International Monetary Fund Managing Director Christine Lagarde called on governments to build a “new multilateralism” that includes cities and companies in an effort to address challenges such as widening income disparity.
While policy makers’ immediate priority is to tackle high debt levels or weak banking systems in the wake of the 2008 financial crisis, they also need to adddress longer-term challenges, Lagarde said in a speech in London yesterday. That means adjusting to a growing and aging population, overcoming global warming and reducing income inequality, she said.
“The kind of 21st-century cooperation I am thinking of will not come easy,” Lagarde said, according to her prepared remarks for the British Broadcasting Corp.’s Dimbleby lecture. “Yet given the currents that will dominate the coming decades, do we really have a choice? A new multilateralism is non-negotiable.”
As competition for global capital intensifies with the Federal Reserve’s paring of monetary stimulus, Lagarde said the world needs a close relationship between monetary institutions, which must be “mindful of the potential impact of their policies on others.”
Central-bank rate increases in Turkey, India and South Africa last week failed to contain a 3 percent selloff last month in emerging-market currencies. Those policy moves marked a reversal of the trend over the past five years, when the Fed’s monetary stimulus boosted investment around the world and allowed central banks in developing countries to cut borrowing costs.
Lagarde, a former French finance minister, also called for “a financial system that serves the productive economy rather than its own purposes,” and said no country can stand alone on climate change and inequality.
“Combating climate change will require the concerted resolve of all stakeholders working together -- governments, cities, corporations, civil society and even private citizens,” she said. “Countries also need to come together to address inequality,” for instance, by refraining from competing to have the lowest corporate taxes.
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