As expected, the IMF upgraded its forecast for global growth Tuesday, while simultaneously adopting a cautious cadence in describing the outlook.
“One year into the COVID-19 pandemic, the accumulating human toll continues to raise concerns, even as growing vaccine coverage lifts sentiment,” the Fund said. “High uncertainty surrounds the global economic outlook, primarily related to the path of the pandemic.”
That’s just a paraphrased version of every, single note emanating from Wall Street’s macro teams. The IMF now sees the global economy growing by 6% in 2021, up from 5.5% in the January forecast. The contraction in 2020 was 3.3%.
The figure (above) shows that 2020’s estimated contraction was 1.1% shallower than the Fund estimated in October. That “reflect[s] higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working,” the Fund said. Growth will be 4.4% in 2022, according to the spring update.
Notably, the IMF said that thanks to “unprecedented” fiscal and monetary stimulus, the pandemic recession “is likely to leave smaller scars than the 2008 global financial crisis.”
That’s a projection, but if it turns out to be any semblance of true, it would be remarkable indeed. After all, the financial crisis “merely” represented an existential moment for western capitalism which, in turn, rippled across interconnected markets and an interdependent global economy. That was bad, sure. But the bursting of the US housing bubble and Lehman’s collapse didn’t represent an existential threat to the species, unless by “species” you mean investment bankers and traders operating on a pre-GFC modus operandi.
The IMF did, however, caution that the outlook isn’t as favorable for emerging markets and low-income nations which “are expected to suffer more significant medium-term losses.”
Similarly, the pandemic’s impact has disproportionately fallen on those least able to shoulder the burden, something Jerome Powell has been especially keen to reiterate as part of the Fed’s tweaked mandate which includes fostering labor market inclusivity and a tacit commitment to reducing inequality, even as the central bank’s own tools serve to perpetuate the wealth divide.
“Youth, women, workers with relatively lower educational attainment, and the informally employed have generally been hit hardest. Income inequality is likely to increase significantly because of the pandemic,” the IMF lamented, adding that “close to 95 million more people are estimated to have fallen below the threshold of extreme poverty in 2020 compared with pre-pandemic projections.”
The IMF also cautioned developed market central bankers against communications missteps and forward guidance fumbles which the Fund warned could destabilize emerging markets. Folks like Powell should remember the effects that “divergent policy stances have on capital flows,” the IMF said. (Powell seemed almost quaintly oblivious to that reality early in 2018.)
Last week, the Fund argued for the implementation of more redistributive policies globally in order to “give everyone a fair shot.” On Monday, Janet Yellen made the case for a global corporate minimum tax.
Read more:
IMF Calls For Global Wealth Redistribution To Avert Societal Breakdown
It’s now abundantly clear that policymakers and the proverbial “masters of the universe” are prepared to (finally) address glaring inequality and take steps towards establishing coordinated international norms aimed at putting the brakes on myriad deleterious societal trends.
Capitalism and the concept that the “free market” should be permitted to dictate outcomes, are under serious scrutiny.
To put it colloquially, “life ain’t fair” is on its way out as an acceptable way to think about global affairs, economic and otherwise. Consider the passages below from Gita Gopinath’s “blog” (Gopinath always publishes a companion article when the IMF updates its forecasts):
As exceptional measures such as moratoria on loan payments are withdrawn, firm insolvencies could rise sharply and put one in ten jobs at risk in many countries. To limit long-term damage countries should consider converting previous liquidity support (loans) into equity-like support for viable firms, while developing out-of-court restructuring frameworks to expedite eventual bankruptcies. Resources should also be devoted to helping children catch-up on lost instructional time during the pandemic.
Once the health crisis is over, policy efforts can focus more on building resilient, inclusive, and greener economies, both to bolster the recovery and to raise potential output. The priorities should include green infrastructure investment to help mitigate climate change, digital infrastructure investment to boost productive capacity, and strengthening social assistance to arrest rising inequality.
