Ed Milliband’s call for global action to kickstart economy backed up by IMF

Ed Miliband’s call for an emergency G20 summit in September is backed up by an important year-long project undertaken by the IMF, writes Cormac Hollingsworth.

Today Ed Milliband called (£) for an emergency meeting of the G20 in September, to restart the global recovery from a co-ordinated collapse in demand around the world. His call is backed up by an important year-long project undertaken by the IMF to outline an upside and downside for the world economy over the five years.

Presented at the Toronto G20 as the Mutual Assessment Process (MAP) (pdf), the IMF collected data from:

• The OECD on structural reforms;

• The ILO on labour market policies;

• The WTO on trade policies;

• The UNCTAD; and

• The World Bank on progress in promoting development and poverty reduction.

The IMF say (p. 2, pdf) of the MAP:

“[Its] well-designed, collaborative policy actions across the G-20 would produce better outcomes for all, including significant strides in global demand rebalancing.”

Significantly, the IMF concluded (p. 2, pdf) that:

“Driven by strong and credible consolidation, public finances would be returned onto a sustainable trajectory in G-20 advanced economies.”

The downside scenario of a lack of coordination is also clear: global output would be lower by 3% in 5 years’ time – $2.25 trillion lower – 23 million jobs worldwide would be lost and 60 million people would fall into poverty.

The financial market panic of the last month reflects this downside scenario.

Co-ordinated G20 activism would provide a significant upside: global GDP up 2.5% – $1.5 trillion higher in 5 years – eight million more jobs created in advanced economies, 21 million in emerging Asia and the rest of the world, and 33 million people lifted out of poverty.

But there is a darker warning (p. 3, pdf) within the IMF report that makes his call even more urgent:

Reactive policies in the downside scenario are shown to be less effective.”

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