If trade harms a significant portion of the society, would the world be better off without it? Not according to Christine Lagarde, Managing Director of the International Monetary Fund, who advocates for inclusive growth policies instead of protectionist ones.
Lagarde spoke on Wednesday, September 28 at Northwestern’s Cahn Auditorium about the challenges the global economy currently faces, such as the need for growth that benefits a broader segment of the society.
Here are five key points from Lagarde’s speech:
- About the global economy
Lagarde mentioned that “global recovery has been weak and fragile,” especially in advanced countries like the U.S. and Japan. The global growth rate, according to Lagarde, has been “too low for too long, benefitting too few.”
Lagarde favored structural reforms and the use of expansive monetary policy in advanced countries as ways to foster growth. While she acknowledges that only countries with fiscal space should use fiscal policies, even those without it could benefit from the reallocation of spending.
However, Lagarde did acknowledge some signs of improvement, such as rising median incomes in the U.S. in 2015.
- About trade restrictions
In her speech, Lagarde stated that “restricting trade is a clear case of economic malpractice.” Lagarde recognized trade as the major agent of growth since World War II and mentioned that trade has grown less than global GDP in recent years due to weak demand and protectionist trade policies. According to a 2015 White House report, trade increases the purchasing power of middle-class Americans by 29 percent by allowing them to purchase a variety of goods at lower prices.
- About inclusive growth
Lagarde acknowledged that the gains from trade are not shared by all and that those who lose out on trade must be supported. Both in her speech and in her answers in the audience Q&A, Lagarde stressed the need for inclusive growth and identified current frustrations with trade and globalization as signs that growth must benefit more people. Lagarde mentioned public investment in education, retraining, and job counseling as some ways to ensure that globalization becomes more inclusive.
- About the education of girls
Lagarde identified education of girls as a “high-return investment.” According to the World Bank, a fifteen percent increase in women’s labor market participation in Latin America led to a 30 percent decrease in the area’s poverty rate over the course of a decade. Women’s economic empowerment, said Lagarde, is an “economic no-brainer.”
- About Northwestern
Not everyone knows that Lagarde is proud to say she holds a diploma from NU. When she was head of Chicago-based law firm Baker & McKenzie, Lagarde took a three-week course at Kellogg, along with three hundred of the firm’s partners from around the world. She said this experience allowed key people at the firm to learn about the dynamics and virtue of change. Leading change, according to Lagarde, is key to Kellogg’s success as a management school and something the IMF wants to achieve.
Lagarde connected with the audience since the beginning of the lecture, even quoting former Chicago Bulls player Michael Jordan, a fan-favorite in Chicago. During the Q&A, several questions revolved around ways to make globalization inclusive.
The Annual Meetings of the International Monetary Fund and the World Bank begin on October 7 in Washington, D.C.