← The CGD Podcast
The CGD Podcast
Populism and Nationalism Are Threat to Global Cooperation – Podcast with IMF’s Christine Lagarde
00:11:57
IMF Managing Director Christine Lagarde joins the CGD Podcast to discuss how challenging global economic conditions, including a combination of low growth, a limited number of jobs, and rising inequality, are fueling the rise of nationalism and...
Loading summary
Transcript20 lines
- [00:00]
A
Foreign.
- [00:06]
B
Merchandani. And thanks for joining me on this edition of the CGD podcast. My guest today heads an organization tasked with safeguarding global financial stability. No mean feat when we live in a world of low growth, weak commodity prices, rollercoaster financial markets and geopolitical uncertainties like Brexit and the mass migrations of people. The IMF's managing director, Christine Lagarde worries all these things cannot bode well for low income countries. And she's calling for much greater global cooperation to help the poorest nations in this even more challenging environment. Madame Lagarde joins me on the podcast today. Welcome.
- [00:42]
A
Thank you.
- [00:43]
B
Almost a year ago, the world came together to adopt the Sustainable Development Goals, a hugely ambitious blueprint for global progress. But to what extent do you think that the challenging global economic environment and the tendency for countries to to head towards protectionism and isolation, isolationism, puts those goals even further out of reach now?
- [01:05]
A
It's a big challenge because as you rightly say, the combination of low growth, limited number of jobs in many countries and rising inequalities fuels this rise of nationalism and populism in some countries and under those auspices. To have countries commit to support the low income countries is politically difficult for many of the leaders who have otherwise signed on the Addis Abeba Financing for Development Commitment or the Sustainable development goals in September 2015. Yet you know, problems are global issues in ignore borders. When you have the Ebola virus, when you have climate change circumstances that can affect the well being of people, irrespective of their income, irrespective of their borders, you need to have that degree of cooperation. And it's really important for us all to be fixated on these goals that were set out in 2015. And one of my jobs is to just remind our membership of this commitment to deliver on the SDGs. Our organization is trying to focus on what it can deliver by way of policy recommendations, surveillance, lending, technical assistance, capacity building. And we try to do all that with a focus on the challenges that low income countries are facing at the moment.
- [02:40]
B
But if, say the Brexit vote, if that showed that globalization is not working for people in some rich countries, how can it work for people in poor countries?
- [02:51]
A
What's the alternative is my question. And you know, for low income countries, they need to have external support, they need to have solid macroeconomic policies, they need to have their destiny in their hand. And by that I mean the ability to generate resources that they can put to good use in order to develop infrastructure, to invest in health and education to make sure that they produce growth and inclusive growth. But they will do that in a very interrelated world where they will supply commodities, they will import goods and they will also benefit from both oda, from advanced economies and remittances that are generated by their nationals who work in other countries. So as you see, not only are the issues of a global nature, but the solutions and the tools are very much based on interconnections and cooperation between the countries.
- [03:58]
B
I guess part of the problem though is that politicians think about domestic politics often before they think about international issues. So I mean, you're heading to the G20. What is the message that you will take there for world leaders about the kind of global cooperation that is needed to make sure the world's poorest are not left further behind?
- [04:17]
A
Well, what we collectively need to identify is where there is a good intersection between their respective domestic purpose and interests and the international community needs and aspirations. And to identify that intersection requires everybody's brain power, determination and ability to implement. I'll give you an example. At the G20, a year and a half ago, all the countries decided that they would increase growth by 2 percentage points within five years. And they have to deliver because if the advanced economies grow a bit more, this will produce, you know, spillovers are leading effects on the low income countries, on some of the emerging countries as well. So, you know, implementation begins at home. They set out objectives to increase women's participation in their economies, to increase growth by 2 percentage points, to reduce the cost of remittances. There is an agenda here which is going to serve them well, but which will also have spillover effects in the low income countries. Another objective that was set out was the commitment to spend 0.7% of their GDP into, sorry, over their budget into aid for low income countries. Well, very few countries have done it. And again they have to deliver because if your neighbor's house is burning, you're not safe. And it's critically important that you know, there is that collective understanding.
