Government officials gathered in Washington 14 years ago when the world was grappling with the global financial crisis to exchange ideas and lay the groundwork for the implementation of policies that would save the world economy.
When policymakers gathered in Washington last week, the global economy was in turmoil, leaving the poorest people most vulnerable to the impending shock.
Despite this, as a result of the annual meetings of the IMF and the World Bank, global policy making has not increased as much as it did ten years ago.
Also Read: Oil prices are down about 3% as a result of recession fears
Concerns about a global recession, inflation, debt, financial instability and lack of effective policy coordination were shared by a large number of policy makers.
There is little hope of a follow-up like the G20 Heads of Government summit in April 2009, which helped avert significant and long-lasting economic damage, as few new tools, comprehensive solutions, much more around policy tables. gaining traction.
In the days before last week's meetings, there were certainly a lot of cautionary signs. The cost of living remained stubbornly high. The fear of recession was increasing.
The stock market was uncertain. In the UK there were disruptions that were more specific to poor developing countries. And the IMF in its update to its World Economic Outlook just said that "the worst is yet to come".
The blame game was also going on. Most of the participants blamed the negative consequences of Russia's invasion of Ukraine. Many of them also lamented the growing disruptive dollar strength and rising global yields due to the speed and scope of the US Federal Reserve's catch-up interest rate hikes.
The IMF was criticized for failing to properly oversee and coordinate policy. There was pressure on the Fund and the World Bank to provide more support to vulnerable developing countries.
Also Read: Saudi Arabia responds to US criticism of OPEC+ cuts: "We don't use oil as a weapon"
This was further complicated by the idea that, as in 2008, advanced nations had once again emerged as the world's primary source of instability and systemic risks.
Having said that, the atmosphere in Washington was as gloomy as I remembered during the annual meetings in October 2008.
However, in 2008, scrutiny of important general issues, concern for the future, even larger issues, and respect for shared accountability served as catalysts for serious policy action.
United Kingdom Prime Minister Gordon Brown led the G20 summit in April, providing a bold and well-coordinated policy response that prevented a catastrophic global depression. Given the paucity of resources, more work will be required in the coming months to achieve a similar result this time as well.
Top economic officials are returning to their home countries with the hopeless confidence that the world economy may be entering recession. It is risky to assume that the world's financial markets will always operate smoothly, and that the spread of "little fires everywhere" is likely to cause debt problems.
And once again, despite the urgent need for visionary G20 global policy coordination, various geopolitical tensions make it difficult to take action.
Also Read: UK Prime Minister Liz Truss fires Finance Minister and reverses tax cuts
Additionally, officials believe that little can be done to prevent the negative impact of policies enacted by some of the world's most important policymakers. When it comes to the Fed, this is especially true.
Many government representatives, especially those in developing countries, have returned home worrying that of late the Fed will be forced to continue on an aggressive cycle of rate hikes that will force them to choose between one or more unfavorable policy options. will force.
These include tightening monetary and fiscal policy that the domestic economy would otherwise warrant, decreasing foreign reserve holdings, allowing for further depreciation of the currency that drives inflation and makes it more difficult to pay back international debt, and/or unfavorable. Enforcing foreign exchange controls.
However, the most important conclusion from these annual meetings is not that the world economy is heading towards dangerous times that can be particularly damaging to the most vulnerable nations and sections of society.
It is that the frameworks, tools and mechanisms for collective action are ineffective, and that the need to rely too heavily on whatever individual relief each country may receive will inevitably result in less than ideal both for it and the rest. will be in World.
Hopefully, this will serve as a productive catalyst for change, which the meetings in October 2008 ultimately proved.