On Thursday, March 8, International Monetary Fund Managing Director Christine Lagarde sat down for a wide-ranging interview with Washington Post Opinion Writer Catherine Rampell. Lagarde, who became the first woman appointed to the post of Finance and Economy Minister of France in 2007 and the first woman to hold the top job at the IMF in 2011, discussed women’s economic equality, global economic issues and what’s next for the #MeToo movement at home and around the world.

Coratti:            My name is Kris Coratti, I’m Vice President of Communications and Events here at The Washington Post.  Thank you for joining us on International Women’s Day.  And I wanted to say thank you to our sponsor for this event, Johns Hopkins School of Advanced International Studies.  I’m very pleased that they’re supporting us here tonight.

We are also especially pleased to have Christine Lagarde here with us.  She has since 2011 been Managing Director of the International Monetary Fund, the first woman to hold that position.  And tonight, she’ll be talking about economic equality for women as well as the global financial outlook.  So, please join me in welcoming to the stage IMF Managing Director Christine Lagarde, and Washington Post opinion writer, Catherine Rampell.  [APPLAUSE]

Rampell:          Thank you everyone for joining us on International Women’s Day.  I’m very excited to be having this conversation with Madame Lagarde, and with all of you.  I understand that several embassies are represented here, and we have others from government, from the business community, and all sorts of walks of life.  So, this is a wonderful opportunity, and I’m so glad you could join us.

I am Catherine Rampell—I should have said that first—I’m an opinion columnist at The Washington Post.  I write often about economics and women’s issues, and that will be reflected in our conversation here.  But I’d first like to introduce our esteemed guest, Christine Lagarde, who is the managing director of the IMF, the International Monetary Fund.

In 2011, Madame Lagarde became the eleventh managing director of the IMF, and as you heard, she is the first woman to hold that position.  She is actually the first woman to have held a lot of elite positions in her career.  Previously, she had various jobs in the French government, including Minister for Foreign Trade and the Finance and Economy Minister, which made her actually the first woman to hold that job in any G7 country, if I’m correct.  So, she’s broken through many glass ceilings, and we’ll talk some about that today.

Prior to that, or excuse me, prior to her current position, she also chaired the ECOFIN Council, which brings together economics and finance ministers of the EU.  She helped foster international policies related to financial supervision, regulation, strengthening global economic governance, and as chairman of the G20, when France took over in 2011, she set in motion a wide-ranging work agenda on the reform of the International Monetary System.  In her role as IMF Managing Director, to which she was reappointed in 2016, she has among other things been a strong advocate for women’s financial empowerment and their role in strengthening economic growth.

So, please welcome our guest. [APPLAUSE]  And I also want to let all of you know, who are in the room and who are watching online—I imagine there are some of you—hi, Mom and Dad—that you can tweet questions to Madame Lagarde using the hashtag #postlive, and I’ll pose some of them to her later in the evening.  They’re being sent to me in a curated fashion by iPad; so watch for that.

So, again, thank you for joining us.  I thought maybe we would start by hearing your pitch for why women’s greater social and cultural status can translate to greater economic growth.  I think there are a lot of people who are in favor of both of those outcomes, but what’s the connection between the two of them?  Is there a causal connection?

Lagarde:          Well, I’ll—first of all, good afternoon, and it’s very nice to be here at the Post and very nice to be with you, Catherine.  And happy Women’s Day to all the women and men in the room.  And I’m glad that they’re both men and women. [APPLAUSE]

So, I’d love to say a few words about a working paper that we just published yesterday on the occasion of March the 8th; but I just want to share with you what is very helpful to me to remember what is actually needed for women to be properly empowered and to contribute to the economy as they should, if they so want.