Those are admirable goals. The problem, though, is that it may already be too late on most fronts. For example, only a draconian international crackdown on massive fortunes could quickly reverse the trend towards inequality.
Over time, better growth outcomes and lower returns on capital could close various wealth gaps, but that could take decades, if not a century.
I always find myself coming back to what seems like the inescapable conclusion that the people and organizations often described in conspiratorial terms as “masters of the universe” actually don’t matter very much compared to the two-dozen (give or take) folks and corporations in whose hands most of the world’s wealth is concentrated. Those are the difference makers.
It’s the Googles of the world that will make the difference in determining the path humanity takes in the 21st century. It’s what Jeff Bezos and Elon Musk decide to pursue that will shape our reality going forward. That goes for everything from space exploration to the pursuit of immortality.
Who is Janet Yellen to Bill Gates? Who is Jamie Dimon to Elon Musk? What is Morgan Stanley to Google? In order: Nobody, nobody and nothing. Even the most powerful autocrats whose domestic authority is unquestioned are beginning to fear their homegrown supermen (e.g., Xi versus Jack Ma).
Only a sea change in the way developed economies think about investment and resource allocation can change that. The US government certainly has the capacity to outspend Google on innovation or, alternatively, partner with tech giants on key initiatives. Google only “prints money” in a figurative sense. Congress prints it literally. But it takes political will.
In any case, the executive summary of the IMF’s latest outlook is below for anyone so inclined. Gopinath’s article is here.
Via The IMF
IMFAprilExecSum
TBF, in its present form, the COVID virus doesn’t represent a threat to mankind either. If you’re going to be truly cold blooded about it, a culling of old people esp. in western countries is probably a positive, from a strict utilitarian pov. As long as your loved ones are spared, of course…
hashtag Thanos was right etc.
It’s not impossible to imagine an environmentalist, perhaps a brilliant scientist, at the end of his/her rope, taking on the mantel of Thanos. Covid, intentionally or not, could be looked at as a test case.
Catastrophic climate change looks set to happen (barring some as yet unforeseen positive/saving side effect of global warming – my hope). HOW catastrophic? Are we talking really bad extreme weather events that wreck havoc with world wide food production? Or are we talking Earth turning into Mars? This is still influenceable.
Where does one draw the line on culling? Surely, it’s reasonable to presume that some oligarchic organizations would include “surplus labor” in the same camp as old people in Western nations. Going down such a path would not leave us humans in a very good place.
In a purely Machiavellian world, sure, culling by a ruthless autocrat can occur (and, historically, has occurred, such as the 20th century). However, in retrospect, it’s obvious that those periods were among the darkest that a human could imagine living through (because we have stories from some who did live through it).
Purposefully culling would be a comic book outcome best left to the realm of science fiction.
Guess you aren’t old enough for culling yet. Try that opinion on your sainted granny and her friends.
No but as Runamok as suggested, if you started culling surplus labor, there were times in my life where I would have met the criteria for elimination.
And, as for my granny etc., can I volunteer my mother-in-law? 😉
Look, I obviously wasn’t being serious – except in pushing back on the idea that COVID is a species level threat. It’s a nasty virus, definitely more deadly than the flu but it ain’t the Black Death either. Or an asteroid the size of South America rushing towards Earth. We would be fine, even if we had to achieve herd immunity by everyone catching the virus.
I don’t think there is any scenario where you can contain the damage to “dead old people”. It’s too novel, spreads to effectively and has too varied a symptom range. Anything that straight up robbed people of hope would require draconian martial law or invite mass panic, neither of which allow for normal economic activity to continue. I mean we could barely get people to give up going to the gym without a coup.
I dunno. I don’t remember the Spanish flu provoking mass panics but then again the newspapers were censored back then. I don’t think people would really panic – the red states didn’t, regardless of the self inflicted death toll.
The idea that the virus could mutate into something more dangerous is fair enough. That’s genuinely scary.