Lagarde Watches For Dark Clouds On The Economic Horizon
STEVE INSKEEP, HOST:
The global economy is facing some risk right now, according to a leading woman in finance. We specify Christine Lagarde's gender because the managing director of the International Monetary Fund is among the most prominent women in a male-dominated industry. And gender is very much on her mind on this International Women's Day.
She's been suggesting the world would be a very different place if women played more leading roles in banking. Madam Lagarde has consistently said that had more women been in charge of the major banks, the financial crisis of 2008 might have been avoided. She's now studying risks to the economy, and that is where we began our conversation.
CHRISTINE LAGARDE: There are risks. It's coming from various corners of the world, this sort of downward trend that we're seeing. One is you have the euro area numbers, in particular, combination of the Brexit uncertainty and the trade concerns but also particular matters affecting, for instance, the automobile industry in Germany or the uncertainty over the Italian budget or the protests in the streets of my home country.
But you're also seeing some countries that have gone down for other reasons. Think of Argentina, which has faced a major crisis. Think of Iran, for instance, which have been revised downwards - big way. Think of Venezuela, which is contracting massively. So those are, you know, sort of, the particular countries that are going to contribute to that declining growth in 2019 and in 2020.
INSKEEP: I'm just thinking about this. Part of the reason that Iran is in economic trouble is because of U.S. pressure. Part of the reason Venezuela is in economic trouble, besides its own mismanagement, is U.S. pressure. Part of the reason that the U.S.-China relationship would be seen as a threat is because of U.S. pressure. Are we, collectively - Americans - pretty much doing this to the world?
LAGARDE: You know, every pressure has its purpose. And I'm not going to pass judgment on the purpose that is being pursued. What I would say is that if the U.S. pressure that has been put on the trade landscape is going to deliver a good outcome in terms of, you know, intellectual property rights better protected and not violated, better definition of state-owned enterprises, better understanding of subsidies, that is going to be an improvement for all. If, on the top of it, there could be a better opening of services, it would clearly be a boost to growth around the world. So, you know, I'm always trying to look at the glass half full and not the glass half empty.
INSKEEP: So why is it that you have been arguing that the last financial crisis would have been much less severe, maybe wouldn't have even have happened, if there were more women in powerful positions in finance?
LAGARDE: And I have said that Lehman Brothers was not the best idea. If there had been more Lehman sisters, it probably would have ended up in a safer place. We're saying that - I'm saying that because I believe that it is true. Let me give you two numbers, which, to me, are just, you know, flabbergasting. One is if you look around the world at all the banks, only 2 percent of them have CEOs that are women. If you look around the world at all the banks, only 20 percent of board members are females. Now, that tells me that there is an element of bias and, possibly, of discrimination.
Now, if you look at how banks which have women on the board, have women in their executive teams, are managed - in terms of risk profile, you see that those institutions are better. They are less risky. Their profile is better. They are safer for investors. So what I'm saying here, although it's not causality, it's correlation. But still, even if it's only correlation, it's worth making sure that those risk profiles are less exposed because, simply, there will be diversity. And there will not be too much group thinking, which I think is, in all circumstances, dangerous.
INSKEEP: So you're not arguing that women are naturally more prudent or something like that.
LAGARDE: I think the mixture of men and women around the table brings about a better decision-making process, helps everybody else explore a larger horizon that would not otherwise be explored if it was only a group-thinking process.
INSKEEP: Is it also that if you have a hundred talented people and 50 of them are women, the bank that only draws from 50 potential job candidates just doesn't have as rich a talent pool?
LAGARDE: That's true, absolutely.
INSKEEP: You've made another argument that if developing nations were more welcoming to women in the workplace that there would be a lot more economic growth. Why would one thing cause the other?
LAGARDE: Well, that's a pretty basic, simple conclusion. If you increase the female labor force participation - in other words, the number of women joining the workforce, getting a job, producing value, offering services - you automatically increase the size of the economy.
INSKEEP: How's the United States doing compared to other countries in the world?
LAGARDE: For U.S. women, at large, to earn as much as men, at large, in the U.S., women would have to work an extra 47 days.
INSKEEP: Per year.
LAGARDE: And those are numbers from 2017. Yeah, per year because U.S. women earn 82 percent of what men earn. You convert that into working days - 47 days.
INSKEEP: So we're not doing so great.
LAGARDE: There are worse situations. But no, the US can certainly improve its game - big way - in terms of policies. We certainly support measures that will improve work-life balance and help combine work and family life, measures that will provide for paid family leave. Maternity leave is so embryonic because it doesn't operate at the federal level, contrary to most OECD countries, which all have maternity leave and which provide, for some, 100 percent compensation for a period of time, for most, 50 percent compensation being paid by the state.
INSKEEP: Of the many things that you could plausibly do to address inequality, is there one thing you would recommend to the United States to consider?
LAGARDE: Eliminate the inequality between men and women and you will have already advanced significantly the inequality that is out there.
INSKEEP: Christine Lagarde is managing director of the International Monetary Fund. Madam Lagarde, thanks so much.
LAGARDE: Thank you.
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