Authorization

Low wages are causing public to lose faith in governments, IMF warns

People are losing faith in the ability of their governments to set economies on a sustainable path and to spread the benefits of wealth, according to a new report from the International Monetary Fund.
Maurice Obstfeld, research chief at the world's lender of last resort, said that long-term prospects for the global economy are “sobering” as escalating tensions over trade “present a growing risk” to prosperity.
It was not “paradoxical” that major economies were “flirting with trade war” while economies were expanding because many households had seen little or no benefit from growth.
"Public skepticism about policymakers’ ability to generate robust and inclusive growth has spread," Mr Obstfeld said.
While the world economy is set to expand by 3.9pc this year and next, this will trend downwards from 2020 amid increasing threats to growth, the latest publication of the World Economic Outlook revealed.
Despite the recent global economic upswing, public optimism about trade had been “eroded” by “long-standing trends of job and wage polarization, coupled with persistent sub-par growth in median wages”, Mr Obstfeld said.
Low wages are causing public to lose faith in governments, IMF warns

Maurice Obstfeld said that long-term prospects for the global economy are “sobering” 

Credit:
STEPHEN JAFFE/AFP
This declining trust in economic leadership could drive political developments that “destabilize” the future of prudent policymaking. Governments have to address the profound insecurity workers feel in the face of the rise of technology, Mr Obstfeld added.
The report follows remarks by the head of the Bank of England, Mark Carney, who said that new technology risked a return to 19th century wage stagnation and Marxism.
IMF Global GDP protectionism
“Marx and Engels may again become relevant” if technology destroys jobs, Mr Carney warned.
Another major concern for future growth in advanced economies is the impact of an aging population. A “slowdown in labour force growth” from this effect would only be partly offset by “some recovery in the growth of total factor productivity”, the report said.

Trump tax cuts


US President Donald Trump’s economic policy was directly criticized by the IMF. It warned that, following the recent tax cuts that have stimulated the economy, there would a “sharper” return to lower growth rates in the US compared to other advanced economies. These cuts came “at a time when the current account deficit is already larger than justified”.
In the short term, lower taxes will boost the US economy, but the move will “reduce growth momentum starting in 2020”.
A return of inflation in the US, partly as a result of its fiscal policy, could have a spillover effect on other economies. It could force a sudden tightening of financial conditions as interest rates rise, and “expose vulnerabilities that have accumulated” as a result of quantitative easing, the IMF warned.
There was a slight upgrade for growth in the UK, however. In 2018, the IMF forecast GDP growth of 1.6pc, a 0.1 percentage point increase from its previous prediction of 1.5pc. Its prediction for 2019 remained at 1.5pc, due to Brexit-related economic uncertainty.
In a signal to policymakers at the Bank of England who set interest rates, the IMF also warned that gradual monetary tightening was needed to keep inflation in check at a time of extremely low unemployment.
See also:
Leave a comment
News
  • Latest
  • Read
  • Commented
Calendar Content
«    Июль 2018    »
ПнВтСрЧтПтСбВс
 1
2345678
9101112131415
16171819202122
23242526272829
3031