pledged to redirect $100 billion in SDRs to support vulnerable countries.
- Assessment: These pledges have augmented the IMF’s capacity and provided seed financing for the RSF, but slow deployment of these funds underscores inefficiencies in current practices.

### Sovereign debt distress and systemic risks
- Finding: The developing world is facing a debt crisis reminiscent of conditions that led to the Highly Indebted Poor Countries initiative of the mid-1990s.
- Evidence: The World Bank’s latest international debt report shows sovereign defaults in 10 countries in the past three years, surpassing the total for the preceding two decades.
- Finding: The number of emerging market economies with bond yield spreads in distress territory (1,000 basis points or more over comparable US Treasury bonds) has risen tenfold, from 2 to 20 since 2020.
- Pressure point: Rising interest rates are compounding debt-servicing challenges.
- Recommendation: There is an urgent need for comprehensive debt-refinancing programs, analogous to the Brady Plan response to the Latin American debt crisis of the 1980s, to provide relief and support sustainable development.

### Governance reforms and representation at international financial institutions
- Finding: Global economic governance has lagged behind the economic rise of the Global South and other geopolitical shifts.
- Claim: "The current voting rights in international financial institutions do not reflect the economic and demographic realities of today."
- Data point: The Global South already accounts for half of global GDP and 80 percent of the world’s population.
- Recommendation: Corporate governance principles suggest a need for more equitable representation and independence in decision-making processes at multilateral institutions.
- Strategic imperative: The future relevance of the IMF depends on its ability to adapt to emerging challenges and listen to the needs of its global membership; the path forward involves significant reform.

### Latin America — historical role, risks, and IMF engagement
- Historical note: Latin America and the Caribbean were central to the Bretton Woods Conference; by 1947 more than 40 percent of the Fund’s initial membership were from the region.
- Progress: Inflation and fiscal profligacy have been dramatically tamed in all but a handful of cases; IMF-supported programs with strong domestic ownership have proved effective in many countries since the 1980s.
- Persistent challenges: Great inequality of income and opportunity remains, creating security, crime, and social challenges.
- Multilateralism: Latin America’s future depends on multilateralism and achievement of the IMF’s core mandates as set out in Article I.
- Risks from geopolitics: Geo-economic fragmentation and a potential "new cold war" could be catastrophic for Latin American economies given their small size and specialization in natural resources.
- Climate transition: Countries dependent on fossil-fuel fiscal revenues face painful transitions; countries with lithium, copper, and renewable-energy advantages may see positive tailwinds.
- Role of IMF: The IMF should support national efforts through technical assistance and financing with partner institutions; speaking truth to power about risks from disruptive deglobalization is emphasized as a guiding principle.

### Broader reflections on multilateralism, shocks, and the IMF’s remit
- Assertion: Avoiding economic fragmentation and addressing climate change require well-functioning multilateral institutions such as the IMF.
- Geopolitical responsibility: The US has an outsize responsibility for a well-functioning international financial architecture; constructive approaches by both the US and China toward peaceful multilateralism are necessary for the IMF to support regions like Latin America.
- Institutional adaptation: The IMF must continue to adapt governance and tools (surveillance, lending, trust arrangements) to remain a cornerstone of global stability.

*Source: Excerpted content from the June 2024 Finance & Development PDF chapter "An IMF for Tomorrow."*

### 1. The data show countries that had external public

### 1. The data show countries that had external public

### Impatient politicians
- Alternative hypothesis: governments borrow due to present bias—political incumbents prefer spending while in office, leading to excess borrowing without strong political checks and balances.
- Mechanism and outcomes:
  - Public borrowing crowds out private investment and retards growth (as developed in papers with Manuel Amador and Gita Gopinath).
  - Distinction between public and private flows is important; Chart 2 implies that over the long run, countries with low trend growth rates tended to borrow more.
  - Countries that had external public savings (foreign reserves exceeding external debt) experienced faster growth, while those that borrowed stagnated.
- Historical patterns:
  - During the period of dramatic debt increases, higher borrowing associated with lower growth.
  - In the latter half of the sample (decrease in debt to income, on average), the correlation in Chart 2 does not hold: countries that decreased debt relatively more had slower growth in the period 2004–22.
  - Reductions in debt sometimes resulted from debt forgiveness or default and restructuring; starting from low debt (as most countries did in 1970) differs from low debt due to forgiveness or default.
- Interpretation:
  - The level of debt matters, but so does the history that led to that level of borrowing.
  - Combining theory and data makes a strong case that government debt crowds out investment and lowers growth; the neoclassical paradigm faces a tougher challenge confronting the data.