And for me, the best way to remember that is the four L’s.  So, the first one is the law—and I’ll come to that in a second—the second one is learning; the third one is labor; and the fourth one is leadership.  I start with L, the law, not so much because I’m a lawyer by background, and I’ve practiced for many years, but because we have actually found out in our research that—and you will be surprised by that number—of the roughly 150 countries out of our 189-member of the IMF, 90%—nine zero—actually have in their legal system either in the constitution or in the law or in the soft law, which in some countries actually matters more, discriminations against women.

And we have also identified that in several countries where the law was changed, either at the constitutional or at the legal level, as a result of that, within five years you could see a very significant increase of female labor force participation.  So, the law actually matters.

And I’ll come to now this paper that we have just published yesterday, which is called What Is Driving Women’s Financial Inclusion Across Countries.  We have found out that actually when there is the legal environment that protects women, that gives them legal tools against discrimination, that gives them protection against sexual harassment, their access to finance is generally almost invariably actually deeper and significantly deeper, in terms of banking, in terms of saving, and in terms of credit.  And that legal background is certainly a very strong correlation with this increased access to finance.

You also see in multiple research that economic empowerment is often a factor of access to finance.  When you look the role that women play, either as self-employed, either as SMEs, or simply in the labor force, because of that access to finance, they become more independent, more empowered from an economic point of view.  And you enter that virtuous circle where having that economic empowerment and that level of independence, their vulnerability is reduced, as far as other matters are concerned.  So, that’s as far as the first L is concerned.  I’m happy to go into all my other L’s if you want.

Rampell:          So, a question about that.  How do we know that it’s actually causal, right?  I mean, could it—

Lagrande:        You can go forever into that debate, and economists rave with is it really causality?  Well, you know, be it as it may—and even if it was not 100% perfect—there is a strong enough a correlation that we actually have to level the playing field that so that women can actually have proper access to finance.

Rampell:          In your life—as you all have heard—you’ve broken many glass ceilings.  I’m wondering if you could talk a little bit today about whether you have faced gender-related discrimination in your own career, or even harassment, and if so, how has that informed your outlook on these kinds of policies?

Lagarde:          You know, for a period of my life I did not face discrimination because I was a girl.  I was brought up in a family of boys.  My mother was a professor; my father was a professor; and they made no difference between us.  So, at an early stage I certainly did not face discrimination, and I was the eldest of the group, and I was as fierce and mean as my brothers were.  [LAUGHTER]

So—and they suffered—and the first sort of really in my face discrimination was when I applied for a job with the largest, most prestigious and respected law firm in Paris, and I was fully equipped with all the skills and had taken the exams and was a fully-qualified person. I thought so.  And they thought so, too. So, when I submitted my resume and had the interviews, everything was fine, until eventually I found out when I asked, “Well, will I become an associé in your firm, a partner?”  They looked at me with a smile—that was way back, eh?  It has changed a little bit.  But way back in 1979, they looked at me with a smile and they said, “Of course not.”  And I said, “Well, why is that?” and they said with a bigger smile, “Well, because you’re a woman.”

So, I packed up myself, took my resume, and left.  But that was the first—okay—why?  Because you’re a woman.  So then I was lucky, because I found Baker & McKenzie, and the woman who interviewed me was the managing partner, and she certainly was for me a role model and somebody who was trying to—she was extremely demanding, and the research and the work that we had to do was huge, but she was also coach, and she was standing for us, as well.

Rampell:          I assume that this experience that you had was in France.

Lagarde:          Yeah, yeah.  It was in Paris.  But it would have been the same here—come one.

Rampell:          Were there laws on the books at the time that should have shielded you?

Lagarde:          Yeah.  Yeah, yeah, yeah.  Yeah.  There were, I think back from 1973 the first sort of very, very rigorous and sometimes associated with criminal penalties in case of violation, there were laws in the civil code that punished discrimination on the basis of gender, of sexual preference, and all the rest of it.  But that was—you know, it’s the whole difference between what’s in the books and what is actually implemented.  And what confidence women or victims of discriminations have to actually take the fight, or argue their case, and say this is not acceptable.

