Greater Openness

Let me begin with openness. This generation is a global generation and an open generation. Open to the world, and to the idea of a common global community.

In a sense, this is really an old lesson for a new era—that when countries transcend the narrow national interest and come together for the global good, everybody wins. This was the reason the IMF was founded in 1944—and it remains our guiding principle.

In fact, this principle is more important today than ever before. In this era of globalization, cooperation needs to be hardwired into the psyche of policymakers. Why? As we saw clearly during the crisis, this is a world where economic jitters in one region or market can have instant repercussions all across the globe. In a flat world, there is no room for economic silos.

But old instincts die hard. At the first hints of improving sentiment, countries are enticed to retreat to the alluring comforts of their own backyards. They face the perennial temptations to look only at the national interest—with competitive devaluations, barriers to trade, and a zeal to protect their own financial institutions at the expense of others. This is an anachronistic mindset ill-suited to a modern global economy.

On the contrary, opening up and removing barriers has proven to be more efficient. I am thinking, in particular, about trade and financial integration.

Look at Asia, for example. This is a region that has made tremendous progress in trade integration—trade within Asia tripled over the past decade, and regional trade among emerging Asian nations grew even faster. But it has lagged behind in financial integration. It is not investing enough of its own savings in its own future.

And yet, the advantages of financial integration in Asia are clear. It can lift people up by boosting domestic demand and helping small firms get access to credit. It can make economies safer, by providing more insurance against adverse developments. It can reduce inequality, by helping financial inclusion.

Other regions too can benefit from more integration, including the Middle East and Africa. These regions will gain from opening up—knocking down barriers to trade and welcoming investment. In this way, they can set in train a virtuous circle of higher productivity, enhanced economic diversity, and greater resilience against external turmoil.

Take the Maghreb, for example. On its own, each country in the region is small. But together, they form a vibrant market of 90 million people, offering limitless possibilities.

Possibly the greatest integration of all comes from Europe. If you look behind the daily headlines related to the Eurozone crisis, you see a region in the midst of a historic process of integration. It is really the culmination of a centuries-long search for peace and prosperity, with the understanding that by linking arms you are unlocking swords—and also unlocking a million avenues for mutual gain.

Yes, the European economy faces serious issues that need to be addressed—deeper banking and fiscal union, for example. But destiny beckons through the smoke and the fog. And I, for one, am optimistic about Europe’s future, especially if it stays on the path of reform, integration, and renewal.

Date: 2014-12-29; view: 718