### Smoothing volatility
- Neoclassical prediction: sovereign borrowing smooths fluctuations in income.
- Empirical findings:
  - Over long horizons, countries that borrow show more volatility in government expenditure and private consumption.
  - Positive relationship between changes in debt and volatility of spending—more borrowing associated with more volatile public spending.
  - This is contrary to the smoothing motive predicted by the standard model.
- Consideration of shocks:
  - Large negative shocks (natural disasters, military conflict) could induce borrowing, but long time series are needed to separate luck from policy.
  - If large negative shocks are frequent, optimal policy would be to build reserves rather than increase debt; the sample does not show this behavior on average.
- Conclusion:
  - Sovereign borrowing is associated with lower long-run growth and investment and greater volatility in spending.
  - Consistent with a model of present bias due to political turnover combined with capital taxation: sovereign borrowing generates volatility rather than smoothing it.

### Welfare consequences
- Structural sovereign-debt models:
  - Models replicate large run-ups in debt and subsequent defaults; key ingredient: government faces a volatile income process and taps international debt markets to delink spending from revenues.
  - Default implies exclusion from international debt markets for a period and a reduction in output.
  - Models typically assume governments are much more impatient than lenders, leading to a present-bias-induced default.
- Model implications:
  - Governments default when debt is high and output is low.
  - Lenders price debt to break even on average; interest rates are higher than the comparable risk-free bond and vary over the business cycle.
  - Bond prices (spreads) increase when a recession is likely and decrease in a boom, inducing governments to borrow more in booms than busts—resulting in procyclical fiscal policy.
- Welfare question:
  - If private citizens are relatively patient compared with their governments, does access to sovereign debt markets increase or decrease welfare?
  - Simple calculations (paper with Manuel Amador and Stelios Fourakis) show that modest disagreement about discounting can yield the striking result that the citizenry would be better off if the government was denied access to debt markets.
  - "The extra volatility induced by procyclical borrowing and subsequent default is not in the best interests of private agents if they are not as present-biased as their governments."
- Efficiency of debt markets:
  - If citizens and governments agree on discounting, making debt markets more efficient increases welfare.
  - If there is disagreement, removing frictions may make matters worse.

### Lenders of last resort
- Run mechanism:
  - Debt markets are vulnerable to runs (self-fulfilling panics); a failed auction can force default on maturing bonds.
  - Policy prescription: a third party (e.g., the IMF) promises to lend if there is a failed auction to eliminate the panic outcome.
- Trade-offs:
  - Without a third-party lender, other lenders demand a high premium to cover run risk, limiting borrowing by impatient governments—this constraint can increase citizen welfare.
  - With a lender of last resort, panics can be eliminated, but easier borrowing capacity for impatient governments can worsen welfare.
  - Model calculations with runs indicate that if citizens are not excessively impatient, they may prefer a world without a lender of last resort because it constrains government borrowing despite exposure to panics.
- Ambiguity:
  - "The value of sovereign debt markets to the borrowing countries is ambiguous, whether viewed from the perspective of the data or quantitative models."
  - Political economy distortions in many developing or emerging markets can make access to global capital markets counterproductive—raising volatility and lowering investment.
  - Even a lender of last resort that can unambiguously identify a panic may make things worse.

### Policy implications and research needs
- Practical policymaking recommendation:
  - Proceed with extreme caution in facilitating borrowing in developing and emerging markets.
  - Possible actions: raise the threshold for interventions in a crisis or reconsider the welfare costs of direct lending.
- Research agenda:
  - More research into the costs and consequences of sovereign borrowing is called for.
- Overall takeaway:
  - Use data and theory to question conventional wisdom; heavy skepticism is warranted regarding neoclassical claims that sovereign borrowing unambiguously smooths income and raises welfare.

