From a recent speech:
The stimulus worked:
Coordinated fiscal and monetary stimulus has worked to bring back the global economy from the edge of a depression.
But unemployment is still a problem, and this is at the heart of the "imbalances" issue:
What lies behind concerns about macro-economic imbalances is in reality a concern about unsustainable and socially unacceptable unemployment levels. Whether it is the worker in Bangalore, in Ohio or in Guangdong, the real issue is jobs.
And unemployment is also the source of the "currency wars":
For it is generating employment which is at the heart of the strategy of some countries to keep their currencies undervalued. Just as it is also at the heart of other countries' loose monetary policies.
To deal with this issue, we need economic cooperation:
The Havana Charter of 1948 which envisaged the creation of the International Trade Organisation, but never came into being, considered employment as an integral part of a global trading system. In its Article 2 it recognized the fact that “while the avoidance of unemployment or underemployment must depend primarily on internal measures taken by individual countries, such measures should be supported by concerted action”. What was true more than 60 years ago is even more so in today's globalised economy.
This is why the G20 has repeatedly emphasized the importance of international cooperation in global economic issues. Cooperation means listening to each other, understanding each others' constraints, and entering into compromises towards commonly identified goals. Today the constraints of countries may be different, the individual actions required from individual countries may be different but they must all be directed towards these common goals.
Consider, for example, the issue of macro-economic imbalances. Addressing them will be inevitably complex. It will require looking into monetary policies, investments in social safety nets, competitiveness, public finances or taxation systems to name but a few.
Trade restrictions are not the answer:
These imbalances do not originate in trade. And therefore addressing them through trade restrictive measures will not work. Worse, it will trigger tit-for-tat protectionism.
In the short term, the uneven growth in the world and high unemployment carry the risk of countries diverging from global solutions and embracing go-it-alone measures. Such uncoordinated 'beggar-thy-neighbour' policies, however, will not result in increased employment. Hence, for a sustainable global recovery, there is a need for coordinated policy action across countries, which would lead to a progressive reduction of these global imbalances and to a greater number of jobs.
Trade agreements can be part of the solution:
Let me now turn to global trade. Trade - both exports and imports - can increase income or output levels through efficiency gains from specialization based on comparative advantage, through greater competition and through economies of scale. In turn, an increase in incomes creates jobs in different sectors by increasing demand. ...
Trade is also likely to contribute directly to the reduction of unemployment in the recovery phase following the crisis. This is because the share of employment which depends on exports and imports is typically large.
But trade agreements are not good for everyone:
Well of course, greater import competition associated with trade opening may lead to job loss in certain sectors of the economy. There are both winners and losers.
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The part about economic cooperation is particularly interesting to me. He says we should be looking into "monetary policies, investments in social safety nets, competitiveness, public finances or taxation systems to name but a few." Is there any possibility for cooperation on these issues? If cooperating means "listening to each other" and "understanding each others' constraints," I can see that. If cooperating means "entering into compromises towards commonly identified goals," I am skeptical.
Also, can international economic cooperation deal with unemployment? The ITO Charter addressed these issues to some extent. Was that unrealistic? Is there anything that can be done today at the international level? Other than trade agrements, of course, which he says create new jobs (on balance).
