Christine Lagarde Delivers the Kissinger Lecture in Foreign Policy and International Relations

. >> Members of congress and
distinguished guests, welcome to the Library of Congress and the 8th Kissinger Lecture. The
Kissinger program is made possible by generous donations and
admirers of Dr. Kissinger who was the 56th secretary of state
of the United States and a recipient o of the Nobel Peace
Prize. Before we move on, we join America in mourning the passing of former
president George HWBusH. The Kissinger program
celebrates statesmanship and foreign policy. This is in
keeping with exactly that tradition. We all wish the
extended Bush family and has many close friends the
best in this difficult time. We mourn the passing also last
month of Dr. James billing ger. His distinguished career here at
the library spanned 2 years. The Kissinger Lecture has been
delivered by heads of state, including
Tony Blair, and former president of Brazil,
former president of the French republic, as well as former United States
secretaries of state. We will have an address by our
Kissinger lecturer, madam Christine Lagarde, followed by a conversation with
Margaret Brennan, CBS News correspondent
and host of Face the Nation. I now introduce Dr. Carla Hayden, the 14th Librarian
of Congress. [Applause]
>> CARLA HAYDEN: Good evening, madam Lagarde, members of congress,
and distinguished guests. We are deeply honored to welcome to
the Library of Congress tonight Christine Lagarde, managing
director of the international monetary fund.
As you can see, we are in the great hall, of the library's Thomas Jefferson building,
surrounded by visual art, symbolizing the
progress of civilization and the traditions of knowledge and learning, a most
fitting venue for the 8th Kissinger
Lecture. Christine Lagarde is a
distinguished public servant with a deep knowledge on of the
world economy and the ways financial architecture can shape
the lives of individuals in countries around the globe. Among her many high ranking
appointments in the private and public sector, in June she
became the first woman to hold the post of finance and economy
minister of a G7 country, later as
chairman of the G20 she set in motion a wide
ranging agenda. She later became the 11th
managing director of the IMF and the first woman to hold that
position. On February 19, 2016, the IMF
executive board selected her to serve as the managing director
for a second five-year term. She has tackled some of the most
challenging financial issues related to European integration,
international trade, and the development of
global economic governance. However, I am excited to be the
person that will deliver breaking news. The room just got a little
quieter. Well, today Forbes released its
100 Most Powerful Women in the World. And Madam Christine Lagarde was
voted the third most powerful woman in the world.
[Applause] [Cheers]
>> CARLA HAYDEN: So, ladies and gentlemen, please join me in
welcoming Ms. Christine Lagarde. [Applause] >> CHRISTINE LAGARDE: Thank you
very much, Dr. Hayden, dear Carla, for this
generous and brief introduction. They are the best. They are the
best. I'm so happy to see many of you
here, my friends, and very much looking forward to the
discussion that we will have after these remarks with
Margaret Brennan. Thank you also, Mr. Haskil, for the warm welcome you
extended to all of us. He could not be here tonight but
I had a conversation with him just before arriving at this beautiful
Library of Congress. And Henry Kissinger was
delighted that we were gathering tonight and he has asked me to express to all of
you his best wishes and very strong support for continuing
the lecture that he started back in 2001. I would also like to indicate
myself that somebody else is very much in our thoughts
tonight, and that is obviously former President George H.W.
Bush is all his family members. We all mourn his passing. Many
others are trying to enter into the rotunda as we speak. And we celebrate the arc of his
life. The pilot who bravely fought in
World War II, the president who helped
heal division after the Cold War and the statesman who believed in the
power of international cooperation. I was privileged to meet him on
several occasions up in Maine and I could appreciate what a
kind, generous, and noble man he was. So tonight, tonight is December
4th. It's actually an important date
for a particular reason that I will not mention to you now.
You'll have to wait until the end of my remarks. And you're
not allowed to look at your cell phone please.
[Laughter] No.
I have to confess something here. When I walked into the Great
Hall and was given a lovely private tour
by you, Dr. Dr. Hayden, three thoughts crossed
my mind. The first one was this young
French student who was studying for her political sciences dissertation back 42 years ago and spent time
in the reading room. Thanks to the Library of Congress I was
able to better research the work I did on Ralph Nader and the
American consumerism in those days. Thank you. I'm in your
debt. The second person I thought
about was my son, a young architect. He would love this
place. He would love it. The space, the height, the
creativity. And the third thought I had was
about my country, France. And maybe another country, actually,
that I was just visiting a couple of days ago, Argentina.
Why is that? Well, when this structure was
completed, in 1897, the chief engineer
remarked, I quote, that the Palagonia, the
Paris opera house, was the prime suggestion for the new Library
of Congress. That makes sense because the
Paris opera house was completed 20 years
earlier in 1875. Now, I think the French may have borrowed a little bit from
others, because Tiat Cologne in buenos
Eros was finished in 1857. If you look
at these two buildings, it tells you something. First of all, intellectual
property was of great interest across borders, even back then,
attitude least among architects, who happily borrowed from each
other, learned from each other, and became inspired as a result.
