Head of IMF Says Global Economy Risks Return of Great Depression

Source: The Guardian

Kristalina Georgieva compares today with “roaring 1920s” and criticises UK wealth gap. The head of the International Monetary Fund has warned that the global economy risks a return of the Great Depression, driven by inequality and financial sector instability.

Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way. While the inequality gap between countries had closed in the last two decades, it had increased within countries, she said, singling out the UK for particular criticism.

“In the UK, for example, the top 10% now control nearly as much wealth as the bottom 50%. This situation is mirrored across much of the OECD (Organisation for Economic Co-operation and Development), where income and wealth inequality have reached, or are near, record highs.” She added: “In some ways, this troubling trend is reminiscent of the early part of the 20th century – when the twin forces of technology and integration led to the first gilded age, the roaring 20s, and, ultimately, financial disaster.”

She warned that fresh issues such as the climate emergency and increased trade protectionism meant the next 10 years were likely to be characterised by social unrest and financial market volatility. “If I had to identify a theme at the outset of the new decade, it would be increasing uncertainty,” she said. With disputes still raging between the US and Europe, she said “the global trading system is in need of a significant upgrade”...

Read more: https://www.theguardian.com/business/2020/jan/17/head-of-imf-says-global-economy-risks-return-of-great-depression

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Uncertainty impacts businesses as well as individuals she said, especially given the rising inequality within many countries. Also “excessive inequality hinders growth and ... can fuel populism and political upheaval”.

Georgieva cautioned against the excesses that led to the 2008 global financial crisis and said that for many, the crisis has never ended, with one in four young people in Europe at risk of falling into poverty. “There is no substitute for high-quality regulation and supervision,” Georgieva said. “We are safer but not safe enough.”

“The IMF delivered a stark message about the potential for another massive financial disaster that we last experienced during the Great Depression," commented Eric LeCompte, head of Jubilee USA, the debt charity. “With inequality on the rise and concerns of stability in the markets, we need to take this warning seriously.”

- IMF Head Gives 'Stark Message' of Looming Inequality-Fueled Global Financial Disaster. Further Fueling the Potential Threat Are 'Climate-Related Shocks,'
https://www.commondreams.org/news/2020/01/17/imf-head-gives-stark-message-looming-inequality-fueled-global-financial-disaster



- Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva speaks on new research on the financial services sector and its impact on income inequality, in Washington, D.C, on January 17, 2020.