And that is—you know, the journey between the law and the implementation is something that is—

Rampell:          Right. So, if it’s about norms rather than laws, what are the tools—

Lagarde:          Well, you need both.

Rampell:          You need both.  Okay.  Sorry.  Yes.  Sorry, not either or.

Lagarde:          You need it to begin with.

Rampell:          If norms are a critical component here, how do we go about changing norms, right?  I mean, how do we go about making it so that partners at a law firm don’t think that it’s okay to say comments like that, or even if they don’t, if they know better than to make a comment like that to a woman today, to act on those kinds of preconceived views about who deserves to be partner?

Lagarde:          Well, I think that it has to be a multi-faceted approach.  It has to do about teamwork, and I think that men and women should be part of that same expectations and requirements that the norms actually change.  I think the more women are empowered in the organization—and that touches on my last L, which is Leadership—you know, if I know that they are—it is no surprise that I joined Baker McKenzie, because there was a woman who was a managing partner in that office. So, there was somebody at a level who could actually say, “What?  Discriminate against an associate because she is a woman?  No.”

So, having leadership—I mean, women in leadership position is also a critical matter.  I think it starts from the top.  When you have—let me give you the exam—I’m tempted to take my country, but I’ll take Canada for instance.  In Canada, Justin Trudeau has determined that he was a feminist, and that he was going to have 50% female cabinet, that he was going to push these issues, that they were going to apply gender budgeting in their fiscal process.  When it happens in that way, then discrimination in the norms is just not appropriate, not tolerated, not accepted.  And it empowers, and it equips those who feel that they are the victims of it, to say, well, wait a minute, at that level it’s not permitted.  Why would it be permitted in the shop, or in the office, or somewhere else?

Rampell:          And to what extent do you perceive that more popular campaigns, like the #MeToo campaign—and I understand that there is something comparable in France—Out Your Pig?  Which I love that.

Lagarde:          Yeah.  Balance Ton Porc 

Rampell:          Thank you.  To what extent do you think that those kinds of bottom-up campaigns might be affecting norms?  Could they affect norms?

Lagarde:          I think they can.  I think they do.  And I think the whole challenge is to not let them sort of go to sleep, and to use them to actually transform that emotion, that passion, that anger, that solidarity, because many men participated in those campaigns, as well—into action, into practice, into what is actually the day-to-day life.  But yes, I think it is certainly an important phenomenon, and it raises the level of awareness.  It brings people to actually question their behavior.

And it can take so many forms.  I’ve always grown up and practiced in international environment—Baker McKenzie was vastly international.  The IMF includes more than 150 different nationalities in the staff.  And there is this sort of blatant obvious sexual harassment case.  There is the bullying at work.  But there are more subtle things, which are sometimes totally unconscious, and which have to do with cultural differences.

If I am—I know it’s a bit stereotyped what I’m going to say, but if I am a Japanese person, a Japanese woman, I regard this space as my private space, and one that you should not enter, and certainly a big alpha male should not enter.  Now, there are some males from various jurisdictions that do not have that perception of the private space, and who can come very close and talk to you very close.  That is regarded as some form of harassment at the workplace by that Japanese person.  And no offense to Japan and everybody has their right to define their space.  But it can take multiple forms, and we have to be attentive to all these multiple forms of harassment and non-respect for the person.

Rampell:          In terms of the #MeToo movement, it has been criticized, or it has been characterized at the very least, as being predominantly effective in white collar industries and in wealthier countries.  What might be done for women in emerging markets, or for that matter, women in lower income positions in rich countries?  I mean, given that they do seem to have been left out, at least of the conversation here, and I would imagine the conversation in lots of other places, as well.

Lagarde:          You’re right, because it’s a—you know, #MeToo in a way is scratching the surface.  And when you look at—and it’s bad—I’m not suggesting that it’s trivial and not important.  It is, and it’s vitally important for some people who have suffered as a result.  But, when I say scratching the surface, it’s because you can think of the violence against women, and you were talking about emerging countries.  I think the lower income countries, or even those that are most, where women are most victims of violence, and there are still to this day counties where there is no conflict, and yet where violence against women is part of the day-to-day life and is regarded as normal.