Second, it reminds us that they understood that building
something lasting means linking the solid foundations of the past with a
spark of imagination. You can't just copy-cat. That kind of creativity and
long-term vision rooted in history and informed by our
successes and failures from the past is my theme for this evening.
First, where have we been? How has creativity and
international economy cooperation helped bring more prosperity and more peace in the
world? And second, where can we travel
together? How can creativity and informed
visionary thinking help adopt the international system to our
current challenges? So let me begin first with a
little bit of shared history, between the
International Monetary Fund and the United States of the last 75
years. In the first half of the 20th
century, the dominant economic and
military powers used force to assert their self-interest at
enormous cost in terms of human life and physical
destruction. The tragic result compelled
nations to find a better way. It only took them two wars, and atrocities along the way, but in
1944, they found it. The United States emerged as the
major global power and did something unprecedented. Informed by the devastateing
ultimate outcome of of the Versailles treaty which we just celebrated the 100 year an
versesy, the United States decided to go
forward with cooperation. Dr. Kissinger called the innovations
of the postwar period, I quote, a great birth of creativity that
brought security to the world. How did the U.S. do it?
Out of generosity? Yeah. With consideration to their
self-interest? Yes. And with a little help from some
of their friends. Let us look at that turning
point of 75 years ago. And think first of the creation
of the system itself. The Principal architect, John Kains
of the UK and Harry Dexter White from
the U.S. were deeply influenced by the
two wars. They witnessed where there were witnessed relationships that had foundations in the treaty of
Versailles. The result was imploding world
trade that deepened the depression and caused massive
economic and social upheaval. Ultimately, these pressures gave
rise to nationalist and pop list
movement ul populist movements and
eventually catastrophe. Emerging from the second World
war, the U.S. and some 40 countries gathered
in New Hampshire and decided to create the International
Monetary Fund and the World Bank. They tasked the fund with
promoting international monetary
cooperation, supporting trade and economic growth, and
discouraging policies that would harm prosperity.
It was revolutionary. It was visionary. And guess what? It worked. From the very beginning, the IMF
helped countries address major new
challenges through collaboration. Complimenting the Marshall plan
we at IMF helped Europe rebuild from
from the horror of war. We helped to implement policies
to promote growth. It's a mission we continue to this day.
As you may have recently seen in countries like arg Argentina,
Egypt, Ukraine, and many others. The genius of this collaborated
system they invented was it was designed to adapt and change. And in the early '70s, that
change arrived. Some of you might remember that
speech, a land mark speech, the
challenge of peace. President Nixon suspended the
U.S. dollar currency into gold and that shocked the world and forced a
year-long negotiation that led to the modern floating exchange rate
structure, away from the fixed gold reference
structure, moving into floating exchange rate structure.
System that is still today in place, in many corners of the
world. But at the time, some thought
that this particular change would mean the end of the IMF.
But all our members at the time, including the United States,
knew that the goal of stability and prosperity extended well
beyond fixed exchange rates. They recognized the benefits of
the global financial firefighter
that could help countries in times of need.
They built on what worked, changed what did not, and they adapted.
And we moved on. 1973, the oil crisis, the IMF
created new tools, to help countries
facing an energy emergency in line with the funds rule to help
smooth shocks and prevent harmful spillovers. As the debt crisis hit Latin
America in the '80s, the IMF with creativity ideas and
support from the United States stepped in to calm the waters. After the fall of the Berlin
wall we took on a new challenge which was happening the Soviet Union bloc
nations to transform themselves from centrally planned to free
market economies. In the 1990s , the fund assisted countries in
overcoming first the Mexican financial crisis and then the
Asian financial crisis. Throughout all these challenges,
we continued to help countries throughout the world with their
fundamentals, their fiscal and monetary exchange rate policies
and with steps to build stronger economic institutions. Because without that
macroeconomic stability, growth cannot prosper.
These efforts enabled better policies that opened markets, boosted
trade, created jobs, and unleashed
economic potential. And then came 2008, and the
financial crisis, the global financial crisis. Most of the other crises that I
have referred to applied to particular regions. This one was the first of a
completely global nature. The ensuing great recession reminded
us that international cooperation was essential, not
optional. As the French finance minister at the time, I
certainly participated in that exercise. All G20 nations and the federal reserve took trued extraordinary
steps to save the system. Veterans, when we sort of come
together, we just wonder how we did it, and how much we transgressed and
had to violate principles and rules and
reinvent. But we helped secure the global
economy. In the decade since the 2008
financial crisis, we supported economic programs in 90
countries. And adapted our lending
instruments, including zero interest loans to
help low-income countries. But the global economy did not
only need liquidity and stimulus, it also needed to
reform its financial architecture. And we worked
with our membership to build a stronger financial
sector so that we could, together, limit the consequences of what will be,
one day, the next crisis. So we learned from the past. We
got creativity. And we changed for the better.
