Before #MeToo, and before Canada elected the rich world’s first openly feminist prime minister, there was a quieter gender revolution within the global establishment.
In 2011, the PhD economists at the International Monetary Fund found themselves working for Christine Lagarde, the former French finance minister. Some of them sniffed at her credentials; she was a lawyer and a politician, not a master of the dismal science. And it’s fair to assume that a few dismissed her because of her gender; the staff of the IMF, like the economics profession generally, was overwhelmingly male.
This was nothing new for Lagarde, who had been breaking down the doors to privileged boys’ clubs since at least the late 1990s, when she became the first woman to be elected leader of international law firm Baker & Mackenzie’s executive committee. Now, she was the boss of the world’s premier economics institution, and she had some thoughts on the research agenda.
Lagarde, who had spent the previous few years fighting the financial crisis of 2008, the Great Recession of 2009, and the European debt crisis of 2010, thought it must be time to reconsider economic orthodoxy. She ordered work on gender gaps, income inequality, and climate change.
To the surprise of many, the IMF started churning out research that showed there was an economic basis for tackling those issues, especially gender. The fund’s policy advice changed as a result: along with fiscal prudence and floating exchange rates, the institution now urges its 189 members to subsidize affordable daycare and to make sure women can travel back and forth to work without fear of being assaulted.
Lagarde’s agenda is starting to take root in the mainstream, especially here in Canada.
Prime Minister Justin Trudeau’s emphasis on gender equality gets most of the attention, but British Columbia, the country’s third most populous province, elected a government that promised universal daycare. Two of the three main parties that contested the Ontario provincial election made similar promises. And Quebec, of course, has been offering childcare spots for dollars a day since the late 1990s.
Thanks to the work of the IMF, critics of these policies can no longer dismiss them as “virtue signalling” or old-fashioned vote buying. Even Bank of Canada Governor Stephen Poloz is a believer. In March, Poloz observed in a speech that if the labour participation rates of women in the rest of Canada matched those of Quebec, there would be about 300,000 more workers contributing to the economy.
“I feel a little bit vindicated in the determination that I had, including in my organization, the IMF, to put gender issues on the table without shame or shyness about it,” Lagarde said in an interview last weekend in Whistler, B.C., the only one she gave while in Canada for a meeting of finance ministers and central bankers from the Group of Seven countries.
“There is a focus on women and their contribution, their talent, and the conditions that will help them flourish. I’m really pleased that could be done and I hope that other countries will have the same instinct going forward.”
The 2008 financial crisis and its torturous aftermath damaged a lot of reputations.
Henry Paulson, the former chief executive of Goldman Sachs Group Inc., arrived in Washington in 2006 as a Master of the Universe and left in 2009 a diminished figure. Stephen Harper, the former Canadian prime minister, suffered a humiliating defeat in an election coloured by economic anxiety, and his British counterpart, David Cameron, resigned after losing the Brexit referendum. Even Mark Carney, who was lured away from the Bank of Canada in 2014 to lead the Bank of England, has been roughed up by the same post-crisis politics that ended Cameron’s political career.
Yet Lagarde has emerged stronger.
In 2011, she needed the combined support of Europe and Washington to become head of the IMF, overcoming a challenge from Augustin Carstens, Mexico’s former central bank governor, who got Canada’s vote for managing director.
But when Lagarde put her name forward for a second term in 2016, she was unopposed. The IMF’s joint bailout of Greece with the European Union and the European Central Bank was fraught, but Lagarde is generally thought to have handled a difficult situation as well as could be reasonably expected. She regularly appears on lists of the world’s most powerful women, and gossip mongers circulate her name when important positions come open in Brussels or Paris.
Perhaps the biggest tribute to her leadership occurred last month when Argentina turned to the IMF for help. Two decades ago, the country suffered through a prolonged depression that many Argentines blame on the fund, which insisted on austerity in return for a bailout. But Lagarde has restored the institution’s credibility, a vital achievement, since the fund’s primary mission is to keep bankrupt countries from unsettling the global economy. It’s difficult to perform that role if desperate countries are unwilling to ask for help. On the evening of June 7 in Washington, the IMF announced that Lagarde and the government of Mauricio Macri had agreed on the terms of a loan with US$50 billion, subject to approval by the fund’s executive board.
“She’s been outstanding,” Paul Martin, the former Canadian prime minister and finance minister, said in an interview.
Alas, there are limits to the head of the IMF’s influence when none of the men and women in the room need her to give them a loan.
The tit-for-tat response of Canada and the European Union to U.S. aluminum-and-steel tariffs are popular with the public, but Lagarde, who also served as trade minister in France, is unconvinced the strategy is wise.
“I don’t think it’s the right reaction,” she said.
That’s not what the aggrieved members of the G7 want to hear right now.