You talk about the beating, you talk about the sexual mutilations, you talk about the determined abortion when the child is female.  So, all that is there, and we are not talking a lot about it.  Certainly, the #MeToo campaign was not about that at all.

Rampell:          So, then, what would be positive steps towards making those kinds of—

Lagarde:          It’s activism, it’s as much awareness as is possible, and it’s naming, shaming—but also trying to understand why that is, and where it is rooted, and where it is coming from.  You know, I travel to many counties which are members of the organization, and there is no single country that I visit where I don’t sit with a group of women of all horizons, all professions, to try to understand.  And I don’t do much talking, as I do now.  I sit and I listen to what they have to say and where are problems coming from, based on their understanding of their society, their culture, their history.

And sometimes I certainly hear things that I would not ever hear when I talk to the authorities, to the finance ministers, the leaders, and the central bank governors.  But the underlying violence that exists in some societies is just flabbergasting and horrifying in some cases.  But, in quite a few instances it has been internalized by the women themselves.  And I will not mention the country, but not long ago I was visiting one where a very high-ranking woman, actually, was explaining to me that if she did not get a good beating now and again, she felt that she was not loved.  And I was like—as, you know—how can you say that?  And she said, “Well, I was brought up like that, and my mother would treat me that way, and that was the way I perceived her affection towards me, and it endures.”

So, you have to get to the bottom of where it’s coming from, why, and understand what can actually address that.  Is it education at an early age?  Is it being more independent financially?  Is it—I don’t think that sort of preaching from the outside is going to be particularly efficient.  I think supporting, helping, showing differences is critically important, but I would say that bottom line, education is probably what will help most.

And obviously, the—no, I was going to say that the standard of living and the economic circumstances also matter enormously.  And it’s true in a way, but it’s only partly true, because you find that violence in many levels of society, irrespective of level of income, actually.

Rampell:          How much does having women in very high-profile leadership positions make a difference.  I mean, if you have in your unnamed country that you mentioned—if you have women who seem to have these views of the appropriate domestic interactions, is having women in leadership positions enough, if they themselves carry these sort of in what I would consider almost regressive views about these issues?

Lagarde:          It helps.  I think it helps.  But it’s not enough, and the numbers are there.  When you look at the num—even in my country, France, which is a sophisticated and developed country, there is a level of violence against women which, I my view, is totally unacceptable.

Rampell:          Speaking of women in positions of power, I was looking back through some of the things that you’ve said about women in important jobs over time, and some years ago—

Lagarde:          Oh, dear.

Rampell:          I think you know where this is going.  You had made a comment about if it had been Lehman Sisters instead of Lehman Brothers, we wouldn’t be in this mess, or something to that effect.

Lagarde:          Yeah.  [LAUGHTER]

Rampell:          Could you elaborate a little bit about what you meant?

Lagarde:          I did say that.  I did say that, and I still—I would still say it, although there is a little bit of research here and there which challenges that view.  But, when you have enough experience—because I’ve worked in highly male-dominated environments—when you have this sort of what I call corridor thinking, which is probably group thinking, of everybody thinking in the same way, having gone to the same schools, having the same sort of attention span, the same level of testosterone, the same impulse, the same attitudes—you end up with decisions that are never questioned, that are always sort of the group thinking, and it produces results that we’ve seen.

So, I’m not suggesting that if it was only a female environment it would be much better, but I’m saying that there would have to be much more diverse environment for good decisions to be made, for choices to be questioned, for doubts to be acceptable.  And I think that diversity is absolutely vital for better output and for better results.  Yeah.  And I think there is plenty of—whether it’s the consulting firms, whether it’s some of the newspapers’ research—I’m sure that the Post must have done some research on that.  In the private sector, in the public sector, you reach either a high level of profitability or a better decision-making process when you have a diverse environment.