And none of that, none of that, would have been possible without
the United States. This country challenged the international quarter when it
needed challenging. It forged compromise when compromise was
necessary. Why? Why did it do all that? Benevolence? It did so because a stronger and
more stable world paid dividends for the United States. It
enabled the U.S. to enjoy some of the longest
runs of sustained economic growth the modern world has ever
known. Since that meeting in
Britainwoods nearly 75 years ago, real U.S. GDP increased by a factor of
eight. The average American's real
income has quadrupled. This did not come at the expense
of other nations. On the contrary, this country's leadership paid the way not for
decades of opportunities here in America, but also growth that spread across
the world. Now, today, that landscape is
shifting again. And part of this change is
driven by geo politics, and the shift in some economic power
from West to East. Part of it by the rise of
non-state actors, including multinational
organizations and corporates. Part of it is driven by
technology, and the rapid acceleration of everything in
our lives. As I'm sure you know, Dr.
Hayden, 90% of the world's data was created just over the last
two years. Now, I have to say as a daughter
of two classics professors, I know my
parents would have found that very, very depressing.
[Laughter] But the truth is that everything
moves faster. Information, money, disease, you name it. And these transformations can
bring enormous opportunities but can also create massive risks.
Why is that? Because more than ever before,
at least as was demonstrated in 2008, what happens in one nation is going
to impact all nations. From weapons of mass destruction
to cyber security to the interconnected financial system, many of our current challenges
recognize no borders. So when support for
international cooperation falters, we must remember the lessons the United States
and her allies taught the world over the last 75 years. It's a
big lesson. Solidarity is self-interest. And that principle endures in
our changing world. Our challenge now is to yet again adapt and reform. So I believe that this year,
2019, can be another turning point in our journey. A moment when the world delivers
a new burst of creativity in solving
our shared challenges. There's something there which
you can't see but from which we can draw inspiration. Correct
me if I'm wrong, but it's something like, they build too
low those who build beneath the stars. It's written up there.
Imagine what the world could be if we were to build beneath the stars,
the docks as I call it, or the age
of anger. Let's imagine. The age of anger. By 2040, inequality could exceed
the levels of the gilded age. Strong monopolies and weak
governments with ineffective domestic
policies could make it impossible for startups
and entrepreneurs to succeed. Health breakthroughs could allow
the richest to live past 120, while millions of others would suffer from
disease. Social media would bombard
populations, underscoring the difference between their reality
and the possibility of a better life. And the aspiration gap would fuel
anxiety and anger. Trust would break down. The
world would be more connected digitally, but less connected
every other way. International cooperation for
the benefit of all would be a concept best studied in libraries like this
one, but rarely practiced on the world stage. Due to the supremacy of national
interest and a singular focus on domestic policies.
So borrow from Dr. Kissinger's world order, we
might be, I quote, facing a period in which forces beyond
the restraints of any order determine the future. That is a very dystopian
scenario. Isn't it? Not one that we designed, and
certainly not one that I believe can be or
should be our destiny. Neither does Dr. Kissinger for that
matter. We have overcome existential threats before and
we can do so again. Think of 2019, if we make it the
start of a different kind of AI. Everybody thinks, oh, she's
going to talk about artificial intelligence. No. Age of ingenuity. This would be a future fueled by
ingenuity and cooperation. 2040, I'm in a new scenario now. We would see flourishing
economies redominantly running on
renewable energy. Women would be fully empowered
in the workforce proven to be an economic game changer. Health
care portability would reflect the changing nature of work in
the digital economy. Corporation would embrace social responsibility as part of their
business model because they would be rated on that, as well. We could save lives and millions
of jobs. We could see an end to mass immigration and
peacefulness between nations would prevail.
Am I being too optimistic? Of course!
You know the difference between the optimist and the pessimist?
They're both wrong, but the optimist is happier.
[Laughter] So I have to be optimistic. Because I'm thinking about the
world my grandchildren will inherit. But it presents us with a
fundamental choice: Stand still and watch discord and discontent bubble over into
conflict conflict, or move forward, reimagine the way
nations work together, and build prosperity and peace.
