Imf-World Bank Annual Meetings
For a small island open economy like Mauritius, indifference is nothing less than symptomatic of a systemic breakdown of our sense of priorities
The annual meetings of the Board of Governors of the World Bank Group and the International Monetary Fund took place in Washington DC from 9th to 15th October 2017 amidst an almost total indifference in Mauritius. There have scarcely been any comments in the media or information from government regarding these events. Here is a one thousand dollar question for our readers: Did a delegation from Mauritius attend the annual World Bank-IMF meetings in Washington last week and, if yes, who were its members?
Our sense is that contrary to what happens every year, most Mauritians including some of the close economic observers would find it difficult to provide an answer to the above questions. Proof if need be that Mauritians continue to think that we are a gift to mankind, no matter what…
One need not always, indeed, even ever agree with the roles of these institutions and their standard prescriptions for remedying the global economic crisis or their usual “one size fits all” remedies for national economies facing all manner of socio-economic difficulties. Critiques of the two “Washington sisters” are now well documented and, following the Great Financial crisis of 2008, these are no longer limited to “leftist” parties and radical intellectuals. Even some of the moderate right thinkers and politicians have, albeit timidly, conceded that the excessively ideological bias and indiscriminate recommendations of these institutions could prove more harmful than helpful under some circumstances.
The point remains though that as much as one can find serious flaws in the practices of the Bretton Woods institutions – as they have been known ever since their setting up at the similarly named conference following the second World War -, it would be sheer folly for any country to ignore their workings and influence in the present globalized and finance dominated economy. For a small island open economy like Mauritius, heavily dependent on the state of the global economy, this sort of indifference is nothing less than symptomatic of a systemic breakdown of our sense of priorities about the really relevant issues which need to be at the top of our agenda in our attempts to ensure a better future for our nation.
The most neutral description of these annual events which we have come across consists of the following: “The Annual meetings of the Board of Governors of the World Bank Group and the International Monetary Fund bring together Central Bankers, Ministers of Finance and development, parliamentarians, private sector executives, representatives of civil society and academics to discuss issues of global concern including the world economic outlook, poverty eradication, economic development and effectiveness. Also featured are seminars, regional briefings, press conferences and many other events focussed on the global economy, international development and the world’s financial system.” This is very heavy stuff and no self-respecting country can feign to ignore the impact of these issues and trends on its own future.
Maintaining a sub-optimal scenario
As we have already suggested, the dominant neo-liberal ideology of free market and deregulation will ultimately prevail. Already the attempts to break the most significant structural bias of the institutions – the fact that the IMF is alternately led by a European and an American while the World Bank remains the precinct of the American administration which for all intents and purposes appoints its President — have failed. And that in spite of the emergence of such economic giants as China and India and the relative decline of Europe over the past decades.
In fact, during last week’s conference, there was an attempt by China to enhance its role in the institutions. In line with the wish of the World Bank to garner more capital in order to expand its global anti-poverty programmes, China proposed to increase its contribution to the institution. This was immediately rejected by the US Treasury Secretary Steven Mnuchin, who claimed that “more capital is not the solution when existing capital is not allocated effectively”. Such obstructionist attitudes towards any attempts at significant or structural reforms of the IMF/World Bank combine do not contribute to an improvement in its reputation and further undermines some of the admittedly weak reformist attempts coming from within the institutions.
As regards the economic forecasts for the coming year, the “pundits” seem to have taken a fairly optimistic view of things. The IMF has bumped up its forecast for global economic growth while simultaneously warning its 189 member nations that “there is no room for complacency.”
As for the central bankers there was no real consensus. The dominant thinking seemed to be that operators should be ready for some tightening of monetary policy as the rate of economic growth picks up. Federal Reserve Chair Janet Yellen, who is probably participating in her last meetings in that position, stated that her “best guess” is prices will accelerate soon, and she was joined in that speculation by European central banker Mario Draghi and Bank of England governor Mark Carney.
As for the Japanese central bank governor Haruhiko Kuroda, he announced that his country will maintain the massive stimulus programme aimed at igniting inflation to a level which would help break through the secular stagnation which still bedevils his country’s economy. For the uninitiated who still remember that once upon a time central banks were tasked with the sole mission of combating inflation, it may be useful to remark here that central bankers wishing and hoping for accelerated inflation is part of the new normal following the Great Financial Crisis of 2008 whose sequel has yet to be remedied.
Although, as noted earlier, the mood was fairly upbeat as the crowd disbanded last Sunday, the notes of warning about a possible let down were also palpable. Former US Treasury Secretary Lawrence Summers summed it up nicely saying that the only thing to fear is “the lack of fear itself.” Not surprisingly, politics has been identified as the likeliest potential spoiler to the rosy scenario described above. From the shenanigans of the US President, regarding his relations with North Korea, and his insistent “America First” mantra which runs counter to the assumptions of freer trade and movement of labour underlying the positive forecasts, to the threats posed by Brexit and the separatist movement in Spain, more than ever political leadership could prove to be the missing ingredient for the announced party.
* Published in print edition on 19 October 2017