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IMF and World Bank leaders lack imagination

The IMF and World Bank are meeting in Tokyo but there appears little chance of a bright idea arising that will revive an ailing global economy

PUBLISHED : Wednesday, 10 October, 2012, 12:00am
UPDATED : Wednesday, 10 October, 2012, 3:39am

Memo to International Monetary Fund ministers: is your journey to Japan really necessary?

What kind of crazy cloud-cuckoo land do politicians live in that several hundred finance ministers, central bank governors and thousands of hangers-on are wasting their time and taxpayers' money on the trek to Tokyo for the annual financial summit which began yesterday, when they lack the imagination, the energy and the popular political legitimacy to offer solutions to undoubtedly grave global crises?

The world's top three national economies, the United States, China and Japan, are facing elections or important changes of leadership while the European Union, which counts as the biggest economy and trading power in the world if you can believe in its existence as an entity, lurches from crisis to crisis.

If the world's financial leaders had any sense they would have convened the IMF/World Bank annual meetings and immediately adjourned them until next year when they might have more relevance, with fresh leaders able to tackle the horrendous economic and social problems confronting the world.

Wherever you look, growth is slowing, unemployment is rising, glaring gaps between rich and poor are straining social fabric, and debts and deficits threaten the US and much of the developed world.

Olivier Blanchard, the chief economist of the IMF, put matters into grim perspective when he warned that the euro-zone crisis, debt problems in the US and Japan and China's slowdown meant that it would be at least 2018 before the world economy could manage to get back into good shape.

"It's not yet a lost decade," declared Blanchard, "but it will surely take at least a decade for the world economy to get back to decent shape."

Many leaders have reacted to their problems with a mixture of palliatives and temporary measures, which have not yet grasped the full extent of the problems, let along started to tackle them.

The Organisation for Economic Co-operation and Development's reliable composite Leading Indicators, shows a flat global economy. Europe is in "slow decline cohesively". Greatly heralded new policies of the European Central Bank and of the US Federal Reserve are hardly game changers.

A new element threatening the global economy is that China's massive current account surplus might be vanishing.

The continuing vicious spat between the world's second and third biggest economies over tiny uninhabited islands in the seas between China and Japan also shows the depressing lack of political wisdom, let alone courage, in tackling troubling issues.

China's leading state-owned banks have already said they would stay away from the Tokyo IMF meeting, although the finance minister was expected to attend. However, that is without nationalist Tokyo governor Shintaro Ishihara's attempt to stoke the fires with plans to build permanent structures on the Diaoyus to demonstrate Japan's control of them.

In Japan, one has to ask, who is the finance minister? Yes, his name is Koriki Jojima, the sixth minister in three years, but he has no financial track record, no demonstrated ability to offer leadership or play host to a global meeting, let alone the imagination to offer fresh ideas for a global economy in crisis.

But then Japan has its own crisis, with the yen too strong for manufacturers to make a profit. But the longer problems in the US and Europe linger, the more the yen is a "safe haven" currency, even though Japanese growth is faltering, government debts are growing and the population is declining and ageing.

Never mind, prime minister Yoshihiko Noda and Jojima may not have long left in office. The problem then will be the prospect of a more nationalist government bent on restoring the country's former greatness under an embattled economy, complicated arithmetic indeed.

Japan is not alone in its failure to display economic leadership or even wisdom. The US dances along the "fiscal cliff" blithely unaware of how the ground is crumbling underneath it.

The world should also be trembling if leaders in the White House and Congress cannot get their act together and actually do fall off the cliff edge, which would send the US into recession and exacerbate global problems. The US has nothing to bring to the Tokyo party.

It is hard to find any economic or finance minister who has any inkling of how a global economic solution might work. From China to India and right across Europe, governments are finding it hard enough to devise solutions for their own immediate economic and financial crises, let alone think of the world or of the day after tomorrow.

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