By Kristalina Georgieva, IMF Managing Director
October 6, 2020
As prepared for delivery
1. Introduction: A World Turned Upside Down
Dear Minouche, thank you for the warm welcome! I am honored to celebrate
with all of you the 125th anniversary of the
London School of Economics. It is a proud moment for the students and
faculty, and for the alumni.
As an alumna of LSE and as Managing Director of the IMF, I know that our
institutions share so many of the same values. I was reminded of that last
year, when I saw a large new sculpture—the globe—on the LSE campus. We are
connected by our global perspective, by caring deeply about the world we
live in and its future.
Mark Wallinger’s sculpture could not symbolize any better what we are
facing today: our world is turned upside down by the pandemic—by the loss of more than a million lives, by the economic impact on
billions of people. In low-income countries, the shocks are so profound
that we face the risk of a “lost generation.”
To confront this crisis, we can take inspiration from a previous generation. William Beveridge, a former LSE
Director, issued his famous report in 1942, which led to the creation of
the UK’s National Health Service. And in 1944, John Maynard Keynes and
Harry Dexter White led the establishment of the Bretton Woods
system—including the IMF and the World Bank.
They forged a better world in the worst possible moment,
in the midst of war. We need the same spirit now for the post-pandemic
world—build one that is more inclusive and more resilient.
That will be the focus of the IMF’s 189 member countries when we meet in
our virtual Annual Meetings next week. It is what I will concentrate on
2. Global Outlook: The Long Ascent
First, let’s look at the economic picture.
Global economic activity took an unprecedented fall in the second quarter
of this year, when about 85 percent of the world economy was in lockdown
for several weeks.
The IMF in June projected a severe global GDP contraction in 2020. The
picture today is less dire. We now estimate that developments in the second
and third quarters were somewhat better than expected, allowing for a small upward revision to our global forecast for 2020. And we
continue to project a partial and uneven recovery in 2021. You will see our updated
forecast next week.
We have reached this point, largely because of extraordinary policy measures that put a floor under the
world economy. Governments have provided around $12 trillion in fiscal support to households and firms.
And unprecedented monetary policy actions have maintained the flow of
credit, helping millions of firms to stay in business.
But some were able to do more than others. For advanced economies, it is whatever it takes. Poorer nations strive for whatever is possible.
This gap in response capacity is one reason why we see differentiated outcomes. Another reason is the effectiveness of measures to contain the pandemic and
restart economic activities. For many advanced economies, including the
United States and the Euro Area, the downturn remains extremely painful,
but it’s less severe than expected. China is experiencing a
faster-than-expected recovery. Others are still hurting badly, and some of
our revisions are on the downside.
Emerging markets and low-income and fragile states
continue to face a precarious situation. They have weaker
health systems. They are highly exposed to the most affected sectors, such
as tourism and commodity exports. And they are highly dependent on external
financing. Abundant liquidity and low interest rates helped many emerging
markets to regain access to borrowing—but not a single country in Sub-Saharan Africa has issued
external debt since March.
So, my key message is this: The global economy is coming back from the depths of the crisis. But this
calamity is far from over. All countries are now facing what I would call “The Long Ascent”—a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.
As we embark on this “ascent,” we are all joined by a single rope—and we are only as strong as the weakest climbers. They will need
help on the way up.
The path ahead is clouded with extraordinary uncertainty.
Faster progress on health measures, such as vaccines and therapies, could
speed up the “ascent”. But it could also get worse, especially if there is
a significant increase in severe outbreaks.
Risks remain high, including from rising bankruptcies and stretched valuations in financial
markets. And many countries have become more vulnerable.
Their debt levels have increased because of their fiscal response to the
crisis and the heavy output and revenue losses. We estimate that global
public debt will reach a record-high of about 100 percent
of GDP in 2020.
There is also now the risk of severe economic scarring
from job losses, bankruptcies, and the disruption of education. Because of
this loss of capacity, we expect global output to remain well below our
pre-pandemic projections over the medium term. For almost all countries,
this will be a setback to the improvement of living standards.
This crisis has also made inequality even worse because of its
disproportionate impact on low-skilled workers, women, and young people.
