To combat the global economy’s slow, uneven recovery, countries need to implement structural economic-governmental reforms, such as legislation to increase competition in product and labor markets, experts said this week at the International Monetary Fund’s 2014 Annual Meetings.
In the IMF’s World Economic Outlook (WEO), released Tuesday, the organization forecasted a weaker global growth rate than expected, predicting a 3.3 percentage growth in 2014—the same rate for 2013. With a potential recession looming over the Eurozone, and gross domestic product declining in Japan and China, emerging markets and advanced economies may face setbacks, the WEO report said.
IMF Managing Director Christine Lagarde addressed the challenges to global growth during a debate with CNN news anchor Richard Quest on Thursday at Lisner Auditorium, saying that the world economy could advance if countries tailor structural reforms to best suit their own nations.
“There will be a different recipe, a different method for each country,” Ms. Lagarde said. “It’s not a one-size-fits-all. It’s really going to be granular, detailed, and the path is going to be country-specific.”
This year marks the second time the George Washington University has hosted the IMF’s largest annual event, which started Tuesday and will run until Oct. 12. The meetings offer a forum for policymakers, economists and other representatives from the World Bank and the IMF’s 188 member countries to discuss the international community’s most pressing issues.
Agustín Carstens, the governor of the Bank of Mexico, joined Ms. Lagarde in the Thursday debate, along with Eurogroup President Jeroen Dijsselbloem and Vice Chair of the U.S. Federal Reserve Stanley Fischer.
Ms. Lagarde has lauded Mexico as the only emerging market to quickly pass reforms in areas of labor markets, financial systems, energy sectors and education, all while boasting broad political support. Mr. Carstens acknowledged that although it may be difficult, governments need to confront the status quo and have an “important moment” to defeat divested interests that might want to stop policy changes.
The call for structural reforms has been particularly forceful in Europe, where critics have pushed countries like Germany and Italy to modify their governance models. At “A Reform Agenda for Europe's Leaders,” a CNN panel held at the Jack Morton Auditorium, Germany’s Minister of Finance Wolfgang Schäuble and Italy’s Minister of Economy and Finance Pier Carlo Padoan explained that reforms are a slow process, given the complexities of their countries’ politics.
But time is critical and the world can’t afford to wait, several panelists argued. IMF First Deputy Managing Director David Lipton said Germany and other nations should consider investing in their own infrastructure to boost growth potential.
Economist and Harvard University Professor Larry Summers put it most bluntly: “What’s happening in Europe is not working.” Mr. Summers, a former Treasury secretary and head of President Obama’s National Economic Council, said stymied economies in the Eurozone should pay attention to the IMF assertion that well-managed infrastructure investments “pay for themselves” in the form of lower debt burdens.
“The central irony of the financial crisis is that while it’s caused by too much borrowing, spending and lending, it’s only resolved with more confidence, more borrowing and more spending,” Mr. Summers said.
A stronger economic system isn’t just dependent on structural reforms. The U.S. has a major part to play, Ms. Lagarde underscored repeatedly throughout the week. At Thursday’s CNN debate, she stressed that the U.S. promised to sign legislation that would implement economic reforms agreed upon at a G-20 forum held in 2010. That agreement is now two years overdue, thanks to political gridlock in Congress.
“I will do belly dancing if that’s what it takes to get the U.S. to ratify,” she quipped.
Following the debate with Ms. Lagarde, Mr. Quest brought a group of students on air with him during a live CNN segment, asking them what economic issues they found most important. Students listed higher education costs, health care and job availability as their top concerns.
Sophomore Nicolette Bazel made her television debut with other Colonials after spending the day helping out at IMF sessions. The organization asked for student volunteers, and Ms. Bazel was one of nearly 200 who signed up to usher audiences and set up events.
For Ms. Bazel, the experience gave her a chance to see how the annual meetings work—and it brought her closer to the IMF’s famed leader.
“I was helping with some last-minute adjustments on the stage and while coming back to the green room, I ran into none other than Madame Lagarde,” she said. “I was definitely star-struck at that moment.”