Transcript of International Monetary Fund Managing Director Christine Lagarde at Keio University

July 30, 2012

Tokyo, Japan
Saturday, July 7, 2012
Webcast of the event Webcast

Professor Kashiwagi: Ladies and gentlemen, thank you very much for coming to the special lecture session by the Managing Director of the IMF. I want to warmly welcome the entire IMF delegation to the Keio Mita campus today.

I also want to thank all the students coming here this morning despite the rainy weather. I hope you will enjoy today’s session. At the same time I would want to remind you that this session will be filmed and photographed, as you can see, so many cameramen, so you have to bear those photographs.

So with this, I would like to ask Professor Seike to make his remarks welcoming the Managing Director. Professor Seike, please. (Applause)

MR. SEIKE: Good morning, ladies and gentlemen. Thank you all very much for coming today. It is an honor and a privilege for me to say a few words to introduce Madame Christine Lagarde, Managing Director of the IMF.

First of all, on behalf of Keio University, I would like to offer my sincere gratitude to Madame Lagarde to finding the time in her very busy schedule to come and speak with our students. Thank you very much.

My understanding is that this is a special year in the history of Japan and the IMF. In October, the Annual Meetings of the IMF and the World Bank will be held here in Japan for the first time in 48 years. At this significant time it is a great pleasure for us to welcome Madame Lagarde, the highest officer of the IMF.

Madame Lagarde was born in Paris, France. She completed her high school education in France and then traveled to America to study at the Holton-Arms School in Bethesda, Maryland. She graduated from law school at the University of Paris and went on to obtain a master’s degree from the Political Science Institute in Aix-en-Provence. Having been admitted as a lawyer to the Paris Bar, Madame Lagarde built up a highly successful career at the international law firm of Baker & McKenzie.

Then, in June 2005, Madame Lagarde joined the French government as the Minister for Foreign Trade. Two years later, she became the first woman to hold the post of Finance and Economy Minister of a G-7 country. She has also had such roles as chair of ECOFIN Council, which brings together economics and finance ministers of the European Union, and as chairperson of the G-20.

She took her current position as the first female Managing Director of the IMF in July 2011, so it was just one year ago. Madame Lagarde has become one of the key figures in the international economic policy. I, myself, have had the opportunity on several occasions, such as the World Economic Forum in Davos, to listen to her speech, and I have always been impressed with her consistently articulate and well-balanced observations.

Today, Madame Lagarde kindly invites our students to encourage or to engage in a discussion with her following her lecture. This is a rare and valuable opportunity for particularly younger individuals in this audience. I anticipate a lively and productive discussion.

So, without further ado, please join me in giving a very warm welcome to the IMF Managing Director, Madame Christine Lagarde. (Applause)

MS. LAGARDE: Ohayō-gozaimasu. (Laughter and applause) Bonjour, arigato, and good morning. Thank you very much for turning up this morning on a Saturday, when you don’t have class, when you would rather stay in bed and relax or study very hard. Thank you for being here this morning.

I would like to thank you, President Seike, for your very warm hospitality. I would like to thank Professor Kashiwagi, who will be moderating our session later on. All the professors who have attended this morning’s session as well, they might have rather to stay in bed as well after all. (Laughter)

And I would like to specially recognize Professor Kaji, who is with us here, with whom I had dinner last night. And that was my secret weapon for this morning because I questioned her about you and about the spirit of Keio University, and I learned quite a few things.

She promised me that you would be engaged in the debate, that you would ask questions, that you would not be shy and remote, so you have to live up to her promise and my expectations. So when I have done my remarks, I really want you to ask me questions about anything that crosses your mind. It can be economics, it can be the United States, it can be France, it can be Europe, it can be personal, it can be professional—anything that crosses your mind. There are no stupid questions. There might be stupid answers but there are no stupid questions! Questions are always important and welcome. Okay. So those are the rules of the game.

I'll give you a few remarks and in that vein, I'm not going to lecture. I'm not going to give you the IMF gospel on economics. I'm going to tell you a little bit about a changing world and I will relate that to my journey through life up until now. You might find it interesting. You might find it strange because times have changed in a big way, but you can always learn a little bit from other people's journey in life to decide what your path will be in your own life. So don't expect a big lecture on economics! It will not be the case.

You might wonder why I accepted the invitation of Keio University’s President. Well, I looked a little bit into Keio University’s principles and approach to education—and I certainly found it very encouraging to see how number one, diversity, and number two, internationalism are valued at Keio University. And that is certainly what engaged me in preparing for this morning's session.