Rampell:          So, we are now—

Lagarde:          And I think women are more cautious, as well.

Rampell:          More cautious?

Lagarde:          More cautious in general.  And I know this is disputed, and you have some psychologists writing against it in a way, but I’m convinced, and I think there is also research to show that when you compare the trading pattern of a woman trader and the trading pattern of a man trader, the level of rotation is lower in the female trading portfolio, and the outcome at the end of the day in sort of regular tie is probably a little bit lower, but in times of crisis is much higher.  So, you have to balance out and hedge your bets, and have both men and women.

Rampell:         That’s interesting.  I remember a few years ago, there was a lot of hand-wringing here in the United States about how too many of our best and brightest were going into finance, but if that’s the case, should we be having more of our talented women going into finance, or fewer of our talented women going into finance?  Is it a waste of resources or not?

Lagarde:          I hope we’ve learned from the financial crisis that working in finance is not the ultimate panacea, and we need talented men and women in that field, as well.  And we need people who have not only the sense of greed and individual profit optimization, but a bit of a sense of what finance is about and what it should do for society, and for the economy.  But finance should not, as I said, be the ultimate best place to be.  I think it is not.  When you talk to business school professors and deans in the best business schools, they will tell you that whereas 15 years ago, everybody wanted to go in finance, and everybody wanted to product those wonderful algorithms that would make you rich instantly.  I think this is no longer the case.  That’s what they say, which is good.

Rampell:         Well, we are now a decade out from the financial crisis.  I’m hoping we can talk a little bit about where you perceive things going now.  For example, we have a lot of central banks that are unwinding or tightening even, simultaneously.  How worried should we be about all of that happening at once?  Could that expose vulnerabilities in the global economies? How do you think about that question?

Lagarde:          I think you’re correct that we will—as the global economy improves and as that recovery seems to really take root on a global basis, because it’s not just the emerging market economies leading the way, or just the advanced economies; it’s pretty much all economies producing and participating in that growth movement, which is almost at the pace where we were in the decade before the financial crisis.  And it is because of that good situation that gradually central banks are going to be begin tightening monetary policy, have or are in the process, or will be, stopping their purchase of financial bonds of different categories, and will gradually also begin raising interest rates.

So, it’s because of a good set of circumstances that they move in that direction.  So, that’s number one.  Number two, I don’t think that they’re going to be totally synchronized, and we’ve seen the Fed raise interest rates already four times since January a year ago.  The CB is still buying, and certainly has not begun raising interest rates—

Rampell:         But they did drop their easing bias language today.

Lagarde:          Yeah, but it’s—but they’re still buying, none the less.  I think what—I don’t want to over-interpret what Mario Draghi said, but it’s simply an indication that there is a term to that sort of quantity of easing policy that has been adopted for a few years now.  But they’re still doing it.  The UK has just begun raising interest rate, once, and Japan is still with very, very low interest rates, and still buying significant amount of assets on the markets.

So, it’s not synchronized, and I think that’s good, because if there was perfect synchronicity, that could expose serious vulnerabilities around.  Now, clearly what will happen as a result of that very likely monetary tightening initiated in the United States, and probably to be followed through in the UK, then in the Euro area, and possibly later in Japan, is that financing costs will rise.  And those countries and those corporates that, around the world, have consumed a lot of borrowing because borrowing was so cheap—will be facing a debt service, will be facing financing situation that is harder.

So, for those that are weak, that do not have buffers, that are zombie corporates, and there are some in some places around the world, it will be tough.  Yeah.  This is the Warren Buffet analogy with when the sea—when the flows is out, then those without swimming costume are in trouble.

Rampell:         Right.

Lagarde:          We might have a bit of that.

Rampell:         What about other possible risks on the horizon?  We have the threat of a trade war now.  How worried should we be about that in the United States, and in other advanced economies, and in poorer economies that maybe won’t have swimming costumes, if they’re faced with a shock like a major trade war.