There are clearly winners and losers—and we risk ending up with a Tale of Two Cities. We need to find a way out.
3. The Path Forward: Confronting the Crisis and Pushing for
So, what is the path forward? We see four immediate priorities:
First, defend people’s health. Spending on treatment, testing, and contact tracing is an imperative.
So too is stronger international cooperation to coordinate vaccine
manufacturing and distribution, especially in the poorest countries.
Only by defeating the virus everywhere can we secure a full
economic recovery anywhere.
Second, avoid premature withdrawal
of policy support. Where the pandemic persists, it is critical to
maintain lifelines across the economy, to firms and workers — such as
tax deferrals, credit guarantees, cash transfers, and wage subsidies.
Equally important is continued monetary accommodation and liquidity
measures to ensure the flow of credit, especially to small and
medium-sized firms—thus supporting jobs and financial stability.
Cut the lifelines too soon, and the Long Ascent becomes a
Third, flexible and forward-leaning fiscal policy will be critical for the recovery to
take hold. This crisis has triggered profound structural
transformations, and governments must play their role in reallocating
capital and labor to support the transition. This will require both stimuli for job creation, especially in green
investment, and cushioning the impact on
workers: from retraining and reskilling, to expanding the scope and
duration of unemployment insurance. Safeguarding social spending will
be critical for a just transition to new
Fourth, deal with debt—especially in low-income countries. They entered this crisis with
already high debt levels, and this burden has only become heavier. If
they are to fight the crisis and maintain vital policy support; if they
are to prevent the reversal of development gains made over decades,
they will need more help—and fast. This means access to more grants,
concessional credit and debt relief, combined with better debt
management and transparency. In some cases, global coordination to
restructure sovereign debt will be necessary, with full participation
of public and private creditors.
In all these areas, our member countries can count on the IMF. We will help them all the way up the mountain. We
will strive to be their ‘sherpa,’ We will help show the way with sound
policy advice. We will provide the training some may need. And above all,
we will be there with financial support and help ease the debt burden for
those who otherwise may not make it.
We have provided financing at unprecedented speed and
scale to 81 countries. We have reached over $280 billion in lending commitments—more than a third of
that approved since March. And we are ready to do more: we still have
substantial resources from our 1 trillion in total lending capacity to put at the service of our members
as they embark on their “ascent.”
Again, this will be a difficult climb. It requires new paths up the mountain. We cannot afford simply to
rebuild the old economy, with its low growth, low productivity, high
inequality, and worsening climate crisis.
That is why we need fundamental reforms to build a more resilient economy—one that is greener, smarter, more
inclusive—more dynamic. This is where we need to direct the massive
investments that will be required for a strong and sustainable recovery.
We know that, in many cases, well-designed green projects
can generate more employment and deliver higher returns,
compared with conventional fiscal stimulus.
We also know that an accelerated digital transformation is
underway, promising higher productivity and new jobs with higher
wages. We can unlock this potential by retooling tax systems and investing
in education and digital infrastructure. Our goal must be for everyone to
have access to the internet and the skills to succeed in the 21 st century economy.
4. Conclusion: Keep Climbing!
All this can be done—because we know that previous generations had the
courage and resolve to climb the mountains they faced. It is now our turn;
this is our mountain.
As one climber put it: “Every mountain top is within reach if you just keep climbing.”
The same goes for the Long Ascent and the polices needed to move
forward. Joined by a single rope, we can overcome the crisis and achieve a
more prosperous and more resilient world for all.
Thank you very much!
IMF Communications Department
Phone: +1 202 623-7100Email: MEDIA@IMF.org
What would delayed election results mean for the economy? – Marketplace
It’s likely we won’t know who won the presidency on Election Day this year, and some people are concerned about the possibility of a contested election. Last week, Fitch Ratings wrote in a report that it will be watching the election for “any departure” from the U.S.’s history of accepting election results and the orderly transition of power. If there’s any departure from this norm, it could affect the country’s AAA credit rating, which influences the interest rate the U.S. pays on its national debt.
All the uncertainty surrounding this presidential election could affect the economy in other ways, too. “Marketplace” host Kai Ryssdal talked with Wendy Edelberg, a senior fellow at the Brookings Institution and director of its Hamilton Project, about what might happen. The following is an edited transcript of their conversation.
