Coming out of [the World Bank and IMF Annual Meeting in] Tokyo, it is clear that this is the time that the international community must go beyond deliberation and act. Indeed, we need to act together to move us out the crisis and to secure our future.

As Benjamin Franklin, one of the Founding Fathers of the US, once said, “We must all hang together, or, assuredly, we shall all hang separately.”

Having just returned from the IMF-World Bank Annual Meetings held in Tokyo last month, one thing that struck me was that the spirit of “hanging together” – multilateralism and global cooperation – is alive and well. If we could just harness that spirit into concrete and bold actions, the prospects for finally overcoming the global financial crisis would be excellent.

With about 14,000 participants from just about every country in the world, our recent meetings provided many opportunities for discussion and debates on the best way forward to act collectively and decisively.

The good news is that there is a shared diagnosis of the problems confronting us. Some important actions have been taken, especially by central banks around the world. There is also broad consensus that firm and consistent global policy coordination will be the best way out of the rut that we are in.

The not so good news is that there is continued uncertainty in the markets and the general public about when policy-makers will get their collective act together to finally put this crisis behind us and pave the way for a better future.

Let me tell you why I am cautiously optimistic that the international community can rise to the challenge:

Global challenges

There is no doubt that the current crisis has reinforced the sense of global interconnectedness. The prolonged weak recovery has made this issue even more acute. The global effects are notable in the slowdown in emerging markets, including in Asia, through trade and financial links. In addition, there are growing concerns in low-income countries about rising food prices and volatile commodity prices, as well as continued instability across the Middle East.

As the latest World Economic Outlook (WEO) shows, a number of things are weighing down the global economy, and downside risks continue to cloud the outlook. Most importantly, there is continued uncertainty about whether policy-makers can and will deliver on their commitments. As a result, global growth is expected to remain sluggish, and if the advanced economies do not implement their commitments, then growth around the world will be hurt further.

Messages coming out of Tokyo

The key challenge facing many parts of the world today is to get beyond the crisis and restore growth, especially the need to reduce the unacceptably high levels of unemployment in so many countries. We know what it will take to get us there: a package of policies that includes accommodative monetary policy; the right pace of fiscal adjustment that does not undermine growth but has solid and realistic plans to reduce debt over the medium term; completing the unfinished agenda in financial sector clean-up; and structural reforms to boost productivity and growth.

And, we should not forget that we still need to rebalance global demand in both advanced and dynamic emerging markets.

One clear message coming out of the Tokyo meeting is that without growth, the global economy is in peril. Growth is the single most important thing needed to reduce unemployment, attack the huge legacy of public debt, and address demographic challenges like the large numbers of despondent young people in some countries and the needs of rapidly aging populations in others.

Another clear message is the need for action to improve the financial system so that we move beyond the system that gave us the crisis in the first place. Despite some progress, there is still a large unfinished agenda, which is still too complex, activities are still too concentrated in large institutions and the spectre of “too important to fail” still haunts the sector. Repeated examples of excesses and scandals show that the culture has not really changed. 

So what needs to be done? Again, global cooperation is essential to finish the job of reforming the financial sector. This includes better regulation, better supervision, better resolution of cross-border entities, sensible incentives in financial institutions and a level playing field for the sector.

But, we seem to be losing momentum and many in the industry are concerned about the costs of new regulations and strengthened supervision. A recent IMF study shows that these fears are exaggerated. The bottom line is that the costs of reform are affordable, but the costs of complacency are not. We have been through this before and we should know better.

Need for global solutions and resolve

Coming out of Tokyo, it is clear that this is time that the international community must go beyond deliberation and act. Indeed, we need to act together to move us out the crisis and to secure our future.  

Today’s global challenges require global solutions. They can only be found and deployed through increased global cooperation and responsible leadership on the part of everyone involved – policy-makers, the private sector, civil society and community leaders.

The experience of the recent past is clear: when the international community takes actions in a coordinated way – whether through international institutions like the IMF, the G20 or other forums – the market listens, confidence returns and growth revives.

The current breathing space that markets are providing is a window of opportunity that needs to be seized if we are to make a decisive turn in this crisis. The time to act is now.