I also find it very encouraging that the founder of Keio University, Mr. Fukuzawa, had a vision for the university. He wanted the university to be “a model of the nobility of intelligence and virtue”, and its “students being leaders in society”. Well, he got that right. When you look at the number of prime ministers of Japan, members of cabinet, CEOs of Japanese companies that have graduated from Keio University, certainly his line of forming future leaders was correct and has been delivered upon.

I particularly value the principles of diversity and internationalism. And I know that in this room, there are some students that are not Japanese and I'm told that there are some students from France, which I'm delighted about. I'll say a few words about diversity later on.

But before I turn to the topic of change and how it relates to your journey in life, I would like to set the scene and just remind ourselves that we live in a very rapidly changing world—a world that has changed, that changes, and will continue to change. Sometimes we have this feeling of dizziness because things change so fast. But change is about life, and we've seen changes over time.

But, I would submit to you that the most fundamental changes that occur generally combine accelerated communication, added competition and yet, collaboration. So I would call it my three Cs: Communication, Competition, and Collaboration.

If you look back in your history, I'm sure you will find that combination of the three Cs.

When I look back, I can't help stopping in the 15th century in the Gutenberg times, when thanks to the creation of the printing industry, communication spread and started changing the life of many. It gave birth to the Renaissance times, which were clearly an acceleration of communication, competition, and collaboration. Life was changed forever then.

If you jump forward a few centuries to the close of the 20th century, there was an invention as fundamentally changing to the world as the Gutenberg printing press. What could it be? The close of the 20th century, an acceleration of communication—you use it all the time. The internet, right? The internet, in the same fashion, has massively accelerated communication, brought people together, and transformed you.

You're not like I was at your age. You are connected. I wasn't connected when I was 20. I was writing letters. When, for the first time, I spent a year in the United States at the age of 17, I was receiving a couple of letters a month. And those letters took five days to travel from Paris to Washington.

Now that seems unbelievable, right? You go online. You type emails. You Tweet. You Facebook and other things. And it's instant communication. You are related, you are connected and that has transformed you massively into students capable of reaching out, of communicating extremely fast. And that has been in my view as transformational as, back in the 15th century, the invention of the printing industry may have been.

Now, there have been other episodes of massive transformation. If you look at when your university was founded back in 1858, what happened then? In most advanced economies of the world, the Industrial Revolution and together with it—railroads, transportation—accelerated movement of people. It didn't have much to do with the actual act of communicating, but it brought people much closer together. And yet again, you have the three Cs: communication, competition, collaboration. And that too, changed people forever.

This dimension of interconnection is great. It brings you closer. For those of you who are international students, you can communicate back home. You use FaceTime and it's as if you were there. You can see your parents, your siblings, your friends. Opportunities—you have access to knowledge; you have access to ideas that are not within your own backyard. But it brings threats as well, doesn't it?

It brings threats because things happen instantly, sometimes without any second thoughts and that's how massive amounts of money can transfer in and out of Singapore, for instance. That's when an electronics retailer can go bust in London and interrupt manufacturing schedules all around Asia. That's how the financial crisis happening way out of your own boundaries can actually have consequences on jobs being lost in Japan—or anywhere in the world for that matter.

So, we have to weigh the pros and the cons—accelerated communication, competition, collaboration. It brings the good, it brings the bad. That is why your education, the way in which you appreciate the knowledge, the way in which your brain is capable of sorting out and processing is so important. And that's the reason why education as provided at Keio University is fundamental to you accessing judiciously, wisely, intelligently this wealth of information that is out there.

And that helps you becoming agents of change. Why is it so important? Because nothing is perfect and the world has not evolved and has not changed to make everybody's life fulfilled and satisfied. At the moment, there are about 75 million young people—your age, maybe a couple of years older—who are looking for a job, who don't have a job, who don't have access to employment, and who are refused access to the job market.

And this is clearly one thing that policymakers around the world should pay very close attention to. And that's where certainly the IMF is very keen that policymakers concentrate on making sure that there is not only solid, sustainable, and balanced growth, but also inclusive and job rich growth.

Can you do something about it? Yes, because the quality of your brain as educated by good professors in a good university, with access to a wealth of information, with the ability to meet people that you had no idea you could meet, with the ability of discovering new ways of thinking, can help you change the world for the better. It can help you have an impact on the way in which the world transforms and will continue to transform.

And I would submit that those transformations will require different ways of thinking—thinking more globally because the problems are global, and, as a result, responsibilities are global too.