Kai Ryssdal: So broad brush, lay it out for me. We have been told that we’re probably not going to know who won the election on election night. What do you think that means writ large for the American economy in the next two months?
Wendy Edelberg: I suspect it means that it will take too long to get the kind of fiscal support that we need to support this really fragile recovery. And that frustrates me because doing it now is too late. Doing it a month from now is much too late.
Ryssdal: So I will stipulate that that is a thing that could or will happen on election night or afterward. What happens if it becomes contested and challenged and acrimonious?
Edelberg: So right now, measures that tell us how uncertain things are for businesses, for investors, for households, those measures are through the roof. And uncertainty is generally really bad for economic activity. It prevents firms from putting investments in place and expanding and putting in hiring decisions. And it prevents households from making decisions about the future. And we’re just going to create one more really significant headwind if November and December, for that matter, is that much more an environment of uncertainty, layered on top of the immense uncertainty we have because of the pandemic.
Ryssdal: I say on this program all the time, and regular listeners know this, the stock market is not the economy. I do wonder though, beyond the real economy measures that you have laid out in that answer, what do you imagine stock markets will do? Just because a lot of people look at that as an indicator.
Edelberg: So you’re absolutely right. The stock market is not the economy and the stock market is giving us all sorts of incorrect signals right now. And it wouldn’t really surprise me if it continued to give us really incorrect signals. As much as uncertainty and a contested election would be really bad for small businesses, for individual households, it may well be good for some of the large firms that are driving the stock market gains. That’s really hard to know. And I’m also guessing that people who hold equities are pretty aware of the issues that you and I just talked about. And so my thought is that that’s mostly baked into the stock market. And so those investors are expecting things to be pretty chaotic for a couple of weeks after the election, and I would expect things to basically move sideways, which is to say the flip side, that if we get a clear outcome, and uncertainty is largely resolved very quickly, yeah, I can imagine that being fabulous for the stock market.
Ryssdal: Huh. Let me point out that if he loses, President Trump will still be president for two and a half months, right, Election Day to the 20th of January. Contested election aside, challenged election aside, random tweets aside, he’s still the president with full executive authority to influence this economy.
Edelberg: So maybe this means that with all of these issues leading up to the election off the table, because that uncertainty is resolved, I don’t know, maybe we can hope, maybe policymakers will then come together and do the right thing. I’ve been asked before, “What would you tell policymakers on January 20th to do to support our economy?” And the first thing I’ll say is get in a time machine and go back six months to support the economy then. So I have grave concerns about policymakers waiting until January to pass the kind of fiscal support that the economy needs right now.
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Algorithms Are Making Economic Inequality Worse – Harvard Business Review
There is a code ceiling that prevents career advancement — irrespective of gender or race — because, in an AI-powered organization, junior employees and freelancers rarely interact with other human co-workers. Instead, they are managed by algorithms. As a result, a global, low-paid, algorithmic workforce is emerging. You will increasingly find a gap between top executives and an outer fringe of transient workers, even within organizations. Whether in retail or financial services, logistics or manufacturing, AI-powered organizations are being run by a small cohort of highly paid employees, supported by sophisticated automation and potentially millions of algorithmically managed, low-paid freelancers at the periphery. Job polarization is only part of the problem. What we should really fear is the algorithmic inequality trap that results from these algorithmic feedback loops.
The risks of algorithmic discrimination and bias have received much attention and scrutiny, and rightly so. Yet there is another more insidious side-effect of our increasingly AI-powered society — the systematic inequality created by the changing nature of work itself. We fear a future where robots take our jobs, but what happens when a significant portion of the workforce ends up in algorithmically managed jobs with little future and few possibilities for advancement?
One of the classic tropes of self-made success is the leader who comes from humble beginnings, working their way up from the mailroom, the cash register, or the factory floor. And while doing that is considerably tougher than Hollywood might suggest, bottom-up mobility was at least possible in traditional organizations. Charlie Bell, former CEO of McDonalds, started as a crew member flipping burgers. Mary Barra, chairman and CEO of General Motors, started on the assembly line. Doug McMillon, CEO of Walmart, started in a distribution center.
