Empowerment—the Amartya Sen Lecture, By Christine Lagarde Managing Director, International Monetary Fund
IMF News, June 6, 2014
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- Authors: Christine Lagarde Managing Director
- Published: June 6, 2014
Introduction
- Speech delivered by Christine Lagarde, Managing Director, International Monetary Fund.
- London, June 6, 2014.
- Lecture framed around the intersection of justice and economics: the issue of empowerment.
- Three layers of empowerment addressed: individual, institutional, and multilateral.
Empowerment of individuals — Findings and implications
- Central thesis: empowerment = economic opportunity and the ability to freely choose one’s path in life; cutting away obstacles to human flourishing.
- Obstacles addressed: income disparities and gender disparities.
Income disparities
- Observation: the gap between the haves and the have-nots has risen substantially in recent years; “we might have avoided a second Great Depression, but we have not avoided a second Gilded Age.”
- Amartya Sen’s capability approach emphasized: judge advantage by capability to do the things people value.
- Mechanisms by which inequality hinders empowerment:
- Lack of decent nutrition, healthcare, education, skills, and finance reduces people’s capacity to get ahead.
- Economic insecurity can cause underinvestment in skills and education.
- Higher inequality associated with lower levels of contentment and less intergenerational mobility.
- Policy implication: policies to tame excessive income inequality can be win-win if carefully chosen and calibrated.
- Policy examples recommended:
- Boost spending on health.
- Boost spending on education.
- Active labor market policies.
- In-work benefits.
- Education highlighted as a uniquely powerful agent of empowerment.
- IMF contribution: development and public opening of massive open online courses (MOOCs) for government officials and the general public to enhance knowledge and skills in IMF-related policy areas.
Gender disparities
- Key statistics and findings:
- Globally, women earn only three-quarters as much as men, even with the same job and same education.
- Women are underrepresented in the formal sector and overrepresented in the informal sector.
- Women spend twice as much time on household chores as men—and four times as much on childcare.
- Women make up 70 percent of the billion people living on less than a dollar a day.
- Women are the first to be submerged by economic crisis and are more likely to be fired when they reach the top.
- One study cited: women spend up to 90 percent of their earnings on health and education, as opposed to just 30-40 percent for men.
- Women account for 70 percent of global consumer spending.
- Eliminating gender gaps in labor force participation could raise income per capita by:
- Middle East and North Africa—27 percent.
- South Asia—23 percent.
- Amartya Sen’s contribution: attention to “missing” women and the moral imperative to increase women’s voice and agency.
- Policy implications recommended:
- Focus on education for girls and women.
- Strengthen ownership rights for women.
- Expand employment opportunities outside the home.
- Promote policies to boost women’s participation in economies such as Korea and Japan.
Empowerment of institutions — Findings, metrics, and country examples
- Premise: institutions and governance structures significantly shape individual empowerment through accountability, transparency, and impartiality.
- IMF role in capacity building:
- Devotes a quarter of its budget to capacity building.
- Since 2008, provided training to most of its 188 member countries, and technical assistance to 90 percent of them.
- Low-income and lower-middle income countries receive two-thirds of the IMF’s technical assistance and half of its training.
- Special focus areas: tax systems, public fund management, financial sector oversight, quality of economic statistics.
- The IMF acts as a global conduit for sharing knowledge and know-how through technical assistance and training.
Country and regional examples of IMF capacity building
- Myanmar:
- Identified as the IMF’s third largest recipient of technical assistance.
- Reforms assisted: setting up an independent central bank, removing exchange restrictions, establishing a functioning foreign exchange market.
- Current priorities: tax administration, financial sector oversight, economic statistics.
- Myanmar’s tax revenue noted as a mere 7 percent of GDP.
- Goal: boost tax revenue to fund health, education, and infrastructure and expand access to credit, including for women and rural areas.
- Cambodia:
- Assistance to restore legal framework and trust in the financial system after Khmer Rouge legacy.
- Result: broader rural access to banks compared to a decade ago.
- Kosovo:
- Post-independence capacity building: creation of a brand new central bank and subsequent training support to other central banks.
- Peru:
- Rapid growth but lagging tax capacity; a fifth of revenue lost through avoidance and evasion.
- IMF assistance aimed at strengthening tax collection and public finance management to support programs like Juntos (conditional cash transfer).
- Arab transition countries:
- Assistance in tax policy and administration, financial sector reform, monetary policy, capital markets, and statistics.
- Delivery through regional technical assistance center and regional training institute.
- Sub-Saharan Africa:
- Conference on “Africa rising”; emphasis on strong fiscal regimes to manage resource revenues for current and future generations.
- Technical assistance provided to Kenya, Mozambique, and Tanzania.
- Hands-on help delivered through five regional technical assistance centers in Gabon, Ghana, Côte d’Ivoire, Mauritius, and Tanzania.
- Overarching point: empowerment of people depends fundamentally on empowerment of institutions; continuous institutional capacity building is needed across all members as the global economy becomes more intricate.
Empowerment of multilateralism — Analysis and recommendations
- Argument: many contemporary challenges are global (demographics, climate change, rising inequality, fragile states) and require multilateral cooperation.
- Central tensions:
- World becoming more integrated via trade, finance, technology, and communications.
- Simultaneous diffusion of power and potential fragmentation toward more diverse stakeholders.
- Risk: tension between integration and fragmentation could cause indecision, impasse, and insecurity.
- Moral foundation: Amartya Sen’s view that shared humanity entails responsibilities beyond one’s neighborhood.
- Policy implications and institutional roles:
- Preserve and update effective multilateral instruments and institutions developed postwar.
- Make institutions like the IMF fully representative of current global economic reality.
- Develop a “new multilateralism” that engages emerging powers and expanding networks and coalitions embedded in the global economy.
- Invest in global social capital and a global civil society that provides space for all voices and long-term perspective.
- IMF’s role emphasized:
- Convening 188 countries to share knowledge, collaborate, and lend mutual support.
- Acting as a convener and capacity builder to foster cooperation that unlocks opportunities and reduces obstacles to empowerment.
Conclusion — Core messages
- Economic empowerment equated with freedom, dignity, and opportunity.
- Three pillars to promote empowerment:
- Enabling policies (education, health, labor market and social policies).
- Enabling institutions (accountable, transparent, impartial capacity for fiscal, monetary, and financial governance).
- Enabling international cooperation (reinvigorated multilateralism and inclusive global engagement).
- Amartya Sen invoked as a guiding intellectual force whose thinking on capability, justice, and global responsibility informs the path to empowerment.
International Monetary Fund.