One of the things that we are trying to focus on at the IMF are what we call the spillover effects of policies decided in a particular country. When certain monetary policies, for instance, are applied, it produces an effect in the country where the monetary policy is decided, but it may very well have an effect outside the boundaries of that particular country. And it's the responsibility of the IMF to examine that.

So what do you see there? Interconnectedness. Effects of change beyond boundaries. Collective responsibility. Global approach, because they are global problems.

How can you be best equipped for that? You will be choosing your own paths in life. I've chosen my own path in life, but certainly what has equipped me to better deal with this issue of global problems, global challenges, global responsibilities is certainly to have, very early on, been exposed to the richness of diversity.

What do I mean by the richness of diversity? Well, it's being respectful, tolerant, and welcoming the difference that you see in others. Because we're not all the same color of skin. Because we're not all the same color of hair. Because we don't all have exactly the same culture, nor the same background, nor come from the same fields of society. And yet, each of us brings our own richness. I don’t know how many of you speak French, but there is a beautiful poet called Paul Valéry, who wrote after the Second World War at a time when international institutions, such as the IMF or the World Bank were created—at a time when differences, diversity were celebrated—wrote that lovely piece which says, “Mettons en commun ce que nous avons de meilleur et enrichissons-nous de nos differences mutuelles.” Sounds lovely. But it should mean something as well, right?

So, poorly translated, it's, “let's share the best each of us has and enrich ourselves with our differences.” To me, that is the essence of diversity and how you can actually enrich yourself from the differences demonstrated by others. So, in this process of change that I would like to celebrate and encourage you towards, dare diversity, dare differences, because that will tell you a lot about yourself.

My first experience about diversity was when I was 17. I left my home, my family, my friends. I left my language, my history and my culture. And I went abroad. I was an American Field Service scholar and I joined my American family, my American school. A civilization and a culture that I only knew through having read Alexis de Tocqueville many times over before I went over to the U.S., but I had no idea. It took me actually a couple of days to explain that I would like to have a shower because I wasn’t pronouncing the word “shower” properly and my American family couldn't figure out what I was talking about!

So that was diversity. And the beauty of the American field service is that it brings together students from all over the world to live and share the same experience abroad. So, in the Washington area, not only was I going to school, not only did I have an American family—that eventually understood me as I understood them and still love them to this day—but I was with a group of 50 students who came from all over the world. I had friends from Peru, from Japan, from Turkey, from Denmark, from many corners of the world. And we shared our experience.

And we figured that our diversity, our different skin color, hair, way of understanding issues and societies, and coping with this issue—how you explain that you wanted this, that or the other—brought us together. We realized how much we had in common. We realized how much our differences should be valued and should not set us apart, but rather should bring us closer together. So, that was my first experience of diversity.

The second thing that I'd like to just touch on briefly is the spirit of partnership.

The spirit of partnership is something that I would probably not take long to explain here in Japan because I think that, in many occasions in history, the Japanese people have demonstrated that spirit of partnership. And certainly, back in March 2011, after this terrible, terrible earthquake and tsunami, the Japanese population demonstrated to the world that the spirit of partnership of closing ranks, of doing it together or being resilient in adversity could be a common feature and something that enriched each and everyone participating in the process. And that really amazed the world.

Well, that spirit of partnership is something that you will experience in life and that I encourage you to actually look forward to.

I was for about 20 years a partner in an international law firm. And that again enriched my sense of diversity because we were partners in 60 different offices, 30 different countries, 600 partners, 600 very, very large egos I can assure you. And all these large egos had to be brought together in a partnership where we were accountable to each other, where anybody's mistake was everybody's mistake, where anybody's success was everybody's success, and where we had to close ranks on occasions to make sure that the partnership would survive the random traveling of just one larger ego amongst the 600.

But that spirit of partnership is also something that I would highly encourage you to value in your life, in your journey, because it's hard. It's much harder than being a lonesome cowboy in this wild world, but it is much more rewarding because, again, it's going to teach you something about yourself, about your ability to cope, about your tolerance to others. It will give you a spirit of compromise and of finding something that transcends your own purpose and that goes beyond yourself. So that spirit of partnership added to the principle and enrichment from diversity that I referred to earlier is also something that is, in my view, critically important.

One final point, before I surrender my time and let you ask me any question that crosses your mind.