By comparison, how many Uber drivers do you think will ever have the chance to attain a managerial position at the company, let alone run the ride-sharing giant? How many future top Amazon executives will start their careers by delivering packages or stacking shelves? The billionaire founder and CEO of Instacart may have personally delivered the company’s first order, but how many others will follow in his footsteps?
Here’s the problem: There’s a “code ceiling” that prevents career advancement — irrespective of gender or race — because, in an AI-powered organization, junior employees and freelancers rarely interact with other human co-workers. Instead, they are managed by algorithms.
In this new era of digitally mediated work, there is typically a hierarchical information flow, in which the company decides the information they choose to share with you. Unlike driving a taxi, where there is open radio communication between drivers and the dispatch operator, and among the drivers themselves, when you work for Uber or Lyft, the content of your interactions is the output of an optimization function designed to maximize efficiency and profit.
To be managed algorithmically is to be subject to constant monitoring and surveillance. If you are one of the millions of food delivery workers in China working for Meituan or Ele.me, an algorithm determines how long it should take you to drop off an order, reducing your pay if you fail to meet your deadline. Similarly, employees in Amazon distribution centers are also carefully tracked by algorithms; they must work at “Amazon pace” — described as “somewhere between walking and jogging.”
When you are a gig economy worker, it is not only your AI bosses that should concern you; your co-workers are often also your competition. For example, Chicago residents who live near Amazon’s distribution points and Whole Foods stores reported the strange appearance of smartphones hanging from trees. The reason? Contract delivery drivers were desperate to trump their rivals for job assignments. They believed that hanging their devices near delivery stations would help them game the work allocation algorithm; a smartphone perched in a tree could be the key to getting a $15 delivery route mere seconds before someone else.
Work has been changing over the last few decades. The labor market has grown increasingly polarized, with middle-skill jobs being eroded relative to entry-level, low-skill work, and high-level employment that requires greater skill levels. The Covid-19 crisis has likely accelerated the process. Since 1990, every U.S. recession has been followed by a jobless recovery. This time, as AI, algorithms, and automation reshape the workforce, we may end up with something worse: a K-shaped recovery — where the prospects of those at the top soar, and everyone else sees their fortunes dive.
The new digital divide is a widening gap between workers with access to higher education, leadership mentoring, and job experience — and those without. In my recent book, The Algorithmic Leader, I explore one particularly dire scenario: a class-based divide between the masses who work for algorithms, a privileged professional class who have the skills and capabilities to design and train algorithmic systems, and a small, ultra-wealthy aristocracy, who own the algorithmic platforms that run the world.
A global, low-paid, algorithmic workforce is already emerging. In Latin America, one of the fastest-growing startups is Rappi, a mix of Uber Eats, Instacart, and TaskRabbit. Customers in cities like Bogotá and Mexico City pay about $1 an order or a flat $7 a month. In return, they can access a vast on-demand network of couriers who deliver food, groceries, and just about anything else you want. Amazon has an informal network of delivery people, called Amazon Flex, ready to drop packages right to your door — and soon even hand them to you in the street, place them in your car trunk, or open the door to your house and store your groceries in your fridge.
In his 1930 lecture Economic Possibilities for Our Grandchildren, John Maynard Keynes predicted that by around 2030, the production problem would be solved, and there would be enough of everything for everyone. The catch, however, is that machines would cause technological unemployment. The scenario that Keynes didn’t fully anticipate was our present case of high technological employment, with an accompanying degree of high inequality.
The workforce is changing; so too is the workplace. You will increasingly find a gap between top executives and an outer fringe of transient workers, even within organizations. Whether in retail or financial services, logistics or manufacturing, AI-powered organizations are run by a small cohort of highly paid employees, supported by sophisticated automation and potentially millions of algorithmically managed, low-paid freelancers at the periphery.
Job polarization is only part of the problem. What we should really fear is the algorithmic inequality trap that results from feedback loops. Once you are a gig economy worker reliant on assignments meted out by your smartphone, not only are there few opportunities for promotion or development, but other algorithms may further compound your situation. Think of it as a digital poorhouse. With their earnings and work assignments held hostage by market fluctuations, the new AI underclass may be penalized by automated systems that determine access to welfare, lending, insurance, or health care, or that set custodial sentences.