Lagarde:          Well, I would say first that trade has been, historically and is now, one of the critical engine for growth, and it took us almost a decade to turn the situation around to be back at a stage where about 120 out of 180 countries are driving that recovery process.  And my hope is that trade can continue to be that engine of growth going forward, particularly given the fact that the current growth that we see at the moment is largely fueled by a combination of trade and investment.  And they go together.  It’s not as if you could say, “Okay, well, I’ll switch off the trade engine, and I’ll pump up a bit the investment engine.”  They go hand in hand.

So, I hope that that trade engine can continue to work, if we hope to keep that recovery, which itself is creating the jobs, which is increasing the living and the income of many people around the world.  My hope is that the arguments that have been made here in there can be sorted out promptly, can be sorted out cooperatively, and that we do not go into a tit for tat, and an escalation of those tit for tats, because in trade wars, we’ve seen it: historically, there is no winner.

Rampell:         So, those are your hopes.

Lagarde:          Yeah, well, what can I do?

Rampell:         What might be the consequences, though, if we did have a tit for tat?  Could you imagine the global economic recovery that we have seen the last few years losing steam, reversing?  What are the dire—how dire are the potential consequences, I would say?

Lagarde:          Well, you cannot just look at one country in isolation, because if you do, well, it’s in and of itself, and if it’s a tit only—not tit for tat, and so on and so forth—it’s probably not a major—it probably doesn’t have a major impact.  I think net, it’s losing job, it’s probably a teeny tiny potential risk in the growth.  But the risk of that trigger is that it does produce the tat, and that tat entails a tit, which itself produces a tat, and so on and so forth.  And it is that escalation that is, in and of itself, dangerous for the impact that it has on all those economies, and furthermore, for the impact that it has on confidence.

And confidence is a super precious good that builds over time, and that can be destroyed very quickly.  If the perception of investors around the world is that this is uncertain, you never know where the tariffs are going to go; how high, how low, against whom, on what basis, with what scope, with what exceptions?  Then you sort of—you step back and you don’t invest.  You wait.  And that confidence impact could be significant.  So, it’s a combination of all that, which can be triggered by something which, in and of itself, is not going to be of massive impact for the entire global economy.

Rampell:         Also, in the years following Lehman and the financial crisis, and contagion throughout the world, we did see a greater effort amongst lots of different countries, lots of different regulatory systems to coordinate on financial regulation.

Lagarde:          Yes.

Rampell:         Basel and through other means.  There has been pressure—

Lagarde:          Or the G20—the London G20 right after the crisis in 2008 was a magnificent collective effort to actually reign in the financial risks.

Rampell:         But more recently, particularly here—I don’t know as much about the environment elsewhere—there has been pressure to reverse some of those changes that were made, in terms of banking regulation, financial regulation.  How big of a concern is that?  How much does the IMF pay attention to that?  How worried are you about those changes that could be coming?  Or is it that we went too far, and this is—we over-corrected, and now we’re under-correcting, or whatever the right analogy would be?  How do you think about those kinds of developments?

Lagarde:          Initially, the reason I mentioned London is that in London, it sounded so sort of straight forward and simple.  It was no product, no market, no player will be without proper regulation, proper supervision.  And the fear was yet another risk to the—not so much to the financial sector, but a risk to the overall economy, and a risk to all the depositors around the world who had entrusted their savings and their deposits with the banks.  Because that’s really what it was about at the time.

So, that general principle stood and stands today.  It was—I was going to say, that was 10 years ago, and the corrections that were needed, in terms of capital ratio, leverage ratio, loss absorption capacity of banks, was corrected over time and fortunately, laboriously.  So, you had, over the course of time, Basel II, Basel III, Basel III-plus, now Basel IV.

So there was an element of constant negotiations between those of us who wanted regulation and supervision, the financial sector at large, which was itself segmented between various categories of banks, which were not all necessarily under the same umbrella but which were initially not resisting at all because they were in such a dire situation that there was no capacity to resist at the time.  So we should have moved faster.

