International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn on Tuesday welcomed the rise of “regional organisations” such as the Chiang Mai Initiative in East Asia. These organisations could function under “the overarching role of the IMF,” he proposed.
Answering questions after delivering a lecture under the auspices of the Monetary Authority of Singapore, Mr. Strauss-Kahn called for efforts, at another level, to address global unemployment besides the income inequalities within and across countries.
The idea of an Asian Monetary Fund, when floated over a decade ago, was at first opposed out of concerns that such a new regional organisation “would diminish the power of the IMF.” However, Mr. Strauss-Kahn said: “My position is exactly the opposite. I welcome the Chiang Mai Initiative [a currency pool among China, Japan, South Korea and Southeast Asian countries]. I hope they will go on as fast as possible. We need to have regional organisations like this [one]. As we [at the IMF] work with the European Union, I am happy to work with Chiang Mai Initiative, even though they are totally different institutions. But, it is the same type of spirit: regional solidarity is welcome.”
Global recovery
Focussing, in his lecture, on the current global economic recovery, which “is unbalanced across countries,” he said: “While growth remains below potential in the advanced economies, the emerging and developing economies are growing much faster. And, some may soon be overheating.”
Cautioning that “the recovery is unbalanced within countries” as well, he emphasised that “global unemployment remains at record highs, with the widening income inequality adding to social strains.” Over the next decade, he estimated that 400 million young people would join the labour force. This would pose “a daunting employment challenge.” Indeed, “we face the prospect of a ‘lost generation' of young people, destined to suffer their whole lives from worse employment and social conditions.” The creation of jobs must, therefore, be a top priority not only in the advanced economies but also in many developing countries.
On the positive side, “the leaders of China and India have put tackling income and wealth disparities high on their policy agendas. And, even in a wealthy nation like Singapore, Prime Minister Lee Hsien Loong has noted that the widening income gap is an issue of national concern.”
The negative possibility was of “rising protectionism … as tensions between countries increase.” And, “as tensions within countries increase, we could see rising social and political instability within nations, even war.” To meet the challenges, Mr. Strauss-Kahn suggested a greater “momentum of global cooperation.”