*This article is based on the 2023 Mundell-Fleming Lecture delivered by the author at the IMF’s 24th Jacques Polak Annual Research Conference.*

### 40. Soon afterward, in 1934, he accepted a junior

### fd-june24 - 40. Soon afterward, in 1934, he accepted a junior

### The Messy Legacy of Harry Dexter White — Major themes and findings
- Career timeline and role at Bretton Woods:
  - In 1934, he accepted a junior position at the US Treasury.
  - By 1941, he was the Treasury’s chief economist.
  - He developed a plan for organizing postwar economic and financial relations that led to the Bretton Woods conference in 1944.
  - At Bretton Woods, the 44 allied countries adopted what was essentially the White plan as the blueprint for the IMF and the World Bank.
  - In 1946, White became the first US executive director of the IMF.
  - White died of a heart attack in 1948.

- Core vision and principles:
  - White’s vision: the IMF would foster international financial cooperation so countries could trade freely and develop their economies.
  - Famous statement attributed to White: “prosperity, like peace, is indivisible.”
  - He insisted that all allies have an opportunity to contribute to institutional design, organizing smaller-group meetings before the full conference of more than 700 delegates.
  - White and Keynes agreed the IMF should discourage countries from being open to capital flows initially; the Fund’s charter limited IMF borrowing to finance trade deficits and authorized the IMF to require capital controls when necessary.
  - White insisted that many small and mostly poor members should have at least 10 percent of the voting power.

- Evolution of the global economy and IMF tools:
  - The postwar recovery and the onset of the Cold War created large potential demands on IMF resources; the IMF was too small to satisfy them.
  - White proposed a new international financial asset called “trade dollars,” a prototype for special drawing rights (SDRs) two decades later.
  - Today, the SDR is recognized as a crucial component of the IMF’s tool kit.

- Changing stance on capital flows:
  - In the 1940s, private sector international bank loans and internationally sold bonds were practically nonexistent; policymakers viewed future private capital flows as a “hot money” threat.
  - Over time, as bank loans and international bonds became more widely used, the IMF reversed course and began urging most countries to open their financial markets to foreign competition.
  - The IMF’s current stance is more cautious, recognizing both benefits of openness and risks of volatility and loss of control.

- Membership and geopolitical context:
  - White’s vision of universal participation could not be realized in 1944 because of wartime divisions and colonial rule.
  - Accession of Germany and Japan in 1952 spurred realization; decolonization increased membership from 40 countries in 1946 to 190 countries today.
  - White sought to preserve alliance ties with the Soviet Union; his 1945 unpublished manuscript argued for assuring “friendship and military alliance” between the United States and Russia.
  - That part of his vision was dashed by the onset of the Cold War; the Soviet Union never joined the IMF, and much of the Soviet bloc did not join until after 1991.

- Governance and control:
  - White believed financial control should be in the hands of major creditor countries supplying IMF resources; the US Treasury was the dominant force at the outset.
  - Despite increases in small-member countries, their share of voting power has been “eviscerated”; the US and now the European Union “still hold the reins.”

- Purpose and criticisms:
  - White and Keynes agreed the IMF was to be a “Keynesian” institution promoting prosperity through sound policymaking and by helping countries avoid actions “destructive of national or international prosperity.”
  - Persistent criticism: the IMF is perceived as promoting austerity rather than economic growth.
  - The IMF’s defense: prosperity cannot be sustained without being underpinned by sound policies; countries in distress often must undergo short-term pain for longer-term success.
  - Questions remain about the balance between short-term pain and long-term gain.

- Charges of disloyalty and historical reassessment:
  - During the postwar Red Scare, two former Communist Party members accused White of being a Soviet agent and passing secret documents; evidence was described as “always flimsy.”
  - More recent evidence indicates White was a target of Soviet prying for information, not an agent for their interests.
  - White’s posthumous reputation was badly tarnished by attacks, but “Ultimately, though, his legacy must rise or fall with the value of his greatest achievement, the IMF.”