So, dare to be different. I'm sure that this is a dimension of Keio University that you value. You don't have to all think alike. At the IMF we try to encourage alternative thinking. Not everybody has to think alike. We have, unlike many, many organizations—certainly unlike any organization that I know of in the private sector—an approach that consists of looking inside ourselves to make sure that we are tolerant enough to accept alternative thinking, to accept dissenting views, to encourage dissenting views. And this is highly important.

This is where I'd like to make the connection with interconnectedness that I mentioned earlier on.

I think today, you have a chance to think differently more easily than in my days, or than in your professors' days. Then, when you wanted to have access to alternative thinking, when you wanted new ways of analyzing, you really had to do a lot of research. You really had to sit in the library for hours and hours and hours to find out where you stood in the middle of all that.

Today, with this wealth of information that is available at your fingertips, it's much easier—much, much easier. Having the courage to think differently, to tolerate different analysis, different ways of thinking, is also going to enrich you. You will not be remembered by your professors or by your future employers when you interview for jobs because you will be thinking alike everybody else. No, you will be noticed and you will be remembered because you dare to be different.

Now, to dare to be different and to figure it out from this wealth of information and knowledge that is available at your fingertips, again, your brain must have been trained. Your brain must be able to process, to decide what you want, what you do not want, where you see fairness, where you see justice, where you see balance. This is why education, in and of itself, is so critical for you to actually embrace diversity, partnership, and the ability and the courage to be different.

Now, don't you find here—back to my 3 Cs—communication, competition, collaboration. You can draw from the strength of diversity, of partnership, and of being different towards communication, competition, and collaboration.

Now, if I had one final piece of advice to give you. Two pieces of advice, actually.

The first one—because I’m a former athlete—would be make sure that your body copes with your brain. Your brain is highly activated here, I'm sure, and you will continue to activate your brain, to fill it with lots of knowledge, lots of theories, lots of thinking. But make sure that your body is happy with that as well. We only get one set, so we'd better make sure that it's in good shape and happy with the hyperactivity that you have up here. So, don't forget to listen to your body and to make sure that you practice sports, whatever sport that is, that you breathe properly, that you just check yourself to make sure that your body is happy. That's number one.

Number two: be desperately optimistic. Desperately optimistic because, as I said earlier, life is about change. Change is life. Sometimes it's difficult to cope with it. Sometimes you feel overwhelmed and dizzy. Well, there have been changes before, and there will be changes after us. But we have to participate in those changes, and we have to be optimistic about it. Because if changes happen, if the great companies of Japan have turned robotics into a true expertise of Japan, if walking with music is something that was invented here, and if the flat screens that you see all over the place were born in Japan, it's because people—human beings, men and women—decided that it was worth their time innovating and being optimistic about the future.

And, at the end of the day, there's not much difference between the optimist and the pessimist, because they both get it wrong. (Laughter) But the optimist is happier. (Laughter) So, I would encourage you to actually be happier about those things.

Thank you very, very much. (Applause)

Prof. Kashiwagi: Thank you very much.

MS. LAGARDE: My pleasure.

Prof. Kashiwagi: Well, thank you very much, Madame Lagarde for an excellent, stimulating, inspiring—I don't have enough vocabulary to express—but I thank you very much for a very nice speech, and thank you very much for also encouraging diversity, alternative thinking, optimism. You know, I'm wary coming here without ties. This is cool biz. But the president and all the other professors are wearing ties. (Laughter) I became worried, but, as you say, alternative thinking is a very good thing.

MS. LAGARDE: Alternative dressing, as well. (Laughter)

Prof. Kashiwagi: Alternative dressing, yes. So, I think I learned about this alternative thinking. I was also educated at Keio, but I also spent ten years in the IMF, as a Fund economist and Executive Director, representing Japan, and I enjoyed diversity, alternative thinking.

So, as the Managing Director emphasized, she came here to engage in discussions. She's inviting students to raise questions and I really appreciate this opportunity. So, we would immediately go into the question and answer session, but I would like to point out a couple of rules.

First, for those of you who have questions, you should raise your hands, and then I will point to you, with random sequence. After you are identified, you should stand up, and I think the microphone will be coming. And then you should identify yourself—your name, which faculty you belong to, etc, etc. And, then, present your questions, but in a very short and pointed manner, please. (Laugher) Don't make a long speech. Pointed questions are appreciated. And I encourage students to raise questions in English. It's a good opportunity, but at the same time, I understand that some of you are not so fluent in English. You can do it in Japanese. But, if so, just give us some time to put the headphones on. So, if you want to raise questions in Japanese, state that at the beginning. Okay. These are the rules. So, I will invite questions, and we'll see how many questions we will be seeing.

