October 08, 2012
Global Financial Leaders Ponder Jobs, Growth and Politics
The International Monetary Fund is warning that global economic growth is slowing at the same time the World Bank says hundreds of millions of new jobs are needed around the world. Top financial and political leaders are gathering in Tokyo to discuss these and other major economic issues.
Many Europeans have been angered by government efforts to slash pensions and salaries, while raising taxes in an effort to balance battered budgets.
Public anger is one of many things limiting what leaders can do to solve economic problems in Europe and elsewhere.
As leaders head for the International Monetary Fund and World Bank meetings, many economists say Europe’s problems are the biggest threat to the global economy.
Making cuts while spurring growth
IMF Managing Director Christine Lagarde said the budget cuts must be made gradually and need to be balanced with spending that's designed to boost growth and jobs.
"There should be clearly a focus on austerity, but also on growth as we believe that the two are not mutually exclusive,” said Lagarde.
A World Bank study says 600 million new jobs are needed by 2020 to accommodate new entrants to the workforce. The study says private enterprise creates most new jobs, but World Bank President Jim Yong Kim said government can help by providing good infrastructure and smart regulation.
“There is a lot that governments can do to create an environment where especially small and medium enterprises can create the kind of good jobs that people need and people want," he said.
Battling complex issues
Top financial officials from around the world have met frequently over the past few years to deal with difficult issues. Some economists blame blunders by financial companies for sparking the economic crisis that threw millions of people out of work.
Many experts say regulation has improved, by for example, requiring banks to keep larger cash reserves.
Daniel Hanson of the American Enterprise Institute in Washington said, however, that Europe’s debt woes slow the process.
“Europe is making a lot of progress in safeguarding their system, but they are doing so in the midst of their largest credit crunch on record,” said Hanson.
One expert said that easing Europe’s troubles will be challenging new territory for the IMF, which has experience helping poor nations.
Tufts University Professor Bhaksar Chakravorti expects only modest progress from the IMF and World Bank gatherings in Tokyo. He spoke on Skype.
"I think it moves the ball along a few tiny inches [centimeters] on a field that is probably several miles [kilometers] long," said Chakravorti.
At a time when the globe faces slowing growth, debt problems in Europe, political stalemates in the United States, and other problems, modest progress may be the best that can be achieved.