### A New Economics of Industrial Policy — Major themes and findings
- Revival and context:
  - Industrial policy is experiencing a comeback in advanced economies to address the green energy transition, geopolitical competition, and supply-chain resilience.
  - The authors label recent research the “new economics of industrial policy” (Juhász, Lane, and Rodrik, forthcoming), emphasizing the need to consider political forces behind policymaking.

- Political economy and governance constraints:
  - Industrial policies produce concentrated benefits and diffused costs, making allocation politically fraught and subject to lobbying and rent-seeking.
  - Policy choices are constrained by political institutions, those with political power, and state administrative capacity.
  - Government failure is most likely when industrial policy choices violate political economy constraints.

- Examples of success:
  - South Korea’s Heavy and Chemical Industry push under President Park Chung-hee in the 1960s drove increased output and export development, shifting comparative advantage to targeted sectors (Lane 2022).
  - Postwar Italy’s decades-long industrial policy aimed at southern regions launched durable clusters in high-skill manufacturing and knowledge-intensive services (Incoronato and Lattanzio 2023); estimated to have raised national industrial production (Cerrato 2024).
  - Smaller-scale successes include Latin American examples: state-owned cargo flights to export flowers from Colombia to the US, collaboration in Brazilian soy cultivation, and multipronged policies promoting cut flower exports in Ethiopia (Bienen and Ciuriak 2015; Sabel and others 2012).

- Examples of failure and skepticism:
  - Debacles in postindependence African countries and disappointing Southeast Asian “Look East” policies informed concerns about government failures.
  - Economic pessimism has led some scholars to assert industrial policy is impossible; Gary Becker’s 1985 assertion quoted: “the best industrial policy is none at all.”

- Political environment as decisive:
  - Successes were supported by domestic political environments where sound policies were politically feasible, favored by powerful actors, and compatible with state administrative capacity.
  - South Korea’s all-out export-based industrial policy succeeded in part because enduring military threats from North Korea aligned political and industrial elites and balance of payments problems made import substitution unsustainable.
  - Duplicating East Asian policies without compatibility with local political constraints often leads to failure (e.g., incomplete adoption in Malaysia and Thailand).

### Lessons and policy recommendations
- Key lessons for policymakers:
  - Evaluate alignment with the domestic political environment:
    - Consider who will benefit and who will lose, and how political incentives support good policies.
    - Consider how policies will change future political environments and which policies will endure across political cycles.
  - Tailor policies to state capacity:
    - Countries’ administrative and fiscal capacities differ vastly; policies must be tailored accordingly.
    - Developing economies may lack the fiscal capacity to implement green industrial policies with tools used in advanced economies.
  - Invest in administrative capacity:
    - Industrial policy almost always requires investment in administrative capacity and bureaucratic competence.
    - Example: The US Department of Energy Loan Programs Office has expanded to disburse 10 times more funding since enactment of the Inflation Reduction Act and claims improved administrative processes and institutional safeguards since the Solyndra episode.

- Overall guidance:
  - Ignoring politics is perilous; success requires choosing industrial policy that works within local political and governance constraints and investing in the state’s capacity to deploy and monitor policy.
  - Smaller-scale, context-sensitive policies can succeed even if the exceptional political conditions that enabled large-scale East Asian strategies are rare.
  - More empirical measurement and evaluation are essential; economists and policymakers must focus on market failures, policy mix, and the politics that shape feasible policy choices.