In Whistler, Lagarde watched in astonishment as the finance ministers of Japan, Germany, the United Kingdom, France, Italy and Canada rounded on their counterpart from the United States.
Finance Minister Bill Morneau released a summary statement that called on Steven Mnuchin, the U.S. treasury secretary, to “communicate their unanimous concern and disappointment” to his boss, warning that future “collaboration and co-operation has been put at risk” by U.S. trade policy.
Of men and women present, only Mario Draghi, the head of the ECB and a former Italian treasury official, and possibly Haruhiko Koroda, the governor of the Bank of Japan, had attended more G7 meetings than Lagarde. She has been on the circuit for 13 years, and Draghi has been involved in the meetings for more than two decades. Neither had ever seen such a display of diplomatic anger.
“It has nothing to do with the person of the treasury secretary, who did his best, but the principles and the policies and the positioning (of the U.S.) put six members on one side and another member on the other side, at least for certain aspects,” Lagarde said. “It was unseen before.”
Maybe the problem is that too many of the veterans of the financial crisis have been retired by their electorates?
It took nearly a decade, but the global economy finally is stable and growing at a pace that will create jobs and pull millions of people out of poverty. All the world’s major economies are growing in sync for the first time in years. There are vulnerabilities that need attending, in particular record levels of public and private debt. Yet instead of getting serious about a set of policies that could prolong the expansion, the world’s leading economies are threatening to wreck everything by starting a trade war.
Lagarde is beside herself.
“The IMF finds it very regrettable. Personally, I feel incredibly frustrated because we worked really hard for the last 10 years or so to put the system back in place,” she said. “Then this thing erupts and disrupts the whole system. So it is utterly frustrating.”
Indeed. It is alarming how quickly the U.S.’s closes allies went from comparing notes on how to flatter Trump to organizing an angry intervention at the G7 leaders’ summit at the Manoir Richelieu in Quebec’s Charlevoix region on June 8 and 9.
Maybe the show of force will work and Trump will be persuaded to back off. But he might also choose to make a show of standing up to the global elites so loathed by his political base. That’s why the gambit orchestrated by Trudeau and Morneau is so risky. If Trump digs in, Canada and the others will have started the trade war that they insisted the wanted to avoid.
Lagarde will be back in Canada for the summit in case any of the leaders are looking for ideas on a different path.
The first thing countries should do is “secure the growth,” she said. If you believe political nationalism is the root of the current economic instability, and that those sentiments are fuelled by anxiety about the future, then the surest way to fix that problem is to create opportunity for as many as people as possible. That means keeping the global economic expansion going, not disrupting it with a trade war.
“If there is one lesson to be had from what’s happened, it’s that you have to have your eyes on all the people, not just the majority of those who are flying with the wind,” Lagarde said.
Rather than picking fights with the countries who would undermine the global trading system, Lagarde thinks the free traders should get together in smaller groups, such as the 11-country Trans-Pacific Partnership, the regional commercial arrangement that Canada signed in March but has yet to ratify in Parliament, or around specific sectors, such as digital services.
In pushing this, Lagarde is advocating another break with orthodoxy. Most trade experts would tell you that big multi-lateral agreements spread wealth most efficiently. The problem is that the effort to update the rules administered by the World Trade Organization had stalled even before Trump was elected. To restore faith in the system, Lagarde reckons some progress on trade is better than none at all.
“It’s the reality of today’s world,” she said.
The best-case scenario at the G7 summit would be some sort of agreement in which Trump pledged to be less destructive. Since that seems unlikely, the second-best outcome would be a decision by the rest of the world’s leading economic powers to carry on as best they can, recognizing that the current U.S. administration is a short-term problem to be managed, not exaggerated.
At least there is reason to think that leaders such as Trudeau and France’s Emmanuel Macron will hear a counterpoint to their Trump strategy from a credible source.
The heads of some international institutions might cower in front of presidents and prime ministers; after all, outfits like the IMF and the World Bank work for their members, not the other way around.
Lagarde is bolder, which is why she must be taken seriously.
In April at the IMF’s Spring Meetings, the managing director was asked by a reporter from India about the gang rape of a girl that had become a national incident. Authorities had been slow to respond, and Prime Minister Narendra Modi remained silent until the national outcry forced him to say something.
The issue was extremely sensitive, and India is gearing up for a national election, so I was sure Lagarde would dodge the question. Instead, she said that Indian leaders, starting with Modi, must do more to protect women and girls. It was a remarkable statement because officials in Lagarde’s position almost never call out other leaders by name.
“Violence against women is appalling, not to mention that it is a big economic cost as well,” she said when I asked her if she worried about angering an important member of her institution. “If they want to have a public debate with me I’m happy and I’m ready.”
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