The head of the International Monetary Fund, Christine Lagarde, has expressed concern about the market power wielded by the US technology giants and called for more competition to protect economies and individuals.
Speaking at a press conference to mark the start of the IMF’s spring meeting in Washington, Lagarde said breaking up companies was not the solution, but added that her organisation was monitoring their impact on prosperity, financial stability and the workplace.
“Competition is needed. From competition you get productivity growth and innovation. Too much concentration, too much market power in the hands of the few is not helpful to the economy or to the wellbeing of individuals.”
Pressure has been building in the US for antitrust laws to be used to break up some of the biggest companies, with Google, Facebook and Amazon all targeted by critics.
Lagarde said: “I am not sure breaking up some of the tech titans in this country [the US] or in other countries will be the right answer. It used to be the right answer, but when most of the assets are intangible, how do you break them up? How do you facilitate access and allow market disruptors to operate? I think that is where a lot of new thinking has to be done.”
The IMF is carefully monitoring new digital currencies such as Bitcoin, which it says are prone to fraud and can be used for money laundering. “We have seen a flourishing of cryptocurrencies. There are now more than 100. That has stability implications eventually. We do not think it is systemic at this point in time but regulators and supervisors have to be watchful.”
Lagarde expressed concern at the growing threat of a trade war between the US and China, saying that protectionism posed a threat to the upswing in the global economy and to an international system that had served countries well.
She said the actual impact of the proposed US and Chinese tariffs would be small. “It is more difficult to measure the erosion of confidence. When investors don’t know the terms on which they are trading, they are reluctant to invest. Growth is being driven by more investment and trade, so why damage those engines?”
Britain is one developed country that has not seen its growth prospects upgraded by the IMF over the past year. The Washington-based organisation expects growth of around 1.5% this year and next.
Although the UK economy has performed better than the IMF expected prior to the EU referendum in June 2016, Lagarde said there had been a negative impact from Brexit. “The cloud of uncertainty that covers the British economy is one reason the UK is not enjoying the same upswing as other advanced countries. Hopefully it will clear up as time goes by.”
Lagarde said the UK needed to sort out its new trading arrangements with the European Union and 150 countries around the world. “Once that has been settled, once the cloud has been dissipated, hopefully Britain will be in a better position to benefit from the upswing.”