But then, as things improved, the capacity to argue, lobby, resist, identify better, be more picky about all these regulations, improved.  And, as a result of that, and because it’s a sophisticated and complicated and technical field as well—and made more technical by those who belong to that field on purpose—it took time and it was revised regularly over time, which produced a level of fatigue—you know, sort of reform and regulatory fatigue—which was understandable.

Rampell:          Amongst the financial institutions, you mean?  Or amongst the public?

Lagarde:          Amongst the—yeah, yeah, amongst the financial institutions.  And in their dialogue with the supervisors and the regulators as well.  And that probably produced also an overdrive of tedious, laborious, and, as I said, very, very specific regulations, some of which could certainly, in our view—and we’re looking at it very carefully and attentively—some of which could certainly be streamlined, a bit simplified, thresholds for some small banks could be lowered, and we do not have an issue with that.

Now, if that, which is, in our view, legitimate, was extended, stretched, and were carved in some additional exemptions, some additional reductions, some further lowering of thresholds in sectors where there has to be strong capital, there has to be liquidity ratios in place, there has to be leverage limitations, there has to be loss-absorbing capacity in order to resist the next potential shock that happens, then that would be a real issue and I think that we should all make sure that it doesn’t happen.

Rampell:          So traditionally I think a lot of us think of the IMF as being an institution that works with lower- and middle-income countries, right?  Emerging markets in particular.  Traditionally, I should say.

Lagarde:          Yeah, yeah, yeah.

Rampell:          Emphasis on that word.  Providing guidance on how to get your debt under control, being the lender of last resort, et cetera.  What do you make of the fact that lots of advanced economies still have very large debt levels?  In the United States, we are arguably running an interesting experiment with twin deficits, which is normally something that the IMF admonishes poorer countries for doing.  What do you make of all this?  Does the United States need an IMF program?


Lagarde:          I think our quota would have to be really fat and big in order to help.  You know, we do three things.  We do what we call surveillance, which is an annual audit review and in-depth analysis of all economies around the world, the United States included, the U.K., France, Germany, Japan, and you name it.  And annually we give our policy recommendations, which countries decide to either follow, be inspired by, or decide to ignore at their peril.  So that’s one thing.

Second thing we do is—and that’s massive, actually.  It’s the fastest-growing business line, if you will, that we have, and that is capacity development.  We provide technical assistance, training predominantly in low-income countries and in emerging market economies but also to some advanced economies.  Whether it’s improving the debt management system, whether it’s public finance management, whether it’s banking regulations, we provide that and we have lots of, actually, technical and training centers in Africa in particular.

And the third activity we have, which is the one that we are most sort of well-known for, is providing lending to countries that have massive crisis of balance of payments and that cannot get financing elsewhere.  And we provide the international community money.  It’s a bit like a credit union, the IMF.  So we provide international community money, and, in consideration for that, the countries commit to improve their public finance, restore their position, and be in a situation where they can finance themselves by normal means.

So I’m concerned about the increase of the debt level around the world because if you look at where it is now, it is higher than where it was prior to 2007.  And that includes sovereign and corporate in many corners of the world.  It’s not specific to the U.S.; it’s not specific to Japan; it’s not specific to corporates in various countries.  It’s very much across—

Rampell:          As a percent of GDP, you mean?

Lagarde:          Yeah.  Yeah, yeah, yeah.  And the debt service is fairly low at the moment because of course the financing terms have been extremely favorable for the last five years.  So the debt service is accommodating in a way, which is—

Rampell:          But that may change.

Lagarde:          It may change, and that’s where we might have difficulties, yes.

Rampell:          Uh-huh.

Lagarde:          Which is why we are recommending one thing very clearly, very simply.  We say—because growth is good, we say, “When the sun is shining, please fix the roof,” and deal with you—build buffers, use your fiscal space to actually do the structural reforms that will improve your overall productivity and your capacity to resist.

