Christine Lagarde and Raghuram Rajan talk to each other after the 2012 BBC World Debate in Toyko, Japan. (IMF Staff Photograph/Stephen Jaffe)
Christine Lagarde and Raghuram Rajan talk to each other after the 2012 BBC World Debate in Toyko, Japan. (IMF Staff Photograph/Stephen Jaffe)

A year ago, Reserve Bank of India Governor Raghuram Rajan enlivened the annual spring meetings of the International Monetary Fund and World Bank with a speech on how the Federal Reserve was doing a poor job of co-operating with emerging-market central banks. The drama was heightened when recently retired Fed chief Ben Bernanke rose to challenge Rajan’s claim.

Rajan is back at it. Last week he told graduating students in Pune, near Mumbai, that the rich world continues to play by its own rules. He called on emerging markets to stand up for the themselves. “There is a concern that the rules of the game are not clearly set in the international world,” Rajan said. “We have been too quiet in the emerging markets, saying what the developed markets do is best for the global economy.”

When there is no obvious tension, reporters will strain to create some. That shouldn't be necessary this week as they gather in Washington for the annual meetings. There are plenty of storylines with much at stake. These actually could result in some of the more fascinating meetings in years.

As Rajan’s comments suggest, the emerging markets increasingly are forcing their way into the discussion. The older G7 powers have lost considerable moral authority in recent years because their embrace of aggressive monetary policy has done little to revive the global economy and because the US is blocking an overhaul of voting rights at the IMF. Emerging markets in the past have been diminished because of an unwillingness to step into the spotlight and an inability to unite to counter the influence of the more practiced diplomats from Europe and the US. That could be changing. China scored a major win in coaxing a broad array of countries to join its Asian Infrastructure Investment Bank over Washington’s objections. China has the momentum. It will be interesting to see how it chooses to use it, and if other emerging markets become more emboldened. 

The global economy continues to disappoint and there is no consensus on what to do about it. Christine Lagarde, the IMF’s managing director, last year called the global growth the “new mediocre.” Last week, she said mediocre on the verge of becoming the "new reality." Larry Summers’s secular stagnation hypothesis was gaining in popularity — until Bernanke emerged as a blogger and questioned the idea. The Canadian government’s blind faith in balanced budgets even as the collapse of oil prices rocks the economy shows that politicians could be willing to make do with mediocre. This is troubling because monetary policy is losing its power. As I wrote in the latest issue of Report on Business magazine, the mad scramble by central banks at the start of the year may have made things worse. 

These are the macro issues. The situations in Greece and Ukraine also will loom large. 

Ukraine is negotiating with creditors to lower its debt burden, a condition of its agreement with the IMF. And Greece. The drama never stops. The new government in Athens and European authorities remain at odds. There is no more at stake than the sanctity of the euro zone’s current membership. The tension surely will spill into the meetings. 

It won’t be a dull week. 

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