This week Washington is a city of two tales – each compelling and globally significant.
This is a city where optimism rules; a city that has hosted a grand party to welcome a new leader. Everyone was invited and people could not stop smiling. There were bands, balls and parades, but the party was also about hopes, ideas and endless discussion about a new president with a big list of ambitions.
Economic rescue, healthcare, education, workers rights to collective bargaining, housing, jobs, green energy, renewing America’s standing in the world – everything is possible, and has been made possible, by an act of democracy.
Among the people in Washington, there is an overwhelming sense of pride in their new leader and a pervasive joy that is a delight to witness. Even the traffic, the street closures, the overt security set up to manage the four million guests is taken in stride and the secret service is definitely the cool squad in town.
Yet in the same city we are talking to the World Bank and the International Monetary Fund about the bleakest economic context since World War Two.
The IMF admits that its December forecast was too optimistic and that their late January forecast will be much worse!
With some 10 million workers in developed countries and some 25 million in developing countries already predicted to lose their jobs how much worse can the outlook get?
The bottom line is that the IMF says unless there is at least 2% of global GDP invested in fiscal stimulus, urgent stimulus measures targeted at jobs and vulnerable workers, any hope of seeing recovery into 2010 will be long odds.
US President Obama has made a serious fiscal package targeted at jobs a first-order priority.
Our own Government must build on their timely efforts to date with an Australian equivalent – focused on keeping and creating jobs, retraining workers to generate the skills needed for the eventual upturn and protecting the vulnerable. Urgent action must be taken within weeks.
Then the real test of leadership towards restoring the global economy will be whether there is serious cooperation to invest in fiscal stimulus for the developing economies.
The World Bank’s Senior Vice-President and Chief Economist, Justin Yofu Lin, places priority on responses that reignite demand globally and suggests consideration of a ‘Marshall plan-type of financial transfers to developing countries’. He also points out that ‘Governments must move quickly to adopt policy responses that protect the poor.’
Global leadership has never been more important and the emergence of an authoritative G20 is critical. There must be united action to maintain financial stability, implement effective fiscal stimulus measures targeting job protection and the livelihoods of working people.
This crisis will hurt those far away from the heat of Wall Street and leaders have to intervene to mitigate mortgage foreclosures and turn around the housing market. Bold action must also include introduce measures to avoid deflation in some countries; and rebuild resilience in developing countries.
Finally, we need the commitment to reshape the global financial architecture and regulatory environment to ensure a financial crisis of this magnitude never happens again.
Working people, the victims of a crisis not of their making, can only hope that the optimism of the people in Washington this week is an accurate barometer of the scope for genuine change in both national and international leadership.