These objectives of macro-economic policy – monetary and overall fiscal policy – will certainly be familiar to you in this country; they are at the heart of the policies being pursued right across Europe;  BIS Review 36/2001  1  and they are the policies endorsed, too, by all the members of the IMF in the Madrid Declaration adopted at the IMF Annual Meeting in 1994 and expanded and updated two years later. Of course on occasion the flesh proves to be weaker than the spirit – and achieving these macro-economic objectives is not easy in practice even as a technical matter. But the intention – the international commitment to macro-economic stability – is clear. Acceptance of the aim of macro-economic stability served to bring into sharper focus the structural, supply side, of the economy – that is the whole raft of influences that can affect the underlying growth rate of capacity and thus the growth rate of aggregate demand that can be sustained. And here, too, there has been a strengthening international presumption in favour of open markets and free competition – both domestically and internationally – with a continuing strong presumption against predatory trade or exchange rate manipulation. The justification is that undistorted competition contributes to potential global economic growth through increased efficiency and the more effective allocation of productive resources. Faster growth in turn provides a more favourable context for addressing social concerns, including the issue of poverty.
The international presumption in favour of free markets in itself is somewhat remarkable, given that, at the micro-economic level, increased competition invariably constitutes a threat to established producers – and their employees – who might well be tempted to urge protection in one form or another on their national governments. Consumers, who benefit from such competition, tend to be less vocal or well organised. The threat of protectionism is never, therefore, far away. But in fact the presumption in favour of competition has proved encouragingly robust. And that is not just in relation to international trade. There is a parallel presumption in favour of freedom of capital movements, and much greater openness around the world to foreign investment. Among other things on the supply-side, there is a shared emphasis on the need to direct public spending to developing human resources through education and training, to effective health care, and affordable social safety nets. There has been a global trend to privatisation through which governments have increasingly returned essentially commercial activities, in which they have no necessary comparative advantage, to market disciplines. And there is a common recognition of the need for reforms in labour and product markets designed to reduce distortions which impede the efficient allocation of resources. Now I do not pretend to you, Mr Chairman, that the international policy consensus in favour of macroeconomic stability and supply-side reform is fully articulated, particularly on the supply side; nor do I claim that it is subscribed to in its detail equally in every IMF member country.