Government policies can help people adapt to big global changes
Economics Shape People's Lives.
People all over the world are facing massive challenges and changes: the global pandemic, the effects of technology on work and wages, and rising inequality, to name a few. Governments will need policies to address these issues and support people so they can thrive and adapt to these developments.
The IMF’s work recognizes that policy design affects people. Social spending can help economic reforms succeed by protecting the most vulnerable and addressing inequalities of opportunity and income. Such spending is also a key instrument to support inclusive growth through the 2030 Sustainable Development Goals.
As inequality within countries grows and is exacerbated by the pandemic, entire communities and regions are being left behind. IMF research found that technology and the automation of jobs, rather than trade, are the main drivers of these disparities. Social spending on education to help workers gain new skills, or unemployment benefits to support them while they look for a new job, are necessary parts of the solution.
as inequality within countries grows and is exacerbated by the pandemic, entire communities and regions are being left behind.
The IMF developed a strategy based on best practices for more effective engagement with countries on social spending issues. IMF surveillance and lending operations have increasingly emphasized inclusive growth and reducing inequality, including through the use of social spending “floors” as targets in IMF-supported programs. The Fund worked directly with country officials and gave technical assistance to help them make room in the budget for social spending. The IMF also provided training courses to tackle issues related to inclusive growth.
The Fund has seen that the proper sequencing of reforms in IMF-supported programs can also help in their success, and conditionality should be informed by a country’s political, social, and economic objectives.
The fabric of any community is knitted together through shared values and experiences, and social spending helps bind that fabric together so that big changes are less likely to pull it apart.