Economy

New IMF head should look to future, not past

By John Ross (chinadaily.com.cn)
Updated: 2011-06-03 11:34

The main direction of lobbying for the IMF's new managing director is unfortunately showing the weak side of that organization, not its strong one.

Serious economic commentary already knows the greatest challenges of the next period. It is only necessary to open a business paper to review them. In the next decade, the world economy will pass through the greatest changes in almost a century.

Within a decade, China will overtake the US as the world's largest economy. In the same time frame, Brazil, in parity purchasing power terms, will become larger than any EU economy, with the possible exception of Germany. India will overtake Japan to become the world's third-largest economy.

Related readings:  Who should lead the IMF?  IMF still needs to make changes to its structure  Transparency urged in IMF chief selection  China wants 'democratic' choice for IMF

The world is deriving huge benefits from this growth in developing economies. In China, 630 million people have been taken out of internationally defined poverty in three decades. India has the potential to achieve the same. In the last decade, Africa has enjoyed significantly accelerated economic growth after a period of relative stagnation.

Rapid economic expansion in China, India, Brazil and other developing countries is statistically the largest source of world growth. The acceleration of international economic expansion that results can create GDP increases and job growth in developed countries.

But rather than taking advantage of these openings, some shortsighted circles in developed countries are treating them as a threat. Instead of judging the situation from the key point of view of how to increase the absolute standard of living of their populations, they see it from the angle of "maintaining ranking in the world" – which involves attempting to prevent others reaching the level of prosperity they have already achieved. Instead of seeing the situation of the world economy as a win-win one, they see it as a zero-sum game.

Professor Danny Quah, of the London School of Economics, in an article in The Global Herald, summarizing his research on the shifting center of gravity of the world economy, characterized such thinking very well: "As the East continues to rise in economic strength, debate in the West grows increasingly alarmist. Invariably, the focus is how to respond; invariably, the focus is what is best for the West. But shouldn't the global community be asking instead, what is good for the world?...

"In the alarmist scenario, the West is overtaken in the next 10 years: So, how much... disruption in the East's development trajectory is justified for the West to remain Best?... The shifting global economy has improved the well-being of humanity for the last 30 years: to overturn or even slow these changes now for short-term domestic gain can reveal only a tragic failure of global political vision."