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Christine Lagarde Urges U.S. to Raise Debt Ceiling at GW Event
The International Monetary Fund managing director speaks at preview of the IMF’s annual meeting in the Jack Morton Auditorium.
October 07, 2013
At its annual meeting this week, the International Monetary Fund (IMF) will review patterns of global economic growth and discuss how to transition toward a different financial sector, IMF Managing Director Christine Lagarde told George Washington University students on Wednesday at the Jack Morton Auditorium.
Ms. Lagarde came to campus through the work of the Division of External Relations, the International Affairs Society (IAS) and nine other student organizations. Her address kicked off the IMF’s annual meeting, which will be held at the university next week from Oct. 8 to 12.
The IMF is made up of 188 countries and works to foster monetary cooperation throughout the world while promoting employment, economic growth and financial stability. Each year, the IMF holds an annual meeting with the World Bank to discuss issues of global concern.
The meeting has brought members of the IMF and GW together, as many students have volunteered to help at IMF-sponsored events open to faculty, staff and alumni. The IMF also selected graduate students Allison DeMaio and Mark Duffy to participate in its Youth Dialogue on Oct. 9. Faculty members of the music department will provide entertainment on University Yard throughout the week.
In introductory remarks, George Washington President Steven Knapp highlighted Ms. Lagarde’s years of experience, honoring her for being the first woman in the IMF’s 67-year history elected to lead the organization.
Ms. Lagarde thanked GW for allowing the IMF to use its facilities during the meeting, and joked about how close her office is to the university’s student life.
“From my office, I can spot you and check whether you’re actually studying hard or not. We are neighbors—many of our staff members walk by and envy you for your youth, your good looks and your ability to study hard. They hope some of you will be joining us someday,” she said.
She then gave a preview of what the IMF will discuss behind closed doors and in public this week: Five years after the global economy avoided going into a depression, the fog of the financial crisis is starting to lift, she said. This leaves the IMF with several questions to consider about how to transition various patterns of economic growth in different countries, and how to transition the globe toward a different kind of financial sector.
The advanced economies of Europe, Japan and the U.S. show signs of hope as they stabilize, but it’s crucial to manage their monetary policies carefully, Ms. Lagarde said.
“The key now is to use this time wisely and not waste space,” she explained. “This means different things in different countries. All advanced economies need to move on a broad policy front, but with different emphases—financial in the Euro area, fiscal in the United States and Japan, structural in the Euro area and Japan.”
Ms. Lagarde also stressed how important it is for the U.S. to resolve political uncertainty in light of the government shutdown and concerns about raising the debt ceiling.
“The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy but the entire global economy,” she said. “It is ‘mission-critical’ that this be resolved as soon as possible.”
Emerging markets, Ms. Lagarde continued, must cooperate internally and with each other to ensure they keep moving forward. Similarly, low-income and conflict-ridden countries, especially in the Middle East, will need more engagement with and support from the international community and organizations like the IMF.
The second area the IMF will examine is the global financial sector. Ms. Largarde said the world’s old model of taking outsized risks to gain outsized rewards must transition more quickly into a new kind of system.
“A key concern is the lack of progress in establishing effective cross-border resolution regimes—frameworks and agreements to unwind global systemically important institutions and market infrastructures in an orderly way,” Ms. Lagarde said.
She also cited the need for transparency in derivatives market reform, and the dangers of shadow banking.
Both transitions must ensure that all countries can prosper in an increasingly globalized and interconnected world, which the IMF believes it can help achieve. Ms. Lagarde ended with an Albert Camus quote: “Don't walk in front of me, I may not follow. Don't walk behind me, I may not lead. Walk beside me and be my friend.”
“That is how I see the IMF—not leading, not following, but helping,” she concluded.
Irene Foster, professor of economics, moderated a question-and-answer session with students following Ms. Lagarde’s speech. Students asked several questions that sparked passionate answers from Ms. Lagarde on everything from how Latin America can contribute to the global economy to how India and Brazil can ensure their internal infrastructures catch up to their economies.
One student asked Ms. Lagarde about how to strike a balance between being approachable and being a leader in a male-dominated profession.
“I try to instill in my partners, the people across the table and those with whom I negotiate a little bit of humor,” Ms. Lagarde said. “I try to use humor to remind all that, as Madam [Hillary] Clinton would have said, women’s rights are human rights."
Several IMF-sponsored events, including the Youth Dialogue on Oct. 9 and a discussion on Latin America on Oct. 10, are still open to the GW community. Please register here.