For years the IMF was seen by many as the bad actor in international capitalism, blamed for imposing harsh policies on fragile emerging markets with a resulting rise in poverty and inequality. Now under its second female managing director – the Bulgarian Kristalina Georgieva has recently taken over from France's Christine Lagarde – the philosophy could not be more different.
Whereas the IMF of old was about slashing public spending, Ms Georgieva advocates that the response to a synchronised slowdown in the global economy should be about making the letters of the IMF stand for 'It's Mostly Fiscal'.
In her curtain-raiser speech for this year's annual meeting, while acknowledging that total sovereign debt stood at a high 226% of GDP, she cited Germany, the Netherlands and South Korea as countries with the headroom to raise their fiscal spending. But as important as spending more is what it is spent on, and the new IMF mantra is based around human capital and skills together with research and development and infrastructure, particularly digital infrastructure, being the priority areas.
Only with a skills upgrade can economies transition to a new technological era without leaving behind large sections of the population who then become the supporters of nationalist and populist policies.
Critics might say that the IMF has been slow to take these kinds of ideas on board. Riots in Ecuador against IMF-imposed austerity show how difficult this will be to achieve in practice. But at least the IMF is starting to use more inclusive language.
The challenge now is to get out the message that while globalisation has its challenges, the fostering of world trade and the maintenance of open markets deliver higher growth and more wealth over the long term. The bit to get right during the transition is the distribution.
Ms Georgieva cites statistics showing that the economic fallout from the current trade war will be the loss of 0.8% of GDP by 2020, equivalent to the size of the Swiss economy. But IMF research shows that successful reform programmes in developing countries such as the reduction of red tape in Jamaica and a clampdown on corruption in Ghana can raise growth rates by at least a percentage point.
Globalisation has a lot of enemies these days. Hopefully Mr Georgieva can help it make some friends.
The Banker's cover story of our IMF issue looks at how changes at the top of the IMF and World Bank may influence policy. View it here.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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