The IMF should use the important findings it made public this week and support a jobs- and income-led growth strategy, not let a few countries or its partners in the European ‘troika’ dictate a continuation of austerity policies.”
Before the 12-14 October meetings opened in Tokyo, the IMF’s chief economist revealed that the Fund had seriously underestimated the impact of budget-cutting austerity measures on national economies, apparently due to using an incorrect “multiplier” in their economic models. However the final communiqué of the International Monetary and Financial Committee (IMFC) asserted that only emerging-market economies, not industrialized countries, should “use policy flexibility [to] support growth”, even though ten European economies are expected to be in recession in 2012.
“It is incomprehensible for the IMFC to tell Europe to pursue structural adjustment and fiscal austerity, even though it is in recession, while only countries that are already enjoying growth are encouraged to support pro-growth policies. It seems evident that this totally incoherent approach came from some industrialized-country governments that have obviously not learned the lessons of the IMF’s research revisions,” said Burrow.
Burrow also praised the G24 group of emerging and developing countries at the international financial institutions for drawing appropriate conclusions from the World Bank’s World Development Report (WDR) 2013 on the theme of employment. The G24 stated in a communiqué issued at the Tokyo meetings: “We note the finding of the World Bank’s recent World Development Report that a focus on jobs is the most effective means to reduce poverty, empower people, and promote social cohesion.”
Burrow stated: “The World Bank and IMF should re-examine all of their policies through the ‘jobs lens’ as the WDR proposes. We also agree with the G24 that it is unacceptable that governments have missed the deadline for the 2010 quota reform by not ratifying in sufficient number a modest shift of some votes at the IMF to emerging economies. The G24 also made important suggestions, which we share, about the need for the IFIs to do more to combat commodity price volatility, especially in light of the recent food price hike which will drive millions more people in developing countries into extreme poverty.”