Opening Remarks
:
David Lipton, First Deputy Managing Director, IMF
Moderator
:
Martin Wolf, Chief Economics Commentator, Financial Times
Speakers:
Alberto Alesina, Professor of Political Economy, Harvard University
Paschal Donohoe, Finance Minister, Ireland
Felipe Larrain, Finance Minister, Chile
Lídia Pereira, Member of the European Parliament
Luca Visentini, General Secretary of the European Trade Union Confederation
While there is broad agreement on the economic benefits of
structural reforms, they often carry short-term costs while most of
the economic gains from reforms only materialize over the longer
term. On this background, the panel discussed the political economy
of reform and the challenges with implementing structural reforms.
Key Points:
-
Reform priorities. While panelists agreed that the goal is to
achieve sustainable growth, there were different views on reform
priorities. Alesina called for reforms to focus on labor
market flexibility, trade liberalization, pensions, and social
mobility, while Visentini underscored the need for reforms
focused on social protection and wage inequality. As Pereira
and Visentini noted, reforms should prepare the economy and
society to challenges ahead. Donohoe highlighted that reform
design is not neutral but reflect social values and political
judgments.
-
Reform implementation. Timing, allocation of benefits, as
well as the public narrative are important considerations in reform
implementation. Donohoe noted that the political and economic
cycle matter, as the ability to make the case for reform are greater
during economic booms. Larrain underscored the importance to
present the benefits and the need for change in a constructive
narrative. In this sense, Donohoe and Pereira, and
Visentini emphasized the crucial role of social
dialogue.
-
Political-economy challenges. Panelists noted the challenges
associated with the political process in approving reforms,
highlighting possible electoral costs to the incumbent. Alesina
stressed the problem with vested interests and lobbies blocking
reform. Donohoe noted that the absence of political consensus
may overwhelm the reform agenda. In this sense, reform
implementation may call for a mix of legislation and regulation, as
noted by Larrain.
Quotes:
“There is no template how to carry out successful structural
reforms.”
David Lipton
“The key is identifying the binding constraints on growth and
design a comprehensive reform agenda where reforms complement and
reinforce one another”
David Lipton
“Social dialogue is key for implementing any kind of reform”.
Lídia Pereira
“In academia, you win the argument, in politics, you can win the
argument and lose the vote.” Felipe Larrain
Contributor: Daniela Alcantara
