Moving the Needle

Moving the Needle Maurice Obstfeld discusses his tenure as the IMF’s chief economist

Retiring as chief economist of the International Monetary Fund at the end of 2018, Maurice Obstfeld shares his thoughts on trade tensions, widening inequality, the importance of education, and relations between United States and China in an interview with F&D’s Gita Bhatt. Obstfeld plans to return to the University of California, Berkeley, where he was a prominent academic economist for 24 years and cowrote two leading textbooks on international economics. His successor at the IMF will be Harvard University’s Gita Gopinath.

F&D: What worries you most on the macroeconomic front?

MO: The worries are clearly set out in the World Economic Outlook: trade tensions and adjustment to differential financial conditions in an environment of much higher private and public debt than we had in the past.

Longer term, wage and productivity growth is an issue. How do we spur innovation?

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

That will also help mitigate some of the adjustment issues that might be related to technology and trade. 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. 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. These trends poison our politics.

F&D: The United States and China are world’s largest, most dynamic economies. How do you see the economic relations between the two playing out?

MO: Their disagreements go way beyond economics. They go fundamentally to the issue of global leadership. If you are a country like the United States, which has been a global leader and has shaped the global governance structure, how do you manage this relationship, which at once offers opportunities for cooperation but also hazards of conflict?

Moreover, how do you do it dealing with a system that is very, very different from yours politically? If you look at the approach the Obama administration took to the trade relationship with China...