Lagarde: Policy can address concerns that fuel populism

DAVOS: Political policies can address the public issues that have fueled the rise of populism, the head of the International Monetary Fund (IMF) has said.
Christine Lagarde told the World Economic Forum in Davos that the concerns leading to populist movements in many developed countries are real, but the right policies can ease them.
“We now have an opportune moment to put in place policies that will help,” she said.
Lagarde suggested more redistributionist policies, since “excessive inequality puts a brake on sustainable growth.” She also urged a stronger social safety net, fiscal and structural reforms, and education to help both young people and mature workers prepare for the technological change that is disrupting the workplace.
Lawrence H. Summers, a professor at Harvard University in the US, said that inequality is only one of the causes of rising populism. He also cited “a desire for national unity and strength” and a sense among the middle class that it is no longer in control.
“It’s a mistake not to recognize that the middle class in my country and in others is concerned that the government is not fighting for it,” he said.
Ray Dalio, founder of Bridgewater Associates in the US, said we “may be at a point where globalization is ending.”
Dalio cited the rise in populism, which he too attributed not just to the biggest wealth gap since the 1930s, but also to a sense among the middle class that governing elites do not represent them. “Populism scares me,” Dalio said, calling it “the number-one issue for market participants.”
But Dalio said that the world should not turn its back on globalization and technological change, so the question for the coming years is: “Can the middle be cohesive enough so that the extremes won’t be in control?”
Henrique Meirelles, Minister of Finance of Brazil, reminded participants that “globalization is allowing massive numbers of people to get out of poverty. If you look around the globe, the net effect is extremely positive.”
Italy’s Minister of Economy and Finance Pier Carlo Padoan said: “I don’t think we are exiting globalization… We are entering a new stage.”
Padoan urged his fellow European policy-makers to listen to middle-class concerns for their own futures and those of their children.