*Italic — Source: fd-june24 - 40. Soon afterward, in 1934, he accepted a junior (IMF F&D June 2024 content provided).*

### references

### fd-june24 - references

### References cited
- Bienen, D., and D. Ciuriak. 2015. “Eastern Africa’s Manufacturing Sector: Promoting Technology, Innovation, Productivity and Linkages.” African Development Bank report, Nairobi, Kenya.
- Cerrato, A. 2024. “How Big Is the Big Push? The Macroeconomic Effects of a Large-Scale Regional Development Program.” Unpublished, University of California, Berkeley.
- Incoronato, L., and S. Lattanzio. 2023. “Place-Based Industrial Policies and Local Agglomeration in the Long Run.” Unpublished.
- Juhász, R., N. J. Lane, and D. Rodrik. Forthcoming. “The New Economics of Industrial Policy.” Annual Review of Economics 16.
- Lane, N. 2022. “Manufacturing Revolutions: Industrial Policy and Industrialization in South Korea.” CSAE Working Paper, Oxford, UK.
- Sabel, C., E. Fernández-Arias, R. Hausmann, A. Rodríguez-Clare, and E. Stein. 2012. Export Pioneers in Latin America. Washington, DC: Inter-American Development Bank.

### "An Economist’s Pledge" — key principles (Hippocratic-style oath for economists)
- People behind the numbers: remember that behind statistics are people with dreams, aspirations, and needs.
- Tradition and freedom: respect local traditions while being informed by universal human freedoms; let values guide but not dominate.
- Humble listening, thoughtful speaking: value understanding and uncover unseen layers of people, places, and ideas.
- Diversity in understanding: honor truths from diverse voices regardless of background, eloquence, or identity.
- Mindful of motives, yet objective: be honest about personal leanings while anchoring work in objectivity.
- Truth through data: commit to using data to uncover and measure deeper truths before seeking cause and effect.
- Grit and grace in learning: continuously hone expertise, learn from missteps, and remain open to fresh insights.
- Progress with perspective: promote progress rooted in human well-being and inclusive prosperity beyond income growth.
- Clarity amid complexity: communicate insights clearly so complex ideas are accessible yet respected.
- Shared stewardship: engage civil society to spur broader participation in economic dialogue.
- Principled pragmatism: strive for policies rooted in sound principles and social welfare despite real-world constraints.
- Mentorship for tomorrow: guide and inspire future economists to preserve wisdom and curiosity across eras.
- Future focus: shape an economy that benefits the planet and future generations, valuing long-term sustainable growth.
- Seeing the unseen: weigh visible benefits against unseen costs for unrepresented stakeholders.
- Principled path: advance progress or avoid harm; remain ethically steady even absent external rules.
- Personal vow: carry out duties with detachment, free from emotional ties to outcomes or allure of recognition, dedicating knowledge and efforts for the greater good of people, planet, and progress.

### Zhu Min profile — substantive actions, views, and reform proposals
Key biography and career milestones:
- Born in Shanghai in 1952.
- Degree in economics from Fudan University in 1982.
- Master's in public administration at Princeton and doctorate in economics at Johns Hopkins.
- Worked as an economist at the World Bank in the early 1990s; rose through Bank of China; became deputy governor of the People’s Bank of China in 2009.
- In 2010 became a special advisor to the then managing director and then a deputy managing director at the IMF.
- After his IMF term ended he returned to Beijing and is deputy chairman of the China International Economic Exchange Centre.

Notable IMF reforms and contributions:
- Helped bring about a 6 percent shift in quota shares to emerging market and developing economies.
- In 2015 pushed for inclusion of the Chinese renminbi in the basket of currencies that determine the value of special drawing rights (SDRs).
- Instrumental in persuading China to contribute $45 billion to help during the euro area debt crisis (described as “by far the largest contribution”).

Policy views and reform agenda:
- Governance: IMF voting rights and governance structure are out of step with the shift in economic power toward emerging markets; half of global GDP comes from emerging markets but voting rights lag.
- Broaden IMF focus: move beyond traditional emphasis on current account balances, fiscal balances, and exchange rates to include policies stressing jobs and growth in the developing world while reducing income inequality.
- SDRs and liquidity: favor making special drawing rights more liquid and marketable as an alternative to overreliance on the US dollar.
- Early-warning and resilience: advocate for an IMF role that provides early-warning systems for emerging crises and helps build resilience via regional safety nets (example cited: the Chiang Mai Initiative).
- Climate and fiscal coordination: see a coordinating role for the IMF in supporting carbon neutrality and global fiscal policy for financing the transition, noting that “The World Bank can do projects. But who can support global fiscal policy for financing the transition? Nobody is there.”
- Practical constraints: acknowledges the dominance of the US voice at the IMF and political complications that make some reforms difficult.

