Lost Generation-Unemployment

Independent Films, Politics

Is there risk of "lost generation" of unemployed in US and other developed countries?

As uncertainty continues to roil the world’s financial markets, world leaders should act together to address the three main challenges facing the global economy: debt pressures sapping growth, risk of instability in the core of the global economic system, and social tension, the head of the IMF says.

“What I have been advocating the last few weeks: collective, bold, decisive, courageous action is needed. And it will not be in the interest of those that conduct such actions for the good of the country. It will be for the good of the world,” IMF Managing Director Christine Lagarde said September 15 at the Woodrow Wilson Center in Washington, D.C.

She made her remarks ahead of the Annual Meetings of the World Bank and the IMF, where world economic leaders are expected to discuss the global economic outlook and look for ways to restore confidence.

“I believe that there’s a path to recovery. It’s indeed a narrow one and it’s certainly narrower than it was two years ago because the volume and the amount of ammunition is different. It’s lower. But there is a path and it will require strong political will around the world. Not just in one country, but in many countries. It will require decisive action on the part of some central banks which they seem to be showing to us, including this morning. This will require leadership over brinkmanship, cooperation over competition, action over reaction,” Lagarde said.

The gathering will take place amid a worsening of the euro area debt crisis, rising financial strains in advanced countries, and disappointing data pointing to a softer global recovery, especially in the advanced countries. In emerging markets, the growth picture is brighter, but challenges include inflation pressures, managing strong credit growth, and rising current account deficits.

The IMF’s updated forecast for the world economy will be published September 20. About 13,000 policymakers, private sector and civil society representatives, journalists, and academics are expected to attend the Annual Meetings, which this year take place on September 23–24.

In the short run, a key issue weighing on the recovery is the debt overhang in advanced countries. In the United States, debt-laden households remain reluctant to spend and need some relief. In Europe, uncertainty about sovereign debt sustainability continues to undermine confidence, and European banks need sufficient capital buffers to support growth, Lagarde said.

Social strains are evident in many parts of the world, not just in the countries undergoing severe adjustment. Global unemployment is at an all-time high, and at risk of becoming entrenched, especially among young people.
“Entrenched, high unemployment: this is the case in this country, and this is the case in many, many countries, particularly advanced economies. That effects in particular the younger generation. There have been discussions of the lost generation. Certainly we need to do our best to avoid that because with a lost decade of growth, we run the risk of a lost generation when it comes to jobs,” Lagarde said.

To address the rising risks that major economies may slip back instead of moving forward, four key policy dimensions need to be addressed by policymakers, Lagarde said.

“It’s actually very important that there is stability around the world, that there is stability in all forums and that the international monetary system is without excessive volatility. Certainty is a key to secure confidence. Confidence is a key to create growth, growth is a key to create jobs,” Lagarde said.

Lagarde noted that the IMF, with its 187 member countries, is uniquely positioned to foster collective action among its global membership.

The IMF’s policy steering committee, the International Monetary and Financial Committee, will meet on September 24. Looking further ahead, the Group of Twenty (G-20) industrialized and emerging market economies will meet in Cannes on November 3–4 to discuss ways to strengthen global economic cooperation.

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Directors:

• Muhamed Sacirbey (UNTV-IMF)

Producers:

• Susan Sacirbey (UNTV-IMF)