Rampell:          How receptive are advanced economies to that advice?

Lagarde:          You know, first of all, many of them have incredibly talented economists, and sometimes in some countries—in the case of some countries, many more than we have at the IMF, and the U.S. is one example where clearly the Treasury Department has a number of economists which is largely superior to the U.S. desk that we have at the IMF.  But I think they like to at least confront their views.  They, I think, respect our analysis.  They don’t always agree with it, and I’ve found myself with many countries in a position to actually argue with them why we think that this approach or combination of fiscal countercyclical policy is actually needed for them to rebuild their buffers.  And, well, they say, “Well, not sure that we should do that now.”

You know, I was a finance minister for four years.  It’s very tempting when you have a little bit of surplus, a little bit of fiscal space, to actually say to your colleagues or to the leader or the prime minister, whoever, who is keen to, you know, finance things, whether it’s infrastructure, whether it’s social programs.  It’s tempting to say, “Okay, all right,” but sometimes it’s not okay.

Rampell:          Or sometimes you don’t even have the fiscal space.

Lagarde:          That’s true.  That is true.

Rampell:          And you make room.

Lagarde:          That is true.

Rampell:          We have seen that here certainly.  So, lastly—we’re close to the end—but I wanted to ask you a sort of more general, IMF’s-role-in-the-world kind of question, a governance question.  So the IMF has, in the past, been criticized for lagging behind in representing the global economy, right?  Particularly the criticism has come from China that China now represents something like 16%–what is it?  I wrote it down.  15% of the global economy, but they still have 6% of the IMF vote.

So my question is how do you go about advising and helping shape the global economy if you don’t represent it?  How do you deal with that challenge?

Lagarde:          First of all, we try to have as diverse a staff as we can, because there’s—I mean, the point is completely well taken, and the institution should better represent the membership in terms of contribution to the economy, but I’ll come to that in a minute.

I think the fact that we have a very, very diverse staff with economists from all corners of the world, and not, you know, a dominant group that would be coming from the advanced economies and small minority from the rest, I think is an indication that we want all voices, all talents, and all recommendations to actually be produced by that very diverse group.  And I think they recognize that.  The fact that on my management committee I have one American, yes, but I also have one Chinese, I have one Japanese, and I have one Brazilian.  So that’s also an indication of our determination to include as many voices and as-representative voices as possible.

Now, you referred to the 6% versus the 15%; 6% voice in the organization by way of quota, and 15% contribution to the economy in GDP terms.  The IMF is the only institution, of all the Bretton Woods institutions and all the other international institutions, where we have to—and this is in the articles that were signed by many men, actually—44 men at the time.  I’m not sure—well, there was a March 8 day in those days, but they clearly ignored it for the purpose of consolidating that group.

When it was signed under the auspices of Lord Maynard Keynes and a few others—and Dexter White, of course—they included in the articles wording to the effect that every five years we have to revisit, and every five years we have to adjust on the basis of numbers, and we have to adjust the formula in order to better represent.  So it’s never an easy task.  I’ve gone through one cycle, I’m now beginning another cycle.  It’s highly disputed.  Some people are very keen to keep their prerogatives.  The U.S., which was clearly in a very strong position in 1944, has negotiated to have a veto right in the institution so any decision that requires an 85% majority will only pass if the U.S. is in agreement with it.

And, of course, when you have enjoyed that kind of position and prerogative, it’s not easy to concede and to—

Rampell:          To give up power [LAUGHS]?

Lagarde:          To give up some of your power, yeah.

Rampell:          Well, that’s unfortunately all the time that we have for this evening.  Thank you very much, Madame Lagarde, for joining us.

Lagarde:          Thank you.

Rampell:          And if you’d like to watch video clips of any of this online or highlights from the interview, you can go to washingtonpostlive.com.  And thanks to everyone in the audience today, as well as those online, for watching.