For the first time, the heads of the world’s major multilateral and regional institutions are coming together to issue a personal “Call to Action” aimed at boosting growth and preventing the world from sliding backwards into protectionism. Read the full Call to Action below
The world faces significant and urgent challenges that weigh heavily on prospects for future growth and on the cohesion of our societies.
Our shared objective is the strengthening of growth, employment and the quality of life in every part of the world.
But entering 2012, we worry about:
- Decelerating global growth and rising uncertainty
- High unemployment, especially youth unemployment, with all its negative economic and social consequences
- Potential resort to inward-looking protectionist policies
While the global economy faces severe challenges, it can regain momentum by supporting the economic transformation underway in the emerging world by meeting the infrastructure needs around the globe and by beginning to realize the promise of a greener economy.
To do so, we need:
- An open trading system
- Resilient cross-border finance
- Sustainable government finances
- Determined and coordinated structural reforms
- To address inequalities in all countries
Greater confidence in the growth of wealth- and job-creating prospects of the world economy can be built in two ways:
- Countries must implement promised reforms, for example in the financial sector
- Global cooperation must be renewed
We call on leaders to devote the necessary political energy to deliver concrete actions to exit the crisis and boost growth. Every country, working through its regional economic organizations and development banks and through the international financial and UN institutions, has a role to play. Last November’s G20 Action Plan for growth and jobs, with its mutual assessment process, is a solid foundation upon which we must now build.
Conscious of the boost to growth that this plan can deliver, we support intensified efforts to develop a more comprehensive action plan that could be agreed and implemented at June’s G20 summit in Mexico.
To solve the sovereign debt and banking crisis and reignite growth, we need to:
1. Restore confidence in financial institutions. We can do this by:
- Implementing consistently internationally agreed financial regulatory reforms
- Recapitalizing banks quickly, where necessary
- Promoting access to capital for small and medium-sized businesses
- Ensuring bank deleveraging does not impair trade and project finance
2. Stem financial contagion and stabilize fiscal frameworks in Europe through:
- Continuing the European Central Bank’s measures to secure bank funding and liquidity
- Enhancing the European Financial Stability Facility and European Stability Mechanism to ensure governments can fund at sustainable rates
- Implementing country-level fiscal packages to stabilize debt dynamics
Different options are being considered for stemming contagion in the euro area. They have involved greater recourse to the European Central Bank’s balance sheet and require a strengthening of the European Financial Stability Fund. Governance reforms are needed to offset the risk of moral hazard involved in short-term support packages and to ensure longer-term fiscal discipline.
3. Manage fiscal consolidation to promote rather than reduce prospects for growth and employment. It should be applied in a socially responsible manner.
4. Pursue public-private partnerships to help countries finance investments without adding to future deficits. There is enormous untapped potential in the private sector for such investment and it could be accelerated – and higher growth achieved – through more coordination between countries, international institutions and regional development banks.
5. Address youth and long-term unemployment to provide decent work prospects, along with country-specific structural reforms that are fairly implemented to achieve faster growth. Through dialogue, labour market reforms can be agreed that can both raise employment levels and ease fiscal adjustment.
Medium to Long Term
New sources of growth and structural reforms will be vital in securing sustainable, balanced and inclusive growth for the future.
In addition to labour market measures to raise the level of employment, pro-competition reforms in product markets can open sheltered sectors and encourage innovation, green growth and high-skill development.
Countries should improve both social protection and the efficiency of their public sectors. We offer our expertise to support countries in planning, carrying out and tracking implementation of pension and other changes.
Financial sector reforms – as suggested by the G20 – would improve our ability to prevent and resolve crises. Alongside better-capitalized banks, we support:
- The efforts underway as part of the G20 Data Gaps initiative to create a global financing reporting system that will comprehensively monitor global financial flows and stocks
- Further development of International Monetary Fund-Financial Stability Board (IMF-FSB) early warning capacities, which should provide clear warnings on economic and financial imbalances that threaten sustainable growth and on risks and vulnerabilities in the world economy, and a focus on region-by-region preparedness in meeting these risks
- Further measures to encourage responsible investment and inclusive finance
Support open markets for trade and investment
Countries must reaffirm that none will resort to growth-destroying protectionism and demonstrate that trade restrictions introduced in response to the economic crisis will be rolled back.
Commitment by all countries to greater openness to trade and investment, followed quickly by concrete action, is important to generating the greater levels of confidence that can encourage higher growth.
Tackle high levels of unemployment
Boosting jobs and investing in human capital is the most promising way of tackling inequality. We support the work of the International Labour Organization and others in assisting governments to examine realistic policy options including cost-effective social policies to cushion the most vulnerable from adversity. Investment should target skills and education and thus equip people for the future.
Rising inequality calls for heightened consideration of more inclusive models of growth. We must deliver tangible improvements in material living standards and greater social cohesion.
Enable green growth
Environmental pressures are putting a significant strain on growth. Rio+20 should consider a comprehensive policy strategy for green growth that encourages innovation and diffusion of new technologies, and makes efficient use of economic and regulatory instruments. Low-carbon, climate-resilient growth offers potentially greater employment opportunities.
Support reforms to unleash growth in the Middle East and North Africa (MENA)
The G8 Deauville Partnership commits heads of international organizations to helping MENA countries advance governance reforms and economic planning to improve growth and employment prospects.
We support continued work by the G20 on infrastructure to unlock the growth potential in Africa and low-income countries.
We are ready to work with those countries on improving tax systems, administration and institutional structures, on anti-corruption measures, as well as on the business and investment framework, and on employment, education and social policies.
Protect the most vulnerable
When the world economy falters, the poorest suffer most. The international community needs to provide active and sustained support, including maintaining commitments to deliver promised development aid.
We welcome the commitment of the G20 and others to implement social protection floors.
The governments of individual countries and our international organizations have their own distinctive roles and responsibilities, but working in partnership, we can together achieve more than the sum of our parts. We stand ready to do what we can to surmount the difficulties ahead and to contribute to building greater confidence in the future.
This Call to Action has been made by the Global Issues Group (GIG) of the World Economic Forum, comprised of leaders of the world’s multilateral and regional institutions: Mark Carney (Financial Stability Board), Margaret Chan (World Health Organization), Angel Gurría (OECD), Donald Kaberuka (African Development Bank), Haruhiko Kuroda (Asian Development Bank), Pascal Lamy (World Trade Organization), Christine Lagarde (International Monetary Fund), Luis Alberto Moreno (Inter-American Development Bank), Josette Sheeran (United Nations World Food Programme), Juan Somavia (International Labour Organization) and Robert Zoellick (The World Bank Group). The ideas expressed herein reflect the individual views of GIG members and not necessarily those of their respective institutions.
We will be featuring reaction to the Call to Action from experts. If you would like to share your opinion, please feel free to use the comment box below.