The Director-General of the IMF, Kristalina Georgieva, warns that the global economy risks a return of the Great economic crisis, fueled by social inequalities and the instability of the financial sector. She points out that the next 10 years will be announced with social pipelines, which will determine the volatility of the financial market.
Speaking at the Peterson Institute of International Economics in Washington, Georgieva said a new IMF study comparing the current economy with the 1920s, culminating in the 1929 market crash, reveals that a similar trend is underway. While inequalities between countries have worsened over the past two decades, they have increased within countries, Georgieva has particularly criticized the UK.
“In the UK, for example, the richest 10% now control a wealth equivalent to the cumulative wealth of the poorest 50%. This situation is similar at the level of the Organization for Economic Cooperation and Development (OECD), where the inequalities between incomes and assets have reached or are close to record levels ”.
Georgieva also said that, in some respects, this worrying trend is reminiscent of the first part of the 20th century – when the twin forces of technology and integration led to the first golden age of the 1920s and, ultimately, to the financial disaster. She warned that new issues such as climate emergency and increased trade protectionism mean that the next 10 years will likely be characterized by social downturns and financial market volatility.
With the dispute that still exists between the United States and Europe, “the global trading system needs significant reform,” Georgieva said. Georgieva also said that uncertainties affect not only companies but also people, especially given the increase in inequities within many countries. “Excessive inequities impede development … and can fuel populism and political misunderstandings.”
In a new study presented ahead of next week’s release of new global economic estimates, the IMF highlighted how access to the financial sector in China and India in the 1990s “created the conditions for economic growth in the 2000s,”
“This has contributed to the removal of one billion people out of poverty,” said Georgieva. But she warned against the excesses that caused the 2008 global financial crisis and noted that, for many, the crisis did not end, with one in four people in Europe being in danger of falling into poverty.