Nevertheless, it is dangerous to seek quick fixes for a problem that has yet to fully manifest, especially if it means grafting 20th-century worker protections onto 21st-century business models. Already, governments and regulators supported by populist platforms are focused on attacking global digital giants. They seek to prevent them from avoiding tax liabilities and are working to regulate their freelance workforce’s labor conditions, to apply restrictions on their collection of data, and even to tax their robots. Some of these ideas have merit. Others are premature, or worse, just political theater.
The longer-term solution to algorithmic inequality will not lie in just taxation and regulation, but rather in our ability to provide an adequate education system for the 21st century. Rebooting education will not be easy. Rather than looking for ways to use AI in teaching, the real question is: How do we teach people to harness machine intelligence in their careers? And how do we teach people to be prepared for a lifetime of constant learning and retraining?
Business leaders have a crucial role to play. Not only should they carve out channels of communication, feedback, and advancement for freelancers at the edge of their organizations, they need to get serious about retraining and community engagement. For example, AT&T is retraining half of its workforce, while Cisco, IBM, Caterpillar, McKinsey, and JPMorgan are offering internships to high school students and are working with local schools to upgrade their teaching curriculums. These are all good initiatives, but more will be needed — not just for social cohesion, but also to ensure the diversity and agility of tomorrow’s workforce.
We need a better plan for the future. Without one, the algorithmic inequality trap will be a story told not in statistics and wealth ratios, but in distress signals — smartphones hanging from trees, tent cities for the homeless, and human couriers scanning the skies for the delivery drones that spell their impending end.
Next Saskatchewan government will have to juggle budget, pandemic economy – Global News
The COVID-19 pandemic has led to the largest global economic crisis since the Great Depression.
Economists agree an economic stimulus is the best first move to help businesses rebound as many continue to operate with safety precautions.
“Some of the (historical) lessons we’ve learned is that temporary spending seems to work pretty well and allows you to get your financial house back in order,” University of Regina’s Jason Child’s said.
A recent Scotiabank report found Saskatchewan’s economy is in a relative position of strength despite those precautions.
Last week’s report noted oil production was down 8.6 per cent, but there has been a 33 per cent increase in agricultural crop exports compared to this time last year.
Those exports combined with a bump in the potash and uranium sectors has helped ease some of the concerns.
In August, the province reported its deficit for this year went from $2.4 billion to $2.1 billion.
A Scotiabank senior economist believes one of the ultimate tests in order for the economy to flourish is how well the province handles the virus.
“How businesses respond to it, how households respond to it and ultimately to support growth for the longer run, this is the most important thing to get under control,” Marc Desormeaux said.
Before the campaign, the province committed to spending $7.5 billion in infrastructure over two years, which included a $2 billion stimulus package after pandemic measures kicked in.
The Saskatchewan Party has made several promises to help spur economic recovery including a temporary elimination of the business tax rate, and decreasing power bills by 10 per cent.
Leader Scott Moe also promised a balanced provincial budget by 2024.
The NDP’s Ryan Meili has not committed to a timeline to balance the budget.
The New Democrats have promised to help the economic recovery by introducing a $15 per hour minimum wage and a Saskatchewan first procurement policy to offer public contracts to workers living in the province.
Childs noted while striving for a balanced budget in that time span is a good goal to set, the province shouldn’t be committed to it noting circumstances can change fairly quickly.
He added simultaneously making sure the government’s cheque book is stable and the province’s economy is in a better position will be a task for whoever forms government.
The associate professor said one can suffer at the hands of the other, but both can’t afford to take sharp downward trends.
Childs went on to say the shotgun approach of providing funding to all sectors is a common one and will help temporarily but ensuring long-term growth is generally more stable when it comes from grassroots initiatives.
“If you’re trying to grow an economy, that’s a different story. And again that’s going to require a much defter touch than just trying to keep the lights on,” he said.
Childs said spending during an economic crisis makes sense, but the real direction for the budget and economy will be more clear once Saskatchewan is on the backside of the virus.
In August the province reported its debt could reach $33.6 billion by 2024-2025.
© 2020 Global News, a division of Corus Entertainment Inc.
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