Protectionism may rise again
By Kevin Lim and Saeed Azhar |
February 2, 2011, Wednesday
|
Print Edition
Print Edition
THE world economy is beset by problems such as high unemployment and rising prices which could fuel trade protectionism and even lead to war within nations, the head of the International Monetary Fund warned yesterday.
Rising food and fuel prices in recent months have already hit poorer countries and are one of the factors behind massive anti-government protests in Egypt and in Tunisia.
"As tensions between countries increase, we could see rising protectionism - of trade and of finance. And as tensions within countries increase, we could see rising social and political instability within nations - even war," Dominique Strauss-Kahn said in a speech in Singapore.
Strauss-Kahn noted two "dangerous" imbalances that he said could sow the seeds of the next crisis.
The first was the unbalanced recovery across countries, as emerging nations grow much faster than developed economies and possibly overheat. The second was the social strains within countries with high unemployment and widening income gaps.
Over the next decade, 400 million young people would join the global labor force, posing a daunting challenge for governments, he added.
"We face the prospect of a 'lost generation' of young people, destined to suffer their whole lives from worse unemployment and social conditions. Creating jobs must be a top priority not only in the advanced economies, but also in many poorer countries."
Unemployment stands at 9.4 percent in the United States while European countries are struggling to create jobs.
Despite high joblessness in the wake of the 2008 global credit crisis, trade barriers have not reached levels feared by many analysts.
"The pre-crisis pattern of global imbalances is re-emerging," he said. "Growth in economies with large external deficits, like the US, is still being driven by domestic demand. And growth in economies with large external surpluses, like China and Germany, is still being powered by exports."
Chinese policy makers were moving in the right direction by taking steps to bolster domestic demand, he noted.
Strauss-Kahn said the IMF saw subdued growth of 2.5 percent for advanced economies this year as high unemployment and household debt cut domestic demand. Emerging markets would grow at a faster pace of 6.5 percent, with Asia, excluding Japan, rising by 8.5 percent.
He said the "global growth gap" was straining recovery in other ways, with energy prices rising swiftly.
Rising food and fuel prices in recent months have already hit poorer countries and are one of the factors behind massive anti-government protests in Egypt and in Tunisia.
"As tensions between countries increase, we could see rising protectionism - of trade and of finance. And as tensions within countries increase, we could see rising social and political instability within nations - even war," Dominique Strauss-Kahn said in a speech in Singapore.
Strauss-Kahn noted two "dangerous" imbalances that he said could sow the seeds of the next crisis.
The first was the unbalanced recovery across countries, as emerging nations grow much faster than developed economies and possibly overheat. The second was the social strains within countries with high unemployment and widening income gaps.
Over the next decade, 400 million young people would join the global labor force, posing a daunting challenge for governments, he added.
"We face the prospect of a 'lost generation' of young people, destined to suffer their whole lives from worse unemployment and social conditions. Creating jobs must be a top priority not only in the advanced economies, but also in many poorer countries."
Unemployment stands at 9.4 percent in the United States while European countries are struggling to create jobs.
Despite high joblessness in the wake of the 2008 global credit crisis, trade barriers have not reached levels feared by many analysts.
"The pre-crisis pattern of global imbalances is re-emerging," he said. "Growth in economies with large external deficits, like the US, is still being driven by domestic demand. And growth in economies with large external surpluses, like China and Germany, is still being powered by exports."
Chinese policy makers were moving in the right direction by taking steps to bolster domestic demand, he noted.
Strauss-Kahn said the IMF saw subdued growth of 2.5 percent for advanced economies this year as high unemployment and household debt cut domestic demand. Emerging markets would grow at a faster pace of 6.5 percent, with Asia, excluding Japan, rising by 8.5 percent.
He said the "global growth gap" was straining recovery in other ways, with energy prices rising swiftly.
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