MS. LAGARDE: Girls, as well as boys.

Prof. Kashiwagi: Yes, yes. Diversity. (Laughter) Okay. Shall we start with the gentleman with the eyeglasses? Second row.

SPEAKER: Thank you very much. My name is (inaudible), a student at the College of Economic (inaudible). I'm setting up (inaudible) for next month and I'm so happy to be here because my dream is to be an economist at the IMF. And my question is about --

MS. LAGARDE: So, you're applying today? (Laughter)

SPEAKER: I'd like to. And my question is about international monetary system and regional monetary unions. What role is allowed to be played by regional monetary unions in promoting stability in the international monetary system? Which regional monetary unions try to impose law? What role is allowed to be played by IMF in these regional arrangement? Thank you.

Prof. Kashiwagi: Okay. I think in order to save time, I would collect a couple of questions and then ask Madame Lagarde to respond. So, are there any other global issues?

Okay. The lady on the first row.

SPEAKER: Thank you for the wonderful speech. My name is (inaudible), also from the faculty of economics. I also have a question about the institution. Recently, the IMF embarked on financial support of the euro zone countries, and I believe there was a recent request from the IMF to increase its financial resources, which I believe is to prepare for another support for the euro zone countries. However, I am a little bit confused about how the financial resources of the IMF are required to solve the euro zone crisis. I understand how the major role of the IMF to be the global lender of the last resort, but there is the European Central Bank, which can easily help a country to provide cash, by providing unlimited amount of euro. So, if that's the case, I was wondering why do we need the financial resources of the IMF to cope with the euro zone crisis?

Prof. Kashiwagi: Okay. The role of IMF in euro zone crisis. Maybe one more? The second row, a foreign student.

SPEAKER: Thank you, Ma'am. This is (inaudible) from Bangladesh. I work in the Bangladesh National Board of Revenue and I am studying here in the school of business and commerce. Basically, you say the word alternatives. I have my professor Kashiwagi, Professor Kaji and Professor Yoshino. They also teach us the same thing. So, basically, Bangladesh has got a huge amount of loan recently from IMF and that's not a conditionality, but my question is that it is sometimes that IMF conditionally (inaudible) stability and the structural adjustments programs increase political parties in the LICs. How do you see this type of hard criticism about IMF laws? Thank you.

Prof. Kashiwagi: Okay. Three difficult questions.

MS. LAGARDE: I see that you are well prepared. (Laughter) All right, on the role played by the IMF. I think you're referring to the regional arrangements and how the IMF interacts in relation to those, right? I would probably refer to two regional arrangements. One is the Chiang Mai arrangement, which is probably the one you have in mind, which has just been recently agreed to be doubled and for which ASEAN plus 3 participate in the arrangement.

And the other one, which is obvious to all of you, is the regional arrangements that prevail in the euro zone within the European Union, which touches on your question as well.

Well, clearly, I think they're different these two, because one was put in place ex ante. The Chiang Mai arrangement is of a precautionary nature and does not have as much resources as what is available under the European Stability Mechanism. But, for the moment, the Chiang Mai arrangement is not activated because it's not necessary. So it's precautionary, it's ex ante, it was not really born out of the crisis, but rather post-Asian crisis. And it provides very explicitly for coordination between the Chiang Mai arrangement and the IMF, above a certain threshold.

So, under a certain threshold for precautionary purposes, that regional arrangement can work without the IMF being engaged. Above that threshold, the IMF is engaged and it's regarded actually as one of the important conditions for the Chiang Mai arrangement to operate. So, there is an active role and a partnership that is considered between the regional arrangement and the IMF.

The IMF brings to the table over 60 years of having had to deal with crisis. Not that the IMF has always done exclusively crisis management. It has done lots of other things, as well. But, clearly, the expertise of crisis management lies comparatively more with the IMF than the Chiang Mai arrangement. And I think that drawing on the expertise of drafting conditionalities, making sure that they're implemented, adjusting the policy mix that is, in our view, adequate to bring the country to a better standing, is something that is a smart way of leveraging on the institution.

On the other hand, the European Stability Mechanism is not yet effective, but it will succeed the European Financial Stability Fund, that was put together under necessity because member states in the euro zone were going through a crisis for which a crisis management mechanism was necessary and for which a backstop facility was needed. Now, yet again, if you look at the way in which that has been used, the EFSF—or even prior to that, the bilateral loans between the euro members and Greece for instance, or the Irish program, or the Portuguese program—were put together in good cooperation, in partnership between the Europeans—particularly the European Commission, the European Central Bank—and the IMF, because we brought to the table—in addition to funds, roughly a third or less than one-third of the total funding—our experience in designing programs and recommending a set of policy advice to the countries in crisis.

