IMF, World Bank warn on high food prices, joblessness
WASHINGTON—The IMF and World Bank chiefs Thursday warned that high food prices and joblessness remain dangerous barriers to the world’s economic and social stability despite global macroeconomic gains.
World Bank president Robert Zoellick cited soaring food prices as “the biggest threat to the poor around the world.”
“We are in a danger zone because prices have already gone up; stocks for many commodities are relatively low,” Zoellick said in a news conference opening the annual World Bank-International Monetary Fund spring meetings.
Meanwhile, IMF managing director Dominique Strauss-Kahn warned of the possibility of a “lost generation” of unemployed youths if nations focus only on achieving fiscal balances without heeding social demands.
“It’s probably too much to say that it’s a jobless recovery, but it’s certainly a recovery with not enough jobs.”
“Especially because of youth unemployment… there is now a risk that this will be turned into a life sentence, and that there is a possibility of a lost generation,” he said.
Both leaders described the economic recovery from the 2008-2009 financial crisis as frustratingly incomplete, posing serious challenges for poor and wealthy countries alike, and called on the Group of 20 developed and emerging economies – many of which are facing their own fiscal crises – to focus on food and job issues.
Both cited the turmoil across the Arab crescent, especially Egypt and Tunisia, as partially born of soaring food prices and unemployment.
“We may be coming out of one crisis – the financial and economic crisis – but we are facing new risks and wrenching challenges,” said Zoellick.
“Food prices were not the cause of the crises in the Middle East and North Africa, but they are an aggravating factor. Our latest Food Price Watch shows that there is double-digit food price inflation in Egypt and Syria. It shows that commodity price spikes particularly hurt poor countries.”
Global food prices have soared 36 percent from a year ago, according to the Bank’s food price index released Thursday, pushing some 44 million people below the $1.25 a day poverty line.
Another 10 million people would be pushed into poverty if prices rise another 10 percent, according to Food Price Watch, a Bank price monitor.
“One of the points that we are trying to emphasize through these meetings is the need for the G20 and for the World Bank and others to put food first,” Zoellick said.
“Because I think we are in a particular moment of vulnerability in that if you have some other events, which you can never predict, we really don’t have a cushion.”
Oxfam said the international community had been “skeptical” when France put food at the center of its agenda for G20 presidency this year, but now the rest of the world was “waking up” to the crisis.
“Immediate action must be taken to address underlying factors driving food prices and volatility, which are excessive speculation and demand for biofuels,” said Luc Lampriere, spokesman for the anti-hunger nongovernmental organization.
Strauss-Kahn said the focus on restoring growth has sacrificed attention to important social issues.
“Common knowledge has been for a very long time that if you have growth you have jobs,” he said.
But the current situation is proving that is not always correct.
“It is not the recovery we want… The question now is jobs, jobs, jobs.”
Young people might have expected the current malaise to be temporary, but it could turn into a much longer problem, employment-wise, he said.
He noted the upheavals in Tunisia and Egypt, “where the macroeconomics are not bad but the people don’t feel any change in their situations.”
Strauss-Kahn warned of complacency in advanced countries as the most severe financial effects of the crisis had passed.
He said banking sector reforms had still fallen short, with a need to deal with cross-border standards, bank taxes, shadow banking and, especially in Europe, bank recapitalizations.
He also warned that emerging economies faced the continuing danger of overheating and the pressure of hot capital flows, and gave a solid endorsement of the use of short-term capital controls to maintain stability.
The IMF in the past had been “fundamentalist” against capital controls, but “we are taking a pragmatic view now,” he said.
