During the presentation of world economy outlook report in the framework of the Davos Forum, the president of the International Monetary Fund (IMF), Kristalina Georgieva, quoted Russian teacher Leon Tolstoy in Anna Karenina to ensure that “all the variety, all the charm and all the beauty is made of lights and shadows.” Georgieva was referring to the chiaroscuros facing the global economy in the coming months but those words could well be applied to the policies of the presiding body, severely criticized for years by its defense of austerity and recipes for cutting public spending.
Now that the times of the international financial crisis are far in time and that in recent months have been unleashed numerous social protests in very diverse points of the planet, the agency advocates an increase in social spending as a way to limit its impact on the economy and increase inclusiveness and social cohesion. “It is important to recognize that social spending is well oriented, that the most vulnerable should be protected and that governments should ensure that growth and recovery are shared by all,” as the agency’s chief economist, Gita Gopinath, admitted. Monday in Davos in what seems like a review of the postulates defended in the last decade by the agency.
“In all economies, a key imperative – and increasingly relevant in a period of growing discontent – is to expand inclusiveness, and ensure that social protection networks are in effect protecting the most vulnerable and that government structures reinforce social cohesion, “underlines the Fund in its report among what should be the priorities of economic policy in the current context.
The times of the men in black and the austerity recipes that the agency promoted with an iron hand during the financial crisis, despite the strong deterioration suffered by all social indicators in countries such as Greece, Portugal or Spain. In fact, the Fund now admits that “the sharpening of social unrest in many countries – due in some cases to the deterioration of confidence in traditional institutions and the lack of representation in government structures – could upset the activity [económica], complicate the reform initiatives and make a dent in the attitude, which would reduce growth below what was projected. “
Although the agency reiterates that “countries with high levels of debt should generally carry out consolidations in order to be prepared for the next slowdown and the expense in benefits that is coming” also this time introduces nuances and allows exceptions in case that “private demand is very weak.” He also argues that “the authorities will be in a position to counteract the next slowdown if they prepare a contingency response in advance. The strategy should give the investment a leading role in mitigating climate change, as well as in areas that underpin potential growth and guarantee a wide distribution of benefits, such as education, health, workforce training and infrastructure. ” In short, the big budget items.
“The beginning of this decade brings inevitable memories of the twenties of the twentieth century: high inequality, rapid technological development and great returns in the financial field,” Georgieva recalled Monday. “So that the analogy stays there and doesn’t go any further, acting together and in a coordinated way is absolutely decisive.” “Be ready to act if growth slows down again,” Georgieva has warned, calling for a coordinated tax reform at an international level, which is undoubtedly going to be heard a lot these days in Davos.