So, you see, it is two different mechanisms, two different geneses for the creation of those institutions. But, in both cases, a solid cooperation with the IMF, drawing on its expertise.

Which brings me to your point. The IMF is not a lender of last resort. It is a lender, but not a lender of last resort. It probably would have been the dream of Lord Maynard Keynes back at the creation of the IMF, that it would be a lender of last resort, but it is not. And our resources are really intended to respond to the potential needs of any of the members of the organization.

We have currently 188 members. It's almost all countries of the world. And we have to be able to respond to their needs, whatever they are. So, over the course of time, the IMF has helped Europe after the Second World War. Then, different countries having balance of payment issues, which is generally the condition under which the IMF gets involved. The IMF helped Latin America when they went through their difficult times. Then, the IMF turned to the Asian crisis, where its help was needed as well. And we're back in Europe.

Where do we go next? I don't know. But there will be another destination as well. And the reason why I thought it was necessary for the IMF to have additional resources is the magnitude of the crisis, the stage of development of the economies that are concerned, and, therefore, the heightened level of involvement that we need to engage in. Not only in Europe; not only in the euro zone. But in many other countries that can be the victims of collateral damages as a result of the crisis, which has traveled from having its epicenter in the U.S. to having its epicenter in the euro zone.

So, I think that's why additional resources were needed, and how we managed to raise an additional $456 billion, which brings the institution to being a $1 trillion institution in terms of capacity to commit to support others.

Your third question was about conditionalities. Conditionalities did not exist at the very origin of the IMF, but gradually, over time, it became one of the requirements. And the development of conditionality is really associated with loans being bigger, being for slightly longer periods of time and not just a couple of years, and also associated with the risk-mitigating policies that were required by the lenders. It's all very well lending money to countries that have balance of payment issues that are losing reserves, but it's also helpful, especially when you have a whole bunch, hundreds of economists, working on those countries to say, it might be helpful if you were to do a fiscal consolidation program that focuses heavily on the beginning of the program, and if you were to do some structural reforms that would make product and service markets more open, more flexible, because that will take the country forward and make it more solid.

So, that's how the principle of conditionalities came about and it has, over time, proved helpful. I remember paying a visit to Russia—and there was an IMF program in that country—and having the Russian leaders actually acknowledge that, while it had been resented at the time the program was put in place, which is often the case. When you're told please do that, please be more careful with this, please restrict these spending policies that are taking you nowhere and are just accumulating deficit and building debt, nobody likes it. Let's face it. But it's after the fact when, eventually, countries realize that they've bottomed out, and they are traveling a safer journey, that they think, hm, maybe it wasn't such a bad idea. And I've heard that comment made to me about the role played by the IMF many times, over the last 12 months.

Let me just add one thing. We're trying to be more attentive and more sensitive to two things. One is a better dialogue with civil society. And I think the IMF, lately, has really tried to reach out to civil society. At the time of the annual meeting that will take place in Tokyo in October, you will be able to witness that. We reach out to union leaders. We reach out to nongovernmental organizations so that we hear them, we understand what their position is and what their complaints are, and we try to help design programs with that in mind.

The other is that we are also much more attentive to the less privileged in society, which is why many programs now recommend that there be social safety nets, that whenever there is a recommendation to say remove subsidies—particularly oil products—we try to be very careful because the less privileged are going to suffer, so you’d better plan in advance and make sure that they will be receiving alternative support.

Prof. Kashiwagi: Okay. Thank you very much. Let’s invite more questions. Are there more questions about the Japanese economy or the role of Japan or personal life, et cetera? Okay, the gentleman in the first row.

SPEAKER: Okay. Merci beaucoup.

MS. LAGARDE: Oh, bravo.

SPEAKER: (Speaking French) Oui?


SPEAKER: Thank you very much for your thoughtful speech. And as you already said that this is a time to think not only of the country but also we have the youth problem, especially youth unemployment such as Greece. And yet, of course, we have to try to solve the financial problem, but if we try to solve the financial problem, there is so much damage to young people such as raising tax. So, do you have any solutions or any ideas to solve youth unemployment? Could you tell me about your perspectives?