Okay. Nice words. What does it mean in practice? It means
countries working together, to put people, all people, at
the center of all our efforts. Focusing on real results to
improve their lives. It also means governments and institutions being more
transparent and accountable which includes
listening to more diverse voices. It means ensuring the
economic benefits of globalizations are shared by
many, not just a few. I call that the new
multilateralism. You might just call it common
sense if that word suits you better. But let me be very clear here. Good international cooperation
is never going to substitute for
good domestic policy. Of course, individual countries
have the responsibility for the well-being of their citizens. In fact, strong domestic
policies can form the foundation for effective international cooperation, and
in our modern world there are some issues that can only be addressed through
international cooperation. I want to discuss four such
issues. I promise I'll be brief on each of the four. But I think they are all
important. And to be successful in
delivering on those four, we will need
creativity and we will need cooperation. Let me start with those, the
first one. First one is trade. I've been saying for some time
now that we need to fix the system. More recently, I've
been urging countries to actually deescalate
trade tensions and it was encouraging to see over the
weekend some progress made at the G20 meeting in Buenos Ere
Aires. We must continue the
deescalation and improving trade for the future. It means agreement and also
perfecting intellectual property rights
without stifling innovation and getting
rid of economic rents. New trade agreements would
release the potential of e-customers and trade
in-services. All of this is critical not for the sake of trade, although Montes
que would argue with me. He would say where there is trade,
there is good manners. He's right. Montesque is always right. No, it's critical because trade
gives opportunity and accelerates innovation, and we
need both. Secondly, we need international
taxation cooperation. Companies now have world-wide
presence. Even when they're small. In the old days, you had to be
one of those top guns to be international. Now, very small companies can be
very international companies, but governments have not figured yet a
world-wide answer to tax. And right now, too many tax
dollars are left on the table, thanks to tax
optimization and the bad kind of creativity. So countries need to work
closely together to collect what is
owed, where it's owed, and avoid a race tax
to the bottom. They can close the loopholes
that leads to base erosion and profit shifting. We are working with our partners
so that they can share best
practices and revise regulation for a digital economy in which
many companies have no single established base of operation,
and yet they do operate. Why do we need this? Why do we
need revenue? Because all countries should be investing in
their future. And public and private funding working together can strengthen
infrastructure, improve education, and prepare all of us
to adjust to the technical transformations of our
doorsteps. When the return on those investments are so far
away, it's unlikely the private sector alone will actually
invest. My third issue is our climate.
From the recent major hurricanes in the Caribbeans to the wildfires
in California, so the Pacific, the dangerous effects of climate
change are becoming more tangible by the day. New U.S.
government study shows the economic impact from climate change could
reduce America's GDP in the coming
decades. The collaborative agreement in
Paris in 2015 is probably the best
toolbox we have to start fixing the
planetary challenge and move to a zero carbon economy. It's also ideas I've tried to
highlight tonight. Creativity, visionary thinking,
and a commitment to the global good that serves our best
interests. This is for the survival of
future generations. Now I mentioned three issues:
Trade, tax, climate. Each of them is worthy of their
own Kissinger Lecture. But there's one issue that I
believe is the bedrock for progress nearly everywhere else.
And that is why the fourth and final area I want to discuss is good governance, free from the
shackles of corruption. The simple fact is that without
confidence in our institutions, none of the change we seek will
be possible. So let me focus on that briefly. It's my fourth
and last key point. Why is corruption so corrosive?
Because when people start believing the economy no longer works for
them, society no longer works for them, they start
disconnecting from economy and disconnecting from society.
Corruption stops economy's vitality and siphons off desperately
needed resources. Money diverted from education
and health habituates inequality and limits the possibility of a
better life. Do you know the annual cost of
bribery alone — and corruption is more
than just bribery — but the cost of bribery is estimated to be at $1.5
trillion. That's roughly 2% of global GDP. Millennials feel the problem
acutely. A recent survey of global youth
reveal that young people identify corruption, not jobs,
not better education, but corruption, as the most pressing
concern in their own countries. There's wisdom in this insight
because corruption is the root cause of many of the economic
injustices that many of these young men and women are facing. And that is why, with the
support of our entire membership, we are going
to scrutinize anew the impact on corruption on a country's
macroeconomic health. So far we've done quite a bit of
work on anti-money laundering and combating terrorism. We've done that with 110 of our
country members. But it's only a small part of the wider work needed to promote
good governance. Investing in institution is indispensable,
and also to verify that those institutions actually
deliver. Because likewise, corruption
knows no border. Think for a second how Sentec is changing the economic
game. New innovations can be used by
cyber criminals to funnel illicit financial flows
on a worldwide basis. This is not one nation's problem
or within one nation's ability to solve. It needs
cross-border collaboration. But it is fixable. The same innovations that create
cross cross-border challenges can also be used to help us
fight back, through biometrics, block chain, and more.
We can find better ways to build a better, safer system for the
long term. Governments can and must work
with the world's best engineers to build
stronger cyber security systems to protect people's bank accounts, their
well-being and even hotel bookings. This is common good we must
choose to support. If we take — if we take the
challenge of corruption as the model of cooperation that we can actually implement, it can be a
model for the other topics that I've mentioned. It can be the sign that the
brotherhood of man, as Cains called it, is
ready once again to meet the call of history. Except, by the way, at this
time, women will play a role. [Laughter] [Applause] You should have seen the photo
of those who created Brednews in 1944.
