Obstfeld calls for education investment as he prepares to depart IMF

10 Dec 18

Countries around the world need a “big rethink” on their investment in education, the International Monetary Fund’s outgoing chief economist has urged.

Maurice Obstfeld stressed that more educated populations would help boost the resilience of economies.

“We need a big rethink on educational investments everywhere. Human capital investments very early in life have been shown to be critical to future success,” he said in an interview with the fund’s December issue of its Finance & Development magazine,

“But even later in life, they can promote greater flexibility of workers, prolong working lives, and offset effects of ageing populations.”

Obstfeld, who is retiring at the end of this year, said education investment would also help with some of the “adjustment issues” related to the technological advancements and rising trade tensions.

“It will make economies more resilient and better able to deal with the critical, long-term problem that we just haven’t seen working people share in the gains from growth,” he said.

“There is now a sense in a lot of countries that incomes of working people have stagnated, that social mobility is lower, that opportunity is lower, that one’s children will not be better off and may indeed be worse off.”

The economist said trade tension, as outlined in the IMF’s World Economic Outlook earlier this year, was one of his biggest macroeconomic worries.

In October, the lender cut its projections for global growth to 3.7% for 2018 and 2019, down from the 3.9% forecast in April.

A full-blown trade war between the US and China would make a dent in the world economy, the outlook said.

“Escalating trade tensions and the potential shift away from a multilateral, rules-based trading system are key threats to the global outlook,” the IMF warned.

Obstfeld said at the time that, without multilateralism, “the world will be a poorer and more dangerous place”.

US-based Indian economist Gita Gopinath has been appointed as the IMF’s next chief economist – the first woman to hold the post.

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