Christine Lagarde at Davos: Europe Must ‘Guard Against Relapse in 2013’
2013 will be a “make-or-break year for the global economy,” said Christine Lagarde, the managing director of the International Monetary Fund. “We had a really tough 2012, and yet a lot has happened,” from new policy efforts in Europe to a change of leadership in China. In the coming months, the efforts to calm the financial markets should bear fruit in the real economy, she said: “The question is whether policymakers and governments will continue to implement the policies that they have announced.”
Minutes after delivering a well-received keynote speech at the World Economic Forum in Davos, Switzerland, Lagarde spoke with Newsweek and The Daily Beast editor in chief Tina Brown at a dinner presented in partnership with Credit Suisse. The event, which highlighted women’s leadership, also featured Egyptian democracy activist Dalia Ziada and was cohosted by Yahoo CEO Marissa Mayer, DuPont CEO Ellen Kullman, and Pamela Thomas-Graham, chief talent, branding, and communications officer at Credit Suisse.
Echoing Davos’s stated theme of “resilient dynamism,” Lagarde, the first woman to lead the IMF, struck a note of guarded optimism. She emphasized the need for vigilance and for policymakers to continue to do better. In her speech, she noted that the IMF expects global growth of just 3.5 percent this year. “The short-term pressures might have alleviated, but the longer-term pressures are still with us,” she said. On Wednesday, she noted, the U.S. Congress announced a deferral of the debt ceiling until May 18. That’s a positive sign, but not nearly good enough. Both the United States and Japan have to focus on a medium-term plan to reduce deficits, Lagarde said. In Europe, she added, “a lot has taken place—too slowly, granted—but a lot has taken place,” She cited the creation of the European stability fund and aggressive monetary policy. While a collapse in 2012 was avoided, “we should make sure we guard against the relapse in 2013,” she said. “Don’t relax.”
It’s rare for the head of an global institution like the IMF to be introduced as a “subversive.” But that’s precisely how Brown described the 56-year-old lawyer. “Christine is a subversive in the very best sense of the word,” Brown said, citing Lagarde’s plain-spokenness and “eagerness to punch at complacency.”
Lagarde has gone against the grain of the European financial establishment by speaking out against austerity. In her speech at the World Economic Forum, Lagarde said Europe should continue the “necessary fiscal adjustment at the country level, and supporting demand, especially with further monetary easing.” The IMF’s in-house economists recently took another look at the impact of stimulus efforts and concluded that such efforts offered more bang for the buck than previously thought. “I feel good that we did it,” she said.
The ongoing debate over austerity highlights the larger way in which politics can pose a threat to economic recovery. “In many countries, there is the tyranny of the minority,” Lagarde said. In the U.S. and elsewhere, small minorities of political actors are unwilling to see the world economy as a tightly interconnected whole and prefer to look only in their own backyards. “It takes brave people to raise their voice and say, ‘We all matter to each other,’” she said.
Lagarde, who was the first woman to run the international law firm Baker & McKenzie, also spoke of the need to value women in the workplace and in the world’s political systems—at the highest levels of finance and in everyday life. “Here are some numbers: 50 percent of cars, 50 percent of computers, and 85 percent of consumer goods are bought by women,” she said. “It’s not a claim. It’s just the market.” To continue to thrive and prosper, she said, all countries must figure out ways to make the workforce and educational systems more open to women. Lagarde noted that when she met with corporate leaders, she would ask about the representation of women on the boards, and she carried a list in her back pocket of women qualified to serve on boards. When Brown asked why there weren’t more women running banks, Lagarde cited the barriers imposed by strong networks in the financial world and “the barriers we have in our own mind.” Two women are running banks in Iceland, she said—banks that went bust during that country’s financial crisis but are now recovering.
Lagarde’s frequent travels to financial hotspots—Africa, Asia, “one too many trips to Brussels with my friend George Osborne” (who was also present at the dinner, which included George Soros, Charlize Theron, and Gov. John Hickenlooper of Colorado)—have given her a unique perspective on the trends shaping the global economy. The world’s economic and political systems are being reshaped by megatrends: the growing demand for individual empowerment, the migration of political and economic power across the world, a large generation of young people coming of age in the developing world, and resource scarcity.
But from Burma to the Arab Spring, Lagarde said she believes individuals help drive change and progress. “Each of us can make a difference,” she said. Her best moment, she added, was presenting an award to Aung San Suu Kyi, the Nobel Prize–winning democracy and human-rights activist. “She’s just such an impressive hero, completely unassuming and low profile,” Lagarde said.