44 men. Full stop. [Laughter] So I think it's by doing that we
can start restoring trust, which is probably the most precious and most
in-demand commodity in our society. This is how we begin
to adapt once more and reimagine that international cooperation
that we need. New, before I conclude, we have
one more thing to do. I began my remarks by mentioning
that December 4th was an important date. There's one
person who is not allowed to answer that question. That's
Mrs. Harmon who is the president of
the Woodrow Wilson center. Because on December 4th, 1918,
exactly 100 years ago to this day, president Woodrow Wilson
set sale for France to help negotiate what he hoped would be
a lasting peace. He became the first U.S. — the first sitting U.S.
president to travel to Europe. And in some way, some ways, we
can trace the origins of modern creativity
and visionary thinking in U.S. foreign policy to this date. It's also a humbling reminder
that our plans do not always work out as
intended. But it is also a signal that we must try and try
and try again. We must build on what worked, change what does not, and continually
evolve, improve, imagine a better future for all people.
It was the vision that inspired the leaders of this country, and it
must be the mission that will guide us in the days ahead.
Thank you very much. [Applause] >> Thank you, Madam Lagarde.
[Applause] >> Thank you, Madam Lagarde.
And without further delay, I want to welcome to the stage,
please join me in welcoming to the stage, Margaret
Brennan, moderator of CBS Face the Nation.
[Applause] >> MARGARET BRENNAN: Thanks to
all of you. What a gorgeous venue to have
this conversation. And I'm privileged to have it
today. You know, at your introduction,
it was pointed out you were named one
of the third most powerful, I believe,
between Theresa May and chancellor
Merkell in terms of the most powerful women. I think the correction needs to
be made you're actually one of the most powerful individuals in
the world through the work you've done to stabilize the
world economy. That's why I think you laying
out your vision as you have, there's a lot of things we want
to break apart here. Let's start off with what's
happening today. You're seeing recession fears
come out once again. It was a bad day in the market. There
are some who looked at what happened at the G20 and said
there wasn't progress. You said you saw some. How do you define
some progress. Where is the hope you're seeing? >> CHRISTINE LAGARDE: Well, I
might be a little bit bias because I was attending the G7 leaderring
meeting in Canada and the APEC meeting in paw paw new
genie. And the APAC meeting there was
no communicatetion. People could not agree on anything. So
the fact that leaders agreed on a set of principles, issues,
points, the fact that there was that, was in
a way reassuring. So that's — not a new
agreement. I think it was probably not as strong as some
expected it, but it really touched on many critical issues.
The language was not exactly according to sort of the history of communicay drafting. There was clearly a consensus
trade was critically important. Trade had to be conducted
according to rules set by an institution, the
WTO, that had to be reformed. There
was clear agreement on the principles of reform. How it's
going to be reformed is another matter and it's not going to take a few weeks but probably
more months than weeks. And there was willingness to
engage on the part of all. And part of the night was not
such a bad outcome. >> MARGARET BRENNAN: You mean
in the meeting between Xi Peng and the
president? >> CHRISTINE LAGARDE: Yes.
>> MARGARET BRENNAN: Is 90 days enough to come to an agreement between
the two largest economies in the world?
>> CHRISTINE LAGARDE: I'm not sure the objective is a trade
agreement, but at least there's a framework under which they
agreed to move forward and to address some of the key issues.
You know, I think what's clearly important is to come to an
understanding on both sides. To agree on some key principles. To have definitions of what is a subsidy, what warrants
intellectual property right protection, and what is the state on enterprise, and so
on and so forth. So it is complicated and it is
going to take time. But the willingness of these two presidents to move forward, and
to agree to discuss those issues, I think is, compared
with what we have just gone through, is progress. Yes.
>> MARGARET BRENNAN: And the nervousness we're seeing in the
markets, you're saying, look, they're talking.
>> CHRISTINE LAGARDE: Yeah, yeah, yeah. We can't just react on a daily
market variation. These things take time. Markets get jittery and react
sort of off the cuff on the news of the
day, but I think those are, you know, much longer-term issues
that warrant time, thinking, considerations, and,
you know, it's also a clear shift that we are seeing and which is being
acknowledged and will turn into, I hope, some
resolution. >> MARGARET BRENNAN: I think it
was, in listening to you sketch out going back to Brettenwood to the president,
I think it's a good reminder to many people that the U.S. was part in parcel of creating
many of these international institutions, because now in our
daily political life, they're described or at least felt or
perceived by some to be against U.S. interest. That is how some of the more
popularist rhetoric has described institutions like
yours. Today, Mike Pompeyo listed what
he felt were all the flaws of
international or organizations and even the IMF failed to live up to what it was meant
to do, which was rebuild Europe. That
these measures are actually hurting the world, not helping
it. What do you make of his speech?
>> CHRISTINE LAGARDE: First of all, I did not read his entire speech.
