"Innovation, Technology and the 21
IMF News, February 25, 2014
Source details
- Canonical URL
- "Innovation, Technology and the 21
Other formats
Bibliographic details
- Authors: Christine Lagarde Managing Director
- Published: February 25, 2014
Global economic situation and policy context
- Global economic growth projected at "3¾ percent" this year, rising to "4 percent" next year.
- Emerging markets and developing economies accounted for "three-quarters of global economic growth in recent years" but are currently weakening as cycles turn and growth slows.
- Crisis legacy: "had the crisis not occurred, there might have been 62 million more jobs in the world today, according to the International Labor Organization."
- Current labor market scale: "over 200 million people looking for work across the globe"; "75 million of these are young people."
- G20 commitments:
- Complete core financial reforms set out in response to the crisis by "the end of 2014" to make the financial sector safer.
- Improve clear and consistent communication of policy actions and cooperation on monitoring spillovers.
- Country-specific and collective reform efforts that, "if fully implemented, could raise the level of GDP by an extra 2 percent over the next 5 years."
Technology and the economy — trends, productivity, and jobs
- Technological era defined by a "hyperconnected world" and the rise of "genuine machine intelligence" — using machines "for brains" and connecting those "brains."
- Observable innovations cited: smartphones more powerful than previous supercomputers; self-driving cars; 3-D printing of complex parts; advanced robots.
- Productivity puzzle:
- Advanced machine technology effects are "not showing up in productivity statistics—at least not yet."
- Alternative views noted: productivity gains may be "devilishly hard to measure" or may appear "in time."
- Employment risks:
- Historical concern of "technological unemployment" when labor is economized faster than new uses are found.
- Broad risk that rapid change can displace even seasoned professionals.
- Policy imperative: "jobs must be a preeminent priority in the years ahead."
Technology and rising inequality — evidence and drivers
- Global inequality indicators cited from Oxfam and IMF-related findings:
- "Almost half the world’s wealth is owned by one percent of the population."
- "The bottom half of the world’s population owns the same as the richest 85 people in the world."
- "Since 1980, the richest 1 percent increased their share of income in 24 out of 26 countries for which we have data."
- United States specifics:
- "The share of income taken home by the top 1 percent more than doubled since the 1980s, returning to where it was on the eve of the Great Depression."
- "Since 2009, the richest 1 percent captured 95 percent of all income gains, while the bottom 90 percent got poorer."
- Labor’s share and skills:
- "Labor’s share of income has fallen over the past two decades in 26 out of 30 advanced economies—even though labor productivity has risen."
- "The unemployment rate for people without a high school diploma is three times greater than for those with a bachelor’s degree or higher."
- "Over the past two decades, only those with college degrees have seen rising real wages."
- Consequences and policy levers:
- Skewed income distribution "harms the pace and sustainability of growth over the longer term."
- IMF work indicates carefully designed tax and spending policies can reduce inequality via improved access to health and education, targeted social programs, and more progressive taxation.
- Political economy caveat: "Policies aimed at countering inequality are hard to design" and "throw up winners and losers."
Education and the "new multilateralism" — solutions and institutional responses
- Education as the "bridge" to a desirable future:
- Need to change "what people learn, how people learn, when people learn, and even why people learn."
- Emphasis on skills where humans outperform machines: "cognitive skills, interpersonal skills, fine motor skills, or sophisticated coding skills," plus creativity, caring, craftsmanship, and lifelong learning.
- Call for stronger public–private collaboration and for institutes of education to align strategically with changing technology and labor markets.
- The "new multilateralism":
- Defined as a global approach where "all stakeholders take joint responsibility for the global common good" and where institutions adapt to a "more interconnected and networked" world.
- IMF characterized as "an economic club of 188 member countries" that exemplifies multilateral cooperation in helping members in time of need.
- The new multilateralism should incorporate diverse actors: "cities and multinational corporations" and "civil society organizations" empowered by technology.
- Institutional imperative: bring existing multilateral institutions "fully up to date, and made fully representative of the changing dynamics of the global economy—including the shift toward dynamic emerging markets."
Key policy recommendations and priorities
- Maintain accommodative monetary policy in many advanced economies where appropriate.
- Countries should "continue to bring their houses in order" by adopting credible policy frameworks and implementing structural reforms.
- Improve communication among policymakers to manage spillovers and market volatility.
- Prioritize job creation and policies that ensure growth is inclusive—assessing whether "the small boats rise with the big boats."
- Reform education systems to prioritize uniquely human skills and lifelong learning; encourage public–private partnerships and adaptive curricula.
- Modernize multilateral institutions and expand cooperation across a dense web of networks and coalitions to address global, trans-border challenges.
Concluding perspective
- Technological change is not destiny: "technology is not destiny, we shape our destiny."
- The central test posed: can society shape technology to produce "solid, sustainable, and balanced" growth rather than "fragile, erratic, and unbalanced" outcomes?
- Final civic appeal to Stanford and similar institutions to help shape a future that enhances human creativity, innovation, and shared opportunity.
Speech by Christine Lagarde, Managing Director, International Monetary Fund; Stanford University, February 25, 2014.