Four challenges: IMF
IMF highlighted four challenges to be addressed by the officials gathering in Washington…
• Sovereign debt. Fiscal sustainability remains a problem for some countries, particularly those that entered the crisis with very high levels of debt. “So we are strongly in favor of medium-term consolidation, but it doesn’t mean that in the short term every country will have to tighten as much as possible. It depends a lot on their own situation and it is very country specific.” Where the recovery remains fragile and private sector demand is weak, support for demand is still needed.
• Jobless recovery. Just reviving growth is not enough. “We need growth with jobs. Growth without jobs doesn’t mean much for the man in the street. So obviously, for us, the crisis will not be over until the unemployment rate decreases significantly.”
• Financial sector reform. While a lot has been done to address improved regulation, particularly through the new Basle III accord, a lot more needs to be done on supervision and regulation of the financial sector, which was at the heart of the global crisis. In addition, Strauss-Kahn said the IMF supported moves to introduce taxation of the sector.
Global cooperation. The world got through the economic crisis through very close cooperation, but now the momentum was decreasing. One example of this is emerging competition between countries to adjust their currencies to gain an advantage. “What we all want is the rebalancing of the global economy, and this rebalancing cannot happen without a natural consequence of it, which is a change in the relative value of currencies.”
Politics + Economics = headache
I have been noticing over the past two years that policy makers in the lime light or politicians using the phrase “growth without jobs is horrible” or ” we cannot face a jobless recovery ARHHH”.
Are these guys missing the point or adhering to misconceptions of growth and recovery formed by the public?
Depending on what sector, companies around the world must experience substantive growth for around 12 to 20 months before they can consider hiring once again. Furthermore, during (and as a result of ) recessionary periods, companies examine their internal workforce and re-prioritize organizational objectives. The restructuring period may lead to massive overhauls (bigger than Wario’s) for the company’s structure and size. For example, GM cut their company in half by killing about 6 brands. People cannot expect them to hire the same amount of workers.
Furthermore, demographics also play a vital role in unemployment rates. In Canada the time it takes for unemployment rates to return to pre-recession levels takes twice as long for young professionals (defined as youth 16-25). Why? That is another post for another day.
For now, let us focus on these four challenges and the realization that time is the best public policy tool in the fight against unemployment rates, not fueling economic misconceptions.