Contextual observations:
- Zhu framed as a bridge between China and the West; concern that the pool of people able to play that mediator role is shrinking.
- Described personal style as inclusive, pragmatic, and team-oriented; engaged with civil society activities while at the IMF.

### Book review syntheses — policy-relevant takeaways

- Daniel Susskind, High-Quality Growth: Growth — A History and a Reckoning
  - Central message: economic policy should broaden focus from primarily boosting GDP growth to also accounting for the costs (climate change, inequality, social fragmentation).
  - Policy instruments discussed: taxes and subsidies, laws and regulations, social narratives and norms to incentivize environmentally friendly technological progress.
  - Trade-offs: where mitigation is insufficient, meeting climate and other social objectives may require slower growth; political processes must adjudicate such trade-offs.
  - Implementation challenge: preferences about the balance between growth and other objectives differ sharply across and within countries, complicating policy consensus.

- Keynes-related volume (The Economic Consequences of the Peace after 100 Years)
  - Historical lesson: failures to establish durable international institutions after major conflicts can produce long-run instability; international system reflects a mix of economics and geopolitics.
  - Policy implication: durable international economic institutions can promote stability; current rises in economic nationalism underline stakes for cooperative frameworks.

- Josie Cox, Women Money Power
  - Policy recommendations to advance gender economic equality:
    - Pay transparency legislation.
    - Affordable childcare.
    - Parental leave policies.
    - Protections for reproductive rights.
  - Emphasis: structural and cultural barriers persist; policy reforms across public and private spheres are actionable levers to improve gender equity, with broader economic and social benefits.

*Source: fd-june24 - references (PDF chapter/section).*

### 1.6 million forms of physical money and transactional objects.

### 1.6 million forms of physical money and transactional objects.

### Collection overview
- The National Numismatic Collection (NNC) is "believed to be the world’s largest collection of its kind."
- Size and scope:
  - 1.6 million forms of physical money and transactional objects.
  - Items "represent every inhabited continent, and they span more than 3,000 years of human history."
- Curator: Ellen Feingold.

### Notable items (sampled from the collection)
- A tiny electrum coin, the size of a stud earring, from 7th–6th century BCE Lydia (present-day Türkiye).
- A 2,000-year-old example of "knife money" from China — a bronze, knife-shaped piece of money designed not for practical use but to represent something of value.
- A 14th century Ming Dynasty–era banknote from China.
- Early banknotes from the American colonies with varied motifs and inscriptions (including "'Tis Death to counterfeit").
- Personal checks signed by early US presidents.
- A tire-size stone ring from the island of Yap in Micronesia (featured in the museum exhibition "The Value of Money").

### Cultural, historical, and economic insights
- Physical money as identity and messaging:
  - Coins used to project civic identity: example quoted — a 5th century BCE coin from ancient Greece "has the owl, who represents Athens. And on the other side, you will see Athena. Athens is using the coins to say, 'This is who we are; this is our patron goddess.'"
- Imagery reflects societal values and tensions:
  - Obsolete US banknotes include imagery that goes beyond traditional figures and includes "symbols of industry, like shipbuilding and trains," pastoral scenes ("a woman milking cows and a child snuggling bunnies"), and images that are "respectful and thoughtful, and others that are degrading and inappropriate from our lens," including depictions of slavery or stereotypical images of indigenous communities.
- Material quality offers economic clues:
  - "The types and quality of materials used offer a glimpse into the economic health of past societies."
- Relevance for the digital era:
  - As the world grows increasingly digital, the collection offers lessons about "values, trust, artistic beauty, and collective identity."

### Access, digitization, and public display
- Research access:
  - The NNC’s vault is accessible to researchers by appointment.
- Digitization:
  - The collection is being gradually digitized.
- Public exhibitions:
  - Selected items are on public display in the museum’s exhibition "The Value of Money" and in "Really BIG Money," an exhibition for children.

*melinda weir is on the staff of Finance & Development.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2024/06/fd-june24.pdf_