Prof. Kashiwagi: Okay. Any other questions? The girl with the white paper.

SPEAKER: I’m very honored to ask a question to you, Madame. My name is (inaudible) from faculty of economics. I have a question regarding to your career as being a first female leader in any institutions or organization with diversity. And what was the biggest obstacle you have faced being a female leader? And how did you overcome it? Merci beaucoup.

Prof. Kashiwagi: Okay. Any other questions? The gentleman with the black shirt.

SPEAKER: Merci beaucoup. I am from Mexico. I am from Tokyo Tech. I’m not from Keio University, but I appreciate the invitation was open. You are giving so much advice, encouraging young people, but I would like to ask you for more, advice. What do you think when we youth are facing a lot of systems around us in terms of political, economic, or technological, or even academic that are attached to risk avoidance? So, when we want to try to propose changes, we challenge this kind of a system that really attach it, especially in older generations, how can we face this? Thank you.

Prof. Kashiwagi: There are plenty of questions.

MS. LAGARDE: Yes, plenty of questions. Good ones, too.

Okay, your question about youth unemployment is both a very, very important one and one for which I don’t necessarily have the solution. The solutions are going to have to be collaborative. It’s not as if one person had the solution because that person would be greeted and welcome all over the world.

Let me just tell you the way I look at it. In most countries of the world, the youth unemployment rate is generally double that of the average population, which means that the job market and access to the job market is twice as hard for young people—with or without education—than it is for other people with experience.

Now, the first solution which comes to anybody’s mind is growth. If growth is tepid, no growth at all, or even negative growth, the problem is going to be just compounded. Whereas if there is growth, it’s not going to fix the ratio of one to two, but it’s going to reduce the overall volume of unemployment.

So, the first option is growth. But not any growth. As the G-20 says: solid, sustainable, and balanced growth. And we are seeing rebalancing—there is hope, it’s not all gloomy and sad. The rebalancing that we are seeing, particularly in this part of the world with the current account of China being seven points down relative to where it was before the crisis, that is good with a view to rebalancing. It has to last through and post crisis, but it’s a good and very welcome move and it’s a good change of the economy.

Second solution, I would say second solutions, is to tailor the skill sets—internship training, vocational training that young people have had—to the job markets’ needs. I am not sufficiently an expert in the Japanese economy to actually tell you what it is here, but there are many places where you have a significant gap between training in either universities, colleges, and any places where students acquire knowledge, and what is expected from the job market, which is why I think that solutions can only be collaborative.

I think it’s less the case now, but in my days, the involvement of companies or job market actors in universities was highly resented, was challenged, or was refused. There were protests. We took the streets, actually, to claim that education, university training, had to be totally independent from the job market.

I think those days are gone. It could be afforded because there was full employment, because there had been 30 years of expansion for most developed economies, including Japan. Those days are gone and everybody understands that to actually fulfill your potential and to develop and create value and to be integrated, access to the job markets is needed. Therefore, that gap that we often see between training and the job market requirements need to be filled.

Now, it’s probably less so the case in Japan. When I look at the numbers and when I see that the unemployment rate is about 4.5 percent and double that for young people, it’s twice better than the rate of unemployment in most of Europe, and it’s 4 times better than the rate of unemployment in Spain, for instance.

So, it’s no consolation. It doesn’t mean to say that Japanese young people are lucky relative to Spanish young people, but there is less of a gap to fill and there is less of a challenge to address. But I think it’s a combination of that -- growth on the one hand, and this collaborative approach between the educational system and enterprises and public service needs so that that gap can be filled.

I think there is another factor that is going to help as well and that’s the demographic factor. I’m not sure that it’s ideal in and of itself, but at least in countries where you have an aging population, people are going to retire and vacate space for younger people and for women, I hope.

What was my biggest obstacle? I think it was probably myself because I think when you are 20 and you want to embrace the world, you want to achieve what you feel you can accomplish, you need to have confidence. And confidence is something that is not given. You’re not born with confidence. Confidence builds up over time and confidence is given by your parents, by your teachers, by colleagues, by role models, by people who tell you: you can do it, you have what it takes. You’re not going to be able to get it all right. You will not get it all at the same time. But you can do it.

So, I think the biggest obstacle early on was myself. I was not sure. I was not as confident as I could be, but I was very lucky to find throughout my life people of all horizons—sometimes very humble, sometimes very elevated—who gave me that confidence, very often because they were confident themselves in what they could achieve.

