The IMF shatters the goverment’s dreams
I flew to Washington, D.C., on Monday to participate in the 2014 Annual Meetings of the International Monetary Fund and the World Bank Group and spent all day Wednesday at the conference “Challenges of Job-Rich and Inclusive Growth.” At the end of the day, I had a pretty good idea about the main themes of the annual meetings.
The title of the conference is a good reminder of the Fund’s new focus after the global crisis. Economists used to joke that the IMF stood for “it’s mostly fiscal.” The Fund should be congratulated for having come a long way since then, as my graduate school classmate Justin Wolfers told the audience during the third session on inequality.
Yes, French economist Thomas Piketty’s “Capital in the Twenty-First Century” has not lost its influence in D.C. since my April visit, when I could barely get hold of a hard-copy of the sold-out bestseller by reserving it at the Dupont Circle establishment Kramerbooks. However, like Justin, I prefer to tackle inequality along with social mobility a la the Great Gatsby Curve.
A big theme of the annual meetings is mediocrities: The IMF’s managing director, Christine Lagarde, summarized their latest World Economic Outlook, which was released the day before, in her opening speech of the conference by noting that the global economy was facing the prospect of a new mediocre level of growth, accompanied by high unemployment and rising inequality.
Although the IMF is not mostly fiscal anymore, fiscal policy has not been shelved for good: Lagarde suggested redirecting public resources from energy subsidies, which mainly benefit the rich, toward activities more effective at promoting job-rich, inclusive growth. The Fund has also been emphasizing public infrastructure investment in its latest reports – even though I am not sure if they asked for the opinion of anyone from their Turkey desk.
Former Mexican President Ernesto Zedillo set out another theme of the annual meetings, one I’ve been underlining in my columns as well, by noting in the first session that “el juego se acabó” – the game is over. Emerging markets will not be flushed with cheap liquidity anymore. That’s why they have to put their houses in order by undertaking structural reforms.
The four ministers of finance, from Australia, Indonesia, Nigeria and South Africa, who participated in the concluding session of the conference, “Growth and Reform Challenges,” used their own experiences to highlight the importance of prioritizing the reform agenda and identifying the winners and losers for any given reform.
Unfortunately, the Turkish government’s structural reform program, which was revealed as part of its Medium Term Program just as the ministers were giving this valuable advice, includes 25 transformation strategies with 1,250 action plans – with no prioritization whatsoever and wet dreams like “positioning Istanbul as a financial center.”
While Prime Minister Ahmet Davutoğlu will reveal the government’s “transformation plan” soon, I don’t have high hopes. After all, the ruling Justice and Development Party (AKP) has not shown the will to undertake structural reforms during their 12 years in power. Why would they now – especially before the 2015 general elections?