Even as the World Bank and International Monetary Fund annual Spring Meetings kicked into top gear, IMF Managing Director Dominique Strauss-Kahn made a strong case for reducing global inequality if economic growth was to be sustained.
Speaking earlier this week at the Brookings Institution, Mr. Kahn said, “Because growth beset by social tensions is not conducive to economic and financial stability, the IMF cannot be indifferent to distribution issues. And when I look around today, I am concerned in this regard.”
Mr. Kahn argued that because unemployment was at “record levels,” the global economic recovery under way was “not creating jobs and is not being shared broadly,” as a result of which many people across nations faced a social crisis that was every bit as serious as the financial crisis.
Arguing that the youth were being hit particularly hard by the crisis, Mr. Kahn warned that “what should have been a brief spell in unemployment is turning into a life sentence, possibly for a whole lost generation.”
The ongoing meetings of the Bretton Woods institutions also coincided with the release of several key policy reports such as the Global Financial Stability Report, 2011 , which argued that despite the transfer of risks from the private to the public sector during the crisis, confidence in the banking systems of many advanced economies had not been restored and “continues to interact adversely with the sovereign risks in the euro area. Further in the United States, a “lacklustre” housing market, legacy mortgage problems, and a backlog of foreclosures continued to put pressure on the banking system, limiting credit creation and a return to a fully functioning, mortgage market, the GFSR 2011 argued.
Yet all the cautionary notes on the economic recovery notwithstanding, there were a few bright spots reported by the World Bank, which said in its Global Monitoring Report 2011: Improving the Odds of Achieving the MDGs that two-thirds of developing countries were on track or close to meeting key targets for tackling extreme poverty and hunger.
Describing the picture of countries' performance with regard to meeting the Millennium Development Goals as “diverse and often hopeful,” the Bank reported that among developing countries that were falling short on the MDGs, half were close to becoming on-track.
However even the World Bank warned that soaring food prices were affecting vulnerable sections of the world's population, particularly in developing countries.
At a press conference during the Spring Meetings he said, already, 44 million people had fallen into poverty since June last year and, “If the Food Price Index rises by just another 10 per cent we estimate that another 10 million people will fall into extreme poverty where people live on less than $1.25 a day... The world can do something about this.”
