New Economic Landscape, New Multilateralism
IMF News, October 11, 2018
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Bibliographic details
- Authors: Christine Lagarde
- Published: October 11, 2018
Context and framing
- Speech by Christine Lagarde, Managing Director, International Monetary Fund, as prepared for delivery on October 11, 2018.
- Purpose: Address the IMF 2018 Annual Meetings in Bali; present the concept of a “new multilateralism” to respond to a changing global economic landscape.
- Two-dimensional framing of the new economic landscape:
- First dimension: monetary, fiscal, and financial layers.
- Second dimension: inequality, technology, and sustainability.
- Core claim: Sound domestic policies are essential but insufficient; navigating the new landscape requires international cooperation that is “more inclusive, more people-centered, and more results-oriented.”
Macroeconomic challenges and policy implications
- Trade
- Trade cooperation has driven unprecedented growth over 70-plus years but faces a backlash because “too many people have been left out.”
- IMF estimate: escalation of current trade tensions could reduce global GDP by almost one percent over the next two years.
- Policy recommendation: De-escalate disputes and reform the global trade system “to make it even better, fairer, and stronger for all nations and all people.”
- Global imbalances
- Large current account deficits mirror large current account surpluses.
- Policy recommendation: Excess deficit and surplus countries must cooperate to protect economic stability; IMF External Sector Report underscores this point.
- Rising vulnerability to debt
- Statistic: Public and private debt has hit a record $182 trillion—224 percent of global GDP, about 60 percent higher than 2007.
- Risk: Tighter financial conditions could reverse capital flows, especially for emerging markets, with spillovers across borders and real impacts on people.
- Policy recommendation: Complement domestic policies with a global financial safety net; resources could come from regional financing arrangements (example: the Chiang Mai Initiative) and the IMF; ensuring the Fund has needed resources requires international cooperation.
- Cross-cutting IMF roles
- Cooperation runs through the Fund’s work in lending, surveillance, and capacity development.
- Areas of policy advice and support include financial regulatory reform, public debt transparency, capital flow management, and anti-money laundering.
- Argument: In a hyper-connected world, no country can manage these issues alone; cooperation is in the Fund’s DNA.
21st-century challenges: inequality, technology, and sustainability
- Inequality
- IMF research: Less inequality is associated with stronger, more sustainable growth; excessive inequality correlates with marginalization, damaged communities, and eroded trust.
- Policy recommendations: Partnerships among governments, private sector, and civil society to eradicate discrimination against women; design appropriate labor market reforms; strengthen education, training, and social protection systems to include people and prepare them for technological change.
- Technology
- Observation: The digital revolution (biotech, robotics, artificial intelligence) will create new industries and jobs but also disrupt and disenfranchise.
- Fintech opportunity: Potential to reduce poverty by providing financial services to the 1.7 billion people who currently have no banking access (Global Findex Database, 2018).
- Caution: Fintech must be managed carefully to protect financial stability and safety; digital is global and requires multilateral coordination.
- Action: Launch of the Bali Fintech Agenda at the Meetings (with the World Bank and other partners) to guide joint efforts.
- Sustainability and SDGs
- Climate change: Increasingly negative effects require common action.
- SDG financing gap: Additional spending needed by low-income countries in key sectors (health, education, water, infrastructure) is about $520 billion per year by 2030.
- Policy recommendations: Partnerships among countries, private sector, donors, international institutions, and philanthropists; more efficient resource use; strengthen revenue collection (including curbing tax avoidance and evasion); stamp out corruption.
- Framing: Solidarity on inclusion and climate action is both moral and in self-interest because tensions from exclusion and climate change cross borders.
- Principles of the new multilateralism
- Must be more inclusive (open to diverse views and voices).
- Must be more people-oriented (putting human needs first).
- Must be more effective and accountable (delivering results for all).
- The IMF positions itself “at the heart of this new multilateralism.”
Institutional and human elements
- Acknowledgements in the speech:
- Recognition of Indonesian hosts and ASEAN leaders; references to Indonesia’s economic progress and resilience following natural disasters in Lombok and Sulawesi.
- Thanks to IMF Management, Executive Directors, staff, and retiring Economic Counsellor Maury Obstfeld for leadership and commitment to multilateralism.
- Outreach and inclusion
- Example of youth engagement: Winning photos from an IMF Instagram contest among ASEAN youth were shown to highlight anxieties and hopes of the rising generation.
- Message: The new multilateralism is about the future of young people.
Conclusion: Consider the common good
- Closing exhortation: Quote from the Bhagavad-Gita, 3:20—“In all actions, consider the common good.”
- Core appeal: Commit to the common good so that cooperative multilateral work benefits current and future generations.
- Final message: The “offering” of collective work at the Annual Meetings should return blessings that benefit not only this generation but generations to come.
Source: Speech by Christine Lagarde, “New Economic Landscape, New Multilateralism,” IMF, October 11, 2018.