So, never turn your back to somebody who gives you love and confidence. Sometimes they will do it with severity, they will be demanding, but at the end of the day, like most good professors, most good teachers, they do it because they want you to succeed, they want to give you confidence.

So, welcome that, accept that, and become strong as a result.

Next. How can we propose change in a risk averse environment, right? That’s the essence of your question.

I’m not sure I have the silver bullet, but I think in a risk averse environment you’re really bumping into people, bumping into situations where there is insecurity, where there is uncertainty. And I think the best way to respond to insecurity is not to threaten so that people can continue to be confident despite the fact that you’re proposing changes.

Bringing about changes is one of the most difficult things to do. I experienced it myself when I was chairman of Baker & McKenzie and I probably did one of the most difficult things that you could think of. It’s not a big thing, but in a legal environment, to propose to an international partnership, to change its legal structure the world over, it’s a nest of legal issues that takes people out of their comfort zone.

And believe me, when you take lawyers outside their comfort zone, it’s extremely complicated because lawyers are risk averse by profession. It’s their job. They have to constantly alert clients to risks. They’re not always asked to provide solutions, but they have to alert on risks. So, they are themselves risk averse.

But, in order to do that, you need to not threaten and to actually conduct change. You have to depict what the situation will be like at the end of the change process so that people can actually transport themselves into the future and see that they will be okay. It will be different, the status will be different, the solutions might be different, the policy mix in economy might be different, but they will be okay.

So, when you propose change, don’t think about yourself as the change agent, don’t think about the difficult process and journey to get to the change, think about the anxiety of those who are risk averse and who need to be reassured and comforted so that they know what it will be like once they travel through the change process.

Prof. Kashiwagi: Okay. Unfortunately, I think we’re running out of time. Maybe one more question and I want to raise one question too.


Prof. Kashiwagi: Okay, the gentleman with the --

MS. LAGARDE: There’s a lot of pressure on you because you’re the last one.

SPEAKER: Thank you very much for speaking. My name is (inaudible) and I’m a Keio University student and I am majoring in international finance. I have one question. What does Greece have to do to recover competitiveness?

MS. LAGARDE: What Greece should do for its competitiveness?

SPEAKER: Yes. Thank you.

MS. LAGARDE: Wow. (Laughter)

Prof. Kashiwagi: Well, maybe that’s a very big question for the end, but, I mean, as a moderator’s prerogative there’s one question I wanted to ask you. I’ve heard that you were on the national team of synchronized swimming when you were young. How has that experience benefitted you now? I mean, synchronized swimming in specific, and maybe more in general, what is the benefit of engaging in sports while you are young?

MS. LAGARDE: Okay. Maybe I’ll touch on the Greek question quite quickly.

What we are recommending to the country is to conduct the structural reforms that will help it to improve its efficiency. It starts with very basic things that also relate to fiscal consolidation. Efficiency is not just a matter for product or service markets, it’s also for the purpose of collecting revenues for the country. It was interesting to see that the minister of finance, I think as of yesterday, acknowledged that there was a clear lack of efficiency in revenue collection in the country and that certainly he would make it one of his goals to be more efficient in that respect.

In the same vein, removing barriers, making product and service markets more accessible, removing turf, territories in certain professions that are so regulated that they are constricted and clogged up and are not accessible to either young people or newcomers. Those are the kinds of things that certainly the country can help itself with in terms of improving its competitiveness.

Now, sports. I think any sport—and that was my point about making sure that your brain listens to your body—is important, because to use old Latin and Greek principles, mens sana in corpora sano—if your body is healthy, your brain can actually work. So, the two are very closely associated, which is why I think that whether it’s swimming, whether it’s running, whether it’s Pilates, whether it’s cycling, whether it’s badminton, soccer or whatever, it is good for each of us.

Now, I was lucky to do synchronized swimming because it’s also teamwork; it’s the discipline of sports and the joy of a team. When you go through practice, hours after hours, and when you swim those laps and laps and laps, to do it with other swimmers and with your friends is actually more fun and much more pleasant.

I was lucky to be on the national team and that certainly gave me a lot of pride because I was representing my country in international events and it gives you a sense of where you belong.

But you don’t have to do it at the national competitive level. Even day-to-day practice and university training, if you have a chance to take it, is equally important and helpful to your balance.

Prof. Kashiwagi: Is being a Managing Director more difficult than synchronized swimming? (Laughter)

MS. LAGARDE: Well, you have to hold your breath in both instances. (Laughter)

Prof. Kashiwagi: Well, thank you very much. Really excellent. (Applause)

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