Bits and pieces were picked up. I will very carefully read his
speech. I've heard this austerity
comment made in many instances. When we are called upon to help
a country that is in very dear
financial difficulty, we have to restore stability. We have to restore public
finance discipline discipline. We have to empower the
authorities with financing. That's one thing we do. But we are also an instrument of
macroeconomic sanity. If we're called upon to act,
because there was mismanagement, there was poor public finance organizations,
there was poor monetary policy, for multiple reasons, the
situation was not in order. And we're trying not to bring austerity, but to bring order.
So that's number one. Number two, if we did not come
in to help, the situation would be even worse. Because what
happens is when a country calls for help, we come in, we
do expect that public finances will be,
you know, redisciplined, reorganized, and that stability
will result, at which point investors come in and say, okay, now the situation
is standardized. We can come back and we can invest. If we did not do that, they
simply would not come in at that point. So I think it's — we're not the merchant of austerity, per se. We are merchant of trust in the stability of a system that is
needed in order to attract investors, generate growth, and, you know, entail
creation of jobs. We are the enablers of that.
>> MARGARET BRENNAN: You called out for a kind of collaborative
leadership. Particularly from the United States.
>> CHRISTINE LAGARDE: Because that is what has worked. When I
look back and consider the history of the United States'
role, its involvement, what has worked,
how it has worked for this country and others, that
collaboration has proven extremely efficient.
>> MARGARET BRENNAN: Well, the secretary of state today said
the administration is working to refocus the IMF, and WTO, to promote more
prosperity, into nations that can already access global capital
markets, and to banks that could raise capital on their own.
That's his vision that he describes what the U.S. should
be implementing right now. What do you make of that
proposal? It was delivered in Brussells
and it ruffled a few feathers. >> CHRISTINE LAGARDE: Making
sure that capital can invest, that's exactly what we do. It's because private capital has
completely lost interest in certain countries. When I look at the three I
mentioned: Egypt, Ukraine, Argentina. Why did they come
in? Nobody else wanted to come in. There was not a single
investor prepared to take the risk of going in because the situation was in
disorder, public finance was not properly
managed, and there was internal factors that created massive
instability. So we come in and enable the
country to become attractive again. It's not as if we were a
substitute to private sector investors,
investment. We are the facilitators of that
investment. Otherwise, they simply won't
come. Too risky for them. Once they know we're involved, they know we put in place
sustainability. If restructuring is needed, we ask
for it. If new monetary policy needs to be implemented, we recommend it,
and it's implemented, with some success,
I dare say. I'm not sure he understands very
clearly what is — what is — well, our mission is prosperity.
Yes. This is what the initial
founders actually tasked us to do. That's what we need to do.
>> MARGARET BRENNAN: So these descriptions of the vision and
the leadership that America is providing on this front, for you it is not
achieving what you were saying is needed,
to meet the crises right now that you see?
>> CHRISTINE LAGARDE: I was curious about the taxpayers' money.
We've actually always paid back and more. So over the course of
time, the United States has actually made quite a bit of money out of the IMF involvement
in countries. >> MARGARET BRENNAN: You think
there's a fundamental misunderstanding
or are there portions of truth to these
criticisms? >> CHRISTINE LAGARDE: Well the
fact that growth must be generated as a result of our involvement is
something I completely agree with. It doesn't come overnight
because you need to restore the situation
and start public finance and reorganize sometimes through structural reforms of
the economy, but growth ultimately comes.
I'll tell you. As French finance minister we
had to deal with some difficult cases in Europe. But when I look at a country
like port gal, the involvement of the IMF was critical in
turning the situation around, sorting out quite a few
difficult issues. Portugal is now doing pretty
well compared with other European countries. When I look at Ireland, it's
thriving. >> MARGARET BRENNAN: Those are
countries that needed help in crises?
>> CHRISTINE LAGARDE: We had to come in with the IMF and put in
place significant lending programs and we expected serious measures to be
taken on the fiscal front, because there was too much
fiscal deficit, and in the case of Ireland because the banking
system was completely out of control, and
had gone way too far into extending beyond the country. So this — these programs have
clearly generated a growth. >> MARGARET BRENNAN: When you
use that phrase, you know, describing we could live in an age of anger, putting
a time line out decades from now, if you look at some of the forces, not just
in the United States, but contributed to making trade a
very contentious issue during the 2016 campaign on the left
and on the right, but also what you're seeing in Europe, in your home country of
France right now protests around the economy, and specifically
the gas tax. I won't get into president
trump's tweet about it tonight. But generally speaking, aren't
you seeing those forces of anger? I mean you're seeing more
populist governments come to power, or at least with the economy,
anti-multilateral institutional rhetoric, in a lot of places
right now. >> CHRISTINE LAGARDE: Yeah.
That is correct. >> MARGARET BRENNAN: Are we in
that time you're describing? >> CHRISTINE LAGARDE: We are at
risk of slipping into that kind of age
of anger, which is why it's critically important to actually
address those issues. As I was trying to explain in my remarks,
those are not issues that can be addressed purely domestically. Some of them have to be
addressed domestically, but when it comes to trade, to tax, to climate
change, to cyber security, to corruption, it has to be on an international
cooperation basis, as well. They come together. But yes.
