IMF Managing Director, Christine Lagarde, talks demographic change, energy, and MIT culture
Christine Lagarde, the managing director of the International Monetary Fund, spoke at MIT last Friday, saying “we need to reframe the debate about demographics” and the global challenges that come with demographic changes. Her plan to counter shrinking and ageing populations in advanced economies includes both policy-driven approaches, such as entitlement reform, as well as calls for technological innovation in healthcare and energy.
Lagarde suggested raising retirement ages and using immigration to increase national workforces, although she qualified her immigration statement with the “big, big caveat” that workers must be integrated into the communities they’re entering.
Lagarde said that the IMF and MIT have a similar culture of “rolling up one’s sleeves and tackling problems hands-on in the lab, in the start-ups, in the offices, and whenever we give advice to policymakers.” Although the IMF has no motto, she said it could be the same as MIT’s “Mens et Manus.”
Since the 1940s, the IMF has provided loans and financial advice to developing and developed nations as part of a fund that is now worth hundreds of billions of dollars.
After visiting the MIT Media Lab earlier in the day, Lagarde told The Tech in an interview that she hopes she can “explore some alternative ways to manage knowledge” with researchers and “turn that knowledge into stories that will actually speak to policymakers.”
One of the things she suggested for a hypothetical engineer trying to help tackle demographic problems was “to use innovation in order to reduce public spending.” For health care, that includes “identifying and targeting the therapy that will be most efficient and where money will be best spent,” she said.
“Innovation applied to clean energy, renewable energy is absolutely vital,” she added.
Lagarde became the first female director of the IMF in 2011, and was appointed to a second five-year term just last month. Her first term began during the European debt crisis, and now she is faced with the additional challenges of Europe’s influx of refugees and China’s slowing growth.
Her biggest takeaway from her tenure was “nothing happens without a team.”
“And when I say that, it’s the team of those who work with you, but it’s also the relationship that you build across the membership,” she said. “We have 188 countries in the membership, and we have to — I have to — be mindful of all of them. There is no small country, large country. They’re all members, and they all deserve … the same degree of care and attention.”
“We will only have traction if we care, if we listen, and if we provide the best service,” she said.
Lagarde’s talk on campus, titled “Demographic Change and Economic Well-being: The Role of Fiscal Policy,” was open to the public and hosted by the Compton Lecture Series, which was established in 1957 by MIT president Karl Taylor Compton. The series focuses on world leaders “noted for their universality of thought and their influence on human values,” as prescribed by the 1955 committee that started the series.
The talk was also part of MIT 2016, a series of events taking place from February to June that mark and commemorate the century MIT has spent at its Cambridge campus, following a move from Boston.
Lagarde approached the subject of her talk, demographic change, from first principles, explaining that life expectancies have risen dramatically over the past 50 years due to developments like the introduction of antibiotics and vaccines, and improved education.
In 1950, the average life expectancy was 47. Today, it’s 71, Lagarde said, citing estimates from the United Nations. She called this the “sunny side of demographics.”
However, better conditions mean that families are raising fewer, even if better educated, children, she said. Populations are ageing, and many developed countries are suffering from slower growth and less financial stability. Longer term, the same demographic changes are likely to appear in developing nations as well, she said.
“We must address a huge demographic challenge, so we can leave our economies and societies better than we found them,” she said.
Lagarde acknowledged there are multiple viewpoints in this “debate about demographics” and how to approach the problem. “We need a multi-pronged approach.”
She proposed what she called “game-changers” that center on entitlement reform, improved tax systems and public expenditure, and increasing countries’ GDPs.
“Energy pricing is key,” she said, adding that countries should introduce new taxes and scale back many of their subsidies. By the IMF’s estimate, global energy subsidies — both directly and indirectly — cost $5.3 trillion last year.
Lagarde’s talk was followed by a Q&A with President Rafael Reif and the public. When President Reif asked her about climate change, she said, “I believe that each and every one of us can do something about it.” She referred to Milan, Italy, which is currently considering paying its residents to bike to work.
Beyond her official duties, Lagarde serves as a role model for her unprecedented accomplishments as a woman in finance. Not only was she the first female to direct the IMF, but she had previously been France’s first female finance and economy minister.
“I work in a world where there are too many men and not enough women,” Lagarde said.
In her talk, Lagarde said IMF research showed that growing the female workforce could single-handedly increase the GDP of the United States by five percent.
“I think it’s critically important that we improve the parity, that we reduce the discrimination, that we give everybody a chance to accomplish what they can accomplish,” she said in the interview. “And I also believe that women can be very conducive to a better world.”