New York Times Editorial, August 31, 2011
(The editorial emerges from remarks made by Christine Lagarde, Head of the International Monetary Fund to central bankers at Jackson Hole, Wyoming last week.)
Now free to speak her mind, her blunt remarks and prescriptions were just what the central bankers needed to hear. She rightly called for: rebalancing global trade by stimulating demand in developing countries with big export surpluses; more aggressive mortgage relief in the United States; and giving job creation priority over deficit reduction in the United States and Europe.
She also called for substantial injections of public and private capital into dangerously frail European banks. And while citing the necessity for long-term deficit reduction, she made clear that near-term policies must give priority to generating jobs, stimulating demand and renewing economic growth.
For Europe, specifically, Ms. Lagarde prescribed more financing for debt bailout plans, a concerted effort to strengthen vulnerable banks and, most importantly, a common political vision about the euro’s long-term future that has been grievously lacking.
For the United States, she called for new efforts to resuscitate consumer demand by attacking long-term unemployment and mortgage foreclosures. She suggested “aggressive principal reduction programs for homeowners,” in addition to the kind of refinancing programs the Obama administration is now considering.
American political leaders haven’t taken much notice of her speech. European financial officials have been sputtering ever since. Ms. Lagarde cannot make any of these things happen by herself. If she keeps pushing hard, the politicians may finally wake up.
It is indeed true that Ms Lagarde cannot make any of this happen by herself. However, she does have a bully pulpit from which to harrangue political leaders in both Europe and North America, and while the U.S. rarely seems to listen to anything smacking of external 'control' of their policy-makers, especially from a French, European source, there are those who are listening and attempting to echo her sentiments, if not her precise phrasing.
Her's is indeed a voice of reason, of moderation, of even human compassion and long-term thinking, not only to alleviate the conditions facing both the unemployed and those threatened with mortgage foreclosure. It is time for policy makers to extend their perspective beyond the next election and into the next decade. No country, and no global economy can withstand a decade of depression that will lead inevitably to more unrest, more violence, more terrorism and a continually growing gap between the "have's" and the "have-not's".
Regardless of one's political persuasion, right, left or centre, the costs of refusing to listen to her clarion call for aggressive intervention by governments cannot be contained within a single country, as some in the U.S. and in some European countries would like to believe, and like the rest of us to believe with them.
Failure to act can be considered nothing more than the selfish pursuit of short-term personal political power at the expense of the larger national and international interests of all peoples.