There has to be a response to those issues, because many people are
not satisfied with the income, not satisfied with their future,
have this anxiety of what the future holds for their children,
and all these concerns need to be addressed. And need to be addressed by
societies at large. >> Margaret: The challenge is
the lack of trust in the institutions that have been
tasked with this. >> CHRISTINE LAGARDE: Yes.
>> MARGARET BRENNAN: You mentioned your time as minister
of finance in France. Clearly, one of the difficult time
periods you could have that job. I remember from covering it that
same famous story of you speaking to
frank Paulson and advising him against allowing Lehman brothers go
under. You foresaw the domino effect.
Did you draw a line between what you predicted then and where we
are now? Is that where this shift began that you're laying
certainly did not anticipate that at the time. But looking
back, yes, I think that there's a lot in today's anger, resentment, frustration, that is actually attributable to the
legacy of the crisis. I think that we did a reasonably
good job in trying to strengthen the financial system, avoid
that people actually lose all their savings, and that they be
bankrupt all over those countries. But I think the fact that we
addressed the issues of institutions of the financial
system at large, without doing probably enough explanation as
what it meant for people, and the fact
that many involved in those — in those
financial deals got away with it and
managed to reestablish themselves, I think created a
sense of impunity. In other words, some of the lower
middle-class people thinking to themselves, "Okay, I've lost my
job. I've lost my house. And those people, what have they
lost? Their bonus? Yeah. But that's about it."
And they reestablished themselves. So I think this is not at the
root of and the only component of the frustration and the anger
that we see, but it's certainly participating
and fueling it. That's what I call the sort of untold story of
the legacy of the crisis. >> MARGARET BRENNAN: So how do
you address that? If that age of anger is
simmering? >> CHRISTINE LAGARDE: I think,
you know, in a way it's too late to go back to things that should have taken
place at that time, but we also have the possibility with new
technologies, digital age, that is clearly in the making at the moment, and at an accelerated pace, to organize it
in such a way it's transparent and accountable and it includes people, that
they're plugged into that digital
picture by being properly trained, educated, and skilled, and they don't feel
there's emass collation that you have when something is so out of it to you
and foreign to you that you feel that anger about it.
>> MARGARET BRENNAN: You want another Bretten woods type summit.
>> CHRISTINE LAGARDE: There are so many groups who want another
Brettenwood? >> MARGARET BRENNAN: Who leads
this? >> CHRISTINE LAGARDE: Multiple
leaders everywhere. They don't have to give advice and draft
the programs and provide technical assistance around the
world to 189 countries. But, you know, the beauty of the
institution that I have the privilege to lead is that in its articles, in
its foundations, are the seeds for
constant transformation. What is changing massively
around it calls for probably a different
approach. I think the digital economy in which we are moving, which is
transforming the financial sector, which is
transforming the existing relationship
between value and monetary costs, all that
needs new thinking. I think it's more new thinking than a reform of the Brettenwood
system. >> I know the IMF has written
on this and talked about the demand for cash. And money
itself is changing. Not just how we think and talk about
this. You mentioned Sintec in that
context, financial technologies, and all the various forms of
it. I mean there are advantages and
disadvantages, these days it seems to be not very well
understood, even by the public at large. How much more of this
needs to be led not by the IMF or these organizations but
coming from the corporate world, coming from silicon valley. You have these hearings on
capitol hill and the joke is you have CFO's coming up and the
individuals asking them don't even know how to use the
websites that they're talking about. How do you regulate
crypto currencies. How do you talk about all of this in a way
that actually leads to some kind of regulation or reform?
>> CHRISTINE LAGARDE: Well, first of all, I don't think it
should be entirely left in the lands of hands of
those corporate sector representatives or their legal departments, because
they're dealing with common good and
your privacy and their data and they're dealing with your freedom. So governmental authorities,
parliamentarians, have to be involved. And they have to be
helped along the way for those who are not
computer literate, those who feel completely alien to these digital
transformations, they have to be helped by people like us, at IMF, with financial
technologies, because we try to grasp what it
means, how it is formed, how those technologies are used to shorten the
circuits, to enable payments, and to include
people that we're were not included in
the banking sector, for instance.
So it is a public responsibility. And it has to
be done, again, in cooperation with those engineers, in
cooperation with those who understand the future of data
protection, who understand, you know, how Cloud will eventually, you know, be
antibioticsible accessible or hackable. So there are many technologies
that you don't master and I don't, either, but having enough knowledge to
understand the key principles that need to
be respected, it's on the shoulders
of the parliamenttarians and the governments because they today
have the responsibility to represent the people.
>> MARGARET BRENNAN: You've also answered the call for a lot
of parliamenttarians to get rid of the legal obstacles to the inclusion
of women in the economy. Where does that begin?
