Combating the Rise of Inequality

Benedict Clements, co-editor of an IMF book on Inequality, discusses “one of the defining issues of our time”

Inequality is at the forefront of the economic policy debate today in much of the world

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How is the IMF contributing to the debate about rising income inequality?  

On many fronts. First, we are doing new research on the causes of inequality and its macroeconomic implications. Second, we are doing studies on how economic policies and reforms can help countries achieve their equity goals. Our book on Inequality andFiscal Policy is an example of this kind of research.  Third, we are deepening our work on individual countries in the context of our annual consultations with them. 

What’s the importance of this work?

In many countries, achieving more “inclusive” growth—the kind that creates a high number of jobs and does not increase inequality—is a priority.  In this context, policymakers are eager to know the effects of economic policies on inequality and the effects of these policies on economic growth.  As an advisor to countries on macroeconomic and fiscal policies, the IMF has an important role.  In our book, we look at the evidence and provide guidance for policymakers and Fund staff on these issues.  The good news is that there are many reforms that both reduce inequality and boost growth.  Greater use of property taxes to raise revenues and the reform of energy subsidies are two such examples.     

How much has French economist Thomas Piketty’s book fueled this debate?

Piketty’s work has helped draw attention to the issue.  This is just one of many excellent studies that have documented the rise in inequality.  Of equal importance is the work that examines what countries can do to address it.

In your own case, what attracted you to economics and in particular to fiscal issues?

During my college years, I took a trip to Latin America with the Maryknoll Fathers, who work with the poor.  That trip helped show me that economics really matters when it comes to poverty and inequality. I’ve been interested ever since.

Benedict Clements is a division chief in the Fiscal Affairs Department of the IMF. He has worked in the IMF since 1991 and has published extensively on public finance and macroeconomic issues.

Reexamining Economics

The global economic crisis and the subsequent weak recovery has shaken up macroeconomics.

A conference on the theme “Macro and Growth Policies in the Wake of the Crisis” took place at the IMF’s Headquarters in Washington, DC on March 7-8, 2011. The conference was hosted by four of the world’s most noted economists, including two Nobel laureates: Michael Spence (Stanford University), Joseph Stiglitz (Columbia University), Olivier Blanchard (Economic Counselor and Director of Research at the IMF), and David Romer (University of California, Berkeley). The event brought together leading policymakers and academics from both advanced and emerging countries, as well as representatives from civil society, the private sector, and the media.

The aim of the conference was to distill the policy lessons of the global financial crisis. Participants focused on six key areas: monetary policy, fiscal policy, financial intermediation and regulation, capital account management, growth strategies, and the international monetary system. They also sought to make concrete policy recommendations for how to revive sustainable growth while safeguarding macroeconomic and financial stability.

Review in F&D magazine
LSE review

Conference website In the Wake of the Crisis: Leading Economists Reassess Economic Policy by Michael Spence
My rating: 5 of 5 stars

The global economic crisis has challenged Economics to the core. This is the first pass at reexamining Economics in the light of lessons learned and still being learnt.

The IMF held a conference of leading economists in 2011. Conference co-host and Nobel Prize winner Joseph Stiglitz noted that “the models that were used before the crisis neither predicted the crisis nor gave us a framework for responding to the crisis when it happened.”

IMF Chief Economist Olivier Blanchard said: "The global economic crisis taught us to question our most cherished beliefs about the way we conduct macroeconomic policy." http://blog-imfdirect.imf.org/2011/03...

This book is a collection of thoughts following the crisis and an examination of the future direction of the international monetary system.

View all my reviews