The annual meetings of the International Monetary Fund and the World Bank are a convenient bully pulpit for the United States, an event where top officials can claim hometown rights to lecture the rest of the world on what it ought to be doing.
This time, it’s the United States in the woodshed as the world gathers a few blocks from the White House in collective exasperation over its superpower host.
“I want to be very clear. What is happening is not good news,” IMF capital markets chief José Viñals said Wednesday in what for the IMF is pretty salty language. “It is completely of the essence that the U.S. political machinery gets its act together and ends this impasse.”
The possible economic fallout from the U.S. budget deadlock and the impending changes in U.S. monetary policy have become an uncomfortable focus for the Obama administration at this week’s meetings. The economic stakes are real — the fund downgraded its forecast for global economic growth this year and said the world needs the United States to keep its economy expanding.
But there is frustration with the United States more generally: A major reorganization of the IMF board is stalled until it is approved by Congress as part of a spending bill, and U.S. budgetary politics have become so complicated that it has slipped far down the priority list.
U.S. officials made their apologies in advance.
“With nearly 80 percent of Treasury staff furloughed, there are disruptions,” a Treasury official said this week. “Global leaders should not mistake this momentary episode in American politics for anything less or anything more than a moment of politics.”
Bank and IMF officials say the United States has not been missing in action from the dozens of work meetings that take place during the annual gathering of world finance ministers and central bankers.
Treasury Secretary Jack Lew met with African officials on Wednesday in a separate session, for example, to discuss the Obama administration’s effort to extend access to electricity on the continent.
For those in the room, however, the cost of U.S. unpredictability is real. Borrowing costs for some African nations have jumped as much as half a percentage point in recent months simply because Federal Reserve Chairman Ben S. Bernanke said the central bank might decrease the size of its monthly bond purchases sometime soon.
The Fed hasn’t acted — yet money suddenly became more expensive, said African Development Bank President Donald Kaberuka.
“We are not insulated,” Kaberuka said. “Clarity, stability, for us is important.”
But Lew did take a pass on what had become a sort of tradition — the pre-meeting harangue of Europe or China or whomever the United States thinks is causing the most economic trouble.
Like a high-end high school reunion, the annual gathering is partly about the formal event but equally about the door knocking, policy panels, think-tank speeches and bilateral lobbying that take place. President Obama missed a similar gathering last week in Indonesia, possibly setting back U.S. trade discussions there; U.S. officials also canceled trade talks scheduled for this week in Europe.
The impact of absence is impossible to calculate — meetings can always be rescheduled and the outcome quite probably can turn out the same.
But “it may mean fewer meetings on the agenda, or fewer issues pursued in these meetings. Either way, the shutdown comes at a cost to the U.S. agenda,” Scott Morris, a former Treasury official who served as a liaison to the World Bank, wrote in a recent essay for the Center for Global Development.
And then there is credibility. Former Treasury secretary Timothy F. Geithner rarely missed a chance to prod European leaders about their slow response to their region’s economic problems — and the risks that presented.
Even among the diplomatic set, turnabout is fair play.
“During the crisis, I was listening to so many people saying you in Europe are not capable of taking decisions, you are paralyzed and all this,” European Commission President José Manuel Barroso told a European news agency last week. “Now I would like to say, listen, it’s not only in Europe.”
This is not just idle banter.
In releasing its main annual economic reports this week, the IMF diverted from its preferred focus — how to make the world economy stronger — to ponder how it could stay out of the ditch being dug by its largest shareholder.
In a financial sector report Wednesday, the IMF estimated that confusion over U.S. policy could wipe out trillions of dollars in bond investments around the world and spark the equivalent of a bank run in parts of the U.S. home mortgage market.