Appointed chief economist of the World Bank in June 2008, Lin barely had time to warm his seat before the great recession erupted. Here, he provides his reflections on the events of that time, looking at the causes of the crisis, why they were so serious and their long-term consequences.
He suggests that the crisis and the global imbalances both originated with excess liquidity created by US financial deregulation and loose monetary policy, and recommends the creation of a global Marshall Plan and a new supernational reserve
The consensus that structural reform of debt ridden countries is the only answer to their problem is challenged here. Instead, he suggests that countercyclical fiscal policies should focus on projects that create jobs now and enhance productivity in the longer term. These should include investments in education, infrastructure and the green economy.
He is optimistic for the growth prospects of developing countries. China’s move up the global value chain, he says, will free up an enormous reservoir of employment possibilities that low income countries can tap to start their own dynamic industrialisation.