The IMF recently published its updated outlook for the global economy. The good news is that recovery from the crisis seems to be finally picking up some momentum after a decade of sub-par growth. The bad news, as they see it, is that this momentum could be stopped in its tracks if the sword of Damocles that is the threat of protectionism – whether emanating from Trump’s White House, May’s Westminister or elsewhere – falls. This could throw the process of globalisation into reverse, they worry, and slow growth in the size of the economic pie.
Alongside their biannual economic forecasts, the IMF also publishes its latest thinking on various themes. In light of increased focus on the issue of inequality since the global financial crisis, to which the recent rise in political populism has been attributed, the IMF provides a timely chapter on “Understanding the downward trend in labour income shares”. It explores the reasons why the share of wages in GDP has declined markedly – in advanced, emerging and developing economies alike – in recent decades. Between the mid-1970s and its 2006 low, the labour share has declined from around 55% of GDP to around 50% in advanced economies, before recovering only slightly since the financial crisis, while income inequality has increased significantly over the same period.