Technology and foreign investment are making income inequality worse around the world, the International Monetary Fund said in a new report, handing critics of globalization a powerful argument to use in their political battles.
The International Monetary Fund’s findings, published in the fund’s semiannual economic review, the World Economic Outlook, confirm the work of other economists, who have been trying to figure out why income inequality has widened in both rich and poor countries in the past two decades. The report is an unusual admission by the IMF of the downsides of globalization. Since at least the 1980s, the IMF has pressed countries to open their borders to foreign investment, technology and trade as a path to economic growth - and has channeled loans to countries that took its advice.
An anti-IMF and antiglobalization backlash developed in many parts of the world, especially Latin America and Africa, when the economies that followed the fund’s prescription didn’t grow as rapidly as anticipated. Now, that antiglobalization movement, which has spread to the US, Europe and parts of Asia, has become a political barrier to further liberalization of trade, investment and the migration of workers.
Subir Lall, the IMF’s deputy chief for research, said the report had no political agenda. He said it found that, overall, wealth increased through globalization. In the great majority of countries, the income of lower-income workers has risen in the past two decades, but at a slower pace than for higher-skilled workers. As a result, the gap between haves and have-nots has widened. (read the full article)