The annual meetings of the International Monetary Fund (IMF) are on here this week. I remember being at these meetings back in the 1980s when I was Minister for Finance. I heard the opening speech of the Managing Director of the IMF, Dominique Strauss Kahn.
It was one of the most lucid descriptions of the world’s current economic situation that I have heard. It is accessible on video on the website of the IMF and is worth watching.
He identified the risk that arguments about currency valuations could escalate into a much wider conflict, as happened in the 1930s.
He also explained why the shift in economic power towards emerging economies is taking place. The explanation lies in technology.
For the last 200 years western countries, despite their relatively small populations, have managed to monopolise access to certain technologies, including I assume military technologies. This was historically abnormal.
Now, for a variety of reasons, that monopoly is breaking down and everyone is getting the technology. The spread of mobile phones in India is an example, a dissemination of communications that would have been impossible if we had to rely on fixed lines.
As a result of all this, in future, size of population is going to become more important in determining economic power, and consequently military power.
If such a fundamental shift in economic power is taking place, it is going to be very difficult for western countries to get back to the rates of growth we got used to in the 1990s and earlier. Yet, we seem to be basing our plans on that assumption. We may have to get used to a more frugal way of life , and set the maintenance of living standards rather than increasing them as our goal. Distributing the burden fairly will be crucial.
The Mid Term Congressional elections here in the United States are heating up .
A Washington Post poll shows that a majority of all Americans prefer Democratic party control of Congress, but a majority of those who profess to be “very interested voters” would prefer Republican control.
While 47% of Americans say they would like to pay fewer taxes and have fewer services from the Federal Government, three quarters of them say that they regard the two big programmes run by the Federal Government, Medicare and Social Security, as “very important”. 56% regard defence spending as “very important”.
There would appear to me to be a real risk that people will vote for what they do not really want, because they do not know what their taxes are really spent on. Every taxpayer should be sent a pie chart showing where their taxes go.