>> CHRISTINE LAGARDE: Very often it begins at home. About 90% of the countries in
the institution still have in their
constitution or in the legal system discrimination against women,
barriers to their participation in the economy, to in inheritance when parents die, to owning a
business, to their opening a bank account, so being able to bring calculates
when they try to have a loan. I think that's where the work has
to begin. We've demonstrated or observed in many countries, such as some Latin
America countries like Peru and some
African countries, as well, that when those changes happen, it actually has
consequences on the economy and pushes growth and enables women
to become better integrated into the economy. But it's not only
that. It begins there because there
should not be legal barriers and legal constraints imposed by
governments that prevent women from playing their role in the
economy. >> MARGARET BRENNAN: How much
of an economic benefit is there? How do you quantify?
>> CHRISTINE LAGARDE: Huge. It's huge. It varies. If you look at the Nordic
countries, you know, norway being clearly
one of the best performers, finland
being very good, as well. From those countries, to say,
India or Saudi Arabia, you can have an increase in the economy which varies from
3% to 27%. That's nothing to be turning your eyes away. It's
pretty big. >> MARGARET BRENNAN: Why the
resistance? >> CHRISTINE LAGARDE: Ha.
>> MARGARET BRENNAN: If you can make the argument on numbers, why
the resistance? >> CHRISTINE LAGARDE: I think
you're talking about something that goes much, much deeper into
culture, into psyche, into the way in which societies have been
built over the course of time. You are also talking about the
divide between urban centers and rural
areas. You know? India is a case in point where clearly in rural areas, in particular,
women are prevented from joining the flow,
from being economic partners, and sometimes from accessing sanitation.
>> MARGARET BRENNAN: Bigger picture, because we're running
out of time, I'd be remiss if I didn't ask you about Brexit, and the forces
sort of pulling at the global order right now. That's a rejection of
international organizations and solidarity there. Add that in
to what you're seeing here in the U.S., as well, in terms of
that kind of rejection. It sounds like you're trying to
swim upstream. >> CHRISTINE LAGARDE: One,
first of all, I think the situation has changed. And is
changing in the US. When I look at the latest poll produced, the shift is now into
a majority of those polled. You can term polls in which ever
way you want, but it seems there are
more Brits who would rather remain than exit. Number one. Number two, I think a lot of the
campaign that took place at the time, two years ago now, was geared
towards, "Watch out. The foreigners are going to take
your meal away, and they're going to
have — they're going to go first in the health benefit and
health care system and they're going to take jobs," and
it was the fear of the foreigners. And
unfortunately from within Europe. And it was directed at people
from Poland, Bulgaria and Romania, who, by the way, have
been extremely well integrated in, say, the German
economy, as was demonstrated recently, in a country that
needed additional skilled labor. So that fear factor that was
raised during the campaign may have
completely missed the opportunity that that
particular flow of migration actually produced in an economy nextdoor,
which was Germany. So that's a little bit beside
the point. But I think there is regret in
many, many European corners. I think there is more regret in
the UK than there were only six months ago. And I think there is now the
realization that there will be more loss as a result of Brexit than was
ever mentioned, described, accounted
for, by those who campaigned for the Brexit. I can say that with relative
confidence, because when we produced the
article 4 for the UK, which was the annual
audit we do of all economies, we did
actually give — we did give at the time
three scenarios of Brexit. One of which was the baseline
which was pretty much in line with what everybody assumed, but
another one which was a dark scenario which is very close to
some of the numbers we're seeing now.
>> MARGARET BRENNAN: The dark scenario?
>> CHRISTINE LAGARDE: In terms of forecast coming up in case of
a Brexit development and in case of a no-deal Brexit, which is what we had
considered. >> MARGARET BRENNAN: Is that a
warning to brace ourselves? >> CHRISTINE LAGARDE: I think
it was a very clear, you know, assessment of what the consequences would be as a
result of a no-deal Brexit scenario, where the terms of trade between the UK
and its main economic and trade partner, which is the European union, would be
done under the WTO rules with no
additional sweetener to WTO rules.
>> MARGARET BRENNAN: The dark scenario is a scary phrase to
end on, but unfortunately I'm told that we are —
>> CHRISTINE LAGARDE: No, there was something interesting today, . For those like me who would
like to keep the UK within the European
union there is a perfectly acceptable and legal way to
revoke the article 50, which was the provision under which the UK
pulled out. >> MARGARET BRENNAN: You think
it's a viable scenario? >> CHRISTINE LAGARDE: At least
it's legal. [Laughter]
>> MARGARET BRENNAN: I think this is the optimist you destroyed
yourself described yourself before. I'm sure a number of
people would like to continue that conversation with you offline, but I know we have to
finish. Thank you, madam Christine Lagarde.
And thanks to all of you. [Applause]
>> Well, the next move is up the stairs to your left, and dinner will be
served and you'll get your table
assignments up there. [End event at 7:52 p.m. E T.]

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