- [06:04]
B
You mentioned the 0.7. In fact, I think the UK is currently the only G7 economy to actually meet that commitment. It's enshrined in UK legislation for now, obviously correct a lot of that happening in politics there. But given.
- [06:18]
A
But even with that, you know, when you look at for instance the depreciation of the sterling, the. That's another one. That's $1.9 billion less spent on development despite this extraordinary and very admirable commitment by the UK to deliver 0.7%.
- [06:40]
B
And that was Actually, my question, what do you think are the other implications of Brexit on global stability, on global development and for the poor of the world?
- [06:48]
A
Well, that's an example that I've just given. The fact that the pound has depreciated as an immediate sort of almost mechanic effect on development aid. It's very difficult to predict what the outcome will be on the low income countries and on which low income countries, some of them have probably closer links with the United Kingdom. Is that going to have an impact in terms of global growth around the world? It's to be seen there will be an impact. There is no question about that. How much of it will be difficult and will depend on, you know, essentially what pattern of negotiations, timeline, terms under which the UK remains a very active member of the international community and the European Union, and what impact this has on financial stability, how much volatility is generated, how much markets will be moved as a result of that. So we have various scenarios, as everybody else does, actually.
- [07:56]
B
Do you think it's inevitable that there'll be a recession in the UK and what impact will there be on global growth, on your own global growth forecasts?
- [08:02]
A
You know, in the bad outcome scenario, yes, the country would be in recession. We certainly hope that this bad outcome scenario will only be a scenario and will not become reality and that the, the uncertainty will be cleared, the timetable will be understood, the terms under which trade will continue and capital and people will move will be settled. The sooner that happens, of course, the less uncertainty there is and the better the scenario will be.
- [08:39]
B
It's probably impacted your global growth forecasts. I imagine you were expecting a rosier forecast than now. Brexit may give you, but that forecast comes at the beginning of your second term as the Managing Director of the imf. So halfway through, what do you think has been achieved? What do you think is not yet finished? What are your priorities going to be? Because many observers say, look, the IMF is kind of moving into territory that was traditionally the world banks. You're focusing on financial inclusion, on gender, on infrastructure, job creation, things like that.
- [09:11]
A
So where are you taking the mission is the same. The mission was set out very clearly. It has to do with stability, both from a financial growth point of view and it will continue to be that. But we have to include in our assessment, in our policy recommendation, in our program design, in the technical assistance that we provide to countries. We have to include everything that is macrocritical. So I'm not trying to infringe on anybody's territory, but I'm just seeing for a fact that that the empowerment of women, for instance, in the economy, the elimination of discrimination against them, is going to generate significant growth in various corners of the world. So we have to pay attention to that. We have to identify it and signal the impact that it could have and the policies that need to change. In the same vein, when we look at climate change and we assess the fiscal spending of a country and we see that eventually it is spending inordinate amount of public finance on subsidizing the use of fossil fuel, we have to alert that country that this is not the best use of its public finances because it contributes to worsening the climate change risk. And it's not a good use of revenue which could be spent on health improvement, on education for girls in particular. Those are two examples. Inequality is another one. We have seen fragile growth in the last few years. But if, in addition to being fragile, the income generated by that growth actually are very inequally distributed, then we risk this rise of nationalism, protectionism that is not consistent with solid sustainable growth. So it's our duty and our mission to raise our voice, to do research, to provide policy advice in those areas. And I certainly hope that we can continue to do so.
- [11:20]
B
Christine Lagarde, Managing Director of the imf thank you very much for joining me on the podcast.
- [11:24]
A
Thank you.
- [11:25]
B
CGD has written extensively about global uncertainty. Some of the issues that Madame Lagarde touched on, especially check out our work on Brexit recently with blogs by Vijaya Ramachandran, Owen Barda, Matt Collin and Michelle De Naivas. You can find them all on our website, cgdev.org I'm Rajesh Merchandani and please do remember to join me for the next podcast from the center for Global Development.