24 January 2013

The IMF Gets One Right

IMF chief Christine Lagarde is calling for increases in the minimum wage, strengthening the social safety net, and reining in bankers pay:

Christine Lagarde, the managing director of the IMF, has warned that "corrosive" inequality was hindering the world's economic recovery.

In a combative speech to an audience of some of the world's wealthiest financiers at the World Economic Forum, [Davos] Ms Lagarde said that bankers' pay should be cut to close the gap between the rich and poor. "Excessive inequality is corrosive to growth; it is corrosive to society. I believe that the economics profession and the policy community have downplayed inequality for too long" she said.

Ms Lagarde, a former French finance minister who was appointed head of the International Monetary Fund in 2011, added that it might be necessary for nations to impose minimum wages in order to reduce income gaps.

II believe policies such as robust social safety nets, extending the reach of credit, and – in some cases – minimum wages can help" she told the audience of business and political leaders in the Swiss ski resort of Davos. Ms Lagarde also warned that necessary reforms of the multinational banking sector, which plunged the Western world into recession in 2008-09, were being watered down by industry lobbying.


Ms Lagarde told delegates that bankers' pay is too high. "We must move in the direction of more prudent compensation practices" she said. "Ultimately, this is all about accountability: we need a financial sector that is accountable to the real economy– one that adds value, not destroys it".
Your mouth to God's ear, ma'am.


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