Economic Diplomacy and the Need for a New Multilateralism by Christine Lagarde, Managing Director, International Monetary Fund

IMF News, October 29, 2014

Source details

Canonical URL: Economic Diplomacy and the Need for a New Multilateralism by Christine Lagarde, Managing Director, International Monetary Fund

Other formats

Bibliographic details

Authors: Christine Lagarde Managing Director
Published: October 29, 2014

Introduction: Diplomats and Economists

Acceptance Speech for Foreign Policy Diplomat of the Year Award, Washington, D.C., October 29, 2014. As prepared for delivery.
Thesis: economic issues often underlie political disputes; the IMF operates at the interplay of economics and politics, pursuing multilateralism to promote global financial stability.
The IMF approaches its work with a multilateral mindset: "no nation can go it alone"; key policies spill over and back; the best solutions are negotiated solutions; knowledge is to be shared.
Purpose of speech: review multilateralism—past, present, and the need for a multilateralism for the 21st Century.

1. Multilateralism of the Past

Founding context: IMF created in 1944 through diplomacy, led by the United States, as heirs to the Bretton Woods legacy.
Historical outcomes cited:
- Between 1950 and 1995, France’s per capita GDP rose nearly fivefold; Germany’s more than sevenfold.
- Over the last 70 years, "more economic progress for more people than at any comparable period in history."
Roles of multilateralism:
- Supported newly independent nations during decolonization.
- Assisted transitions after the Iron Curtain lifted.
- Helped Latin America emerge from its debt crisis in the ‘80s and East Asia from its financial crisis in the ‘90s.
- The Great Recession beginning in 2008 did not become another Great Depression largely due to coordinated international response—led by the G-20.
IMF’s functions described: platform for global economic dialogue; instruments of economic diplomacy—financing, analysis, technical assistance—to bolster confidence and galvanize action.
Institutional expectation: IMF to be first responder and problem solver in difficult economic situations.

2. Multilateralism of the Present

Characterization: "This is not your father’s IMF." The world faces complex, interrelated problems with no easy answers.
Key contemporary challenges:
- Six years after the financial crisis, global economy still struggling to regain cruising speed; risk of a "New Mediocre"—anemic growth and weak job creation.
- Membership agreement on policies to create "New Momentum" including growth- and job-friendly fiscal policies, structural reforms, and appropriate infrastructure investment.
- Geopolitical problems exacerbate economic difficulties (examples include Ukraine; the Middle East; West Africa).
Specific country/region actions and figures:
- Ukraine: IMF providing policy and financial support to create space for reforms.
- Middle East: Fund actively supporting economic reform in Jordan, Morocco, Tunisia, and Yemen, including by making available over $9 billion in financing.
- Egypt and elsewhere: work to build policymaking capacity to help youth.
- West Africa / Ebola: IMF, with World Bank and others, disbursed $130 million in additional support to Guinea, Liberia, and Sierra Leone; IMF financing reached those countries within days.
Argument: cooperation is essential to hold at bay or overcome humanitarian disasters, geopolitical hotspots, and weak global growth.

3. Future Challenges and the New Multilateralism

Central claim: 21st Century challenges demand global solutions; collective threats require collective responses.
Critique of pure self-interest models (Adam Smith): interconnectedness means individual self-interest often fulfilled only through collective action.
Examples of issues requiring collective action:
- Climate change: cutting carbon emissions in an individual country cannot solve the problem alone; rising average temperatures increase volatility in agriculture, food and water insecurity, and natural disasters.
- Increasing income inequality felt from the U.S. to China; risk of breakdowns in social and political cohesion if not addressed.
- Gender inequality: hampered economic inclusion suffered by an estimated 865 million women who are being held back.
- Demographics: "there were one billion people in Africa four years ago; that number could rise to 2.7 billion by 2050." For the first time in history, the world will have "more over 65 year olds than 5 year olds."
Additional modern dynamics:
- Global supply chains and cross-border finance increase integration.
- Communications revolution connects billions instantly.
- New centrifugal forces: sectarian divisions, underground operations, non-state actors, shifting centers of power.
Vision for a "new multilateralism":
- Build on institutions of cooperation that have demonstrated efficiency, credibility, and representativeness, while evolving to mirror changing global dynamics.
- Harness cooperation between institutions—without division or turf battles, with a true sense of partnership.
- Include new networks of influence addressing inequality, inclusion, transparency, and environment, without losing efficiency.
- Instill broader "civic responsibility" among all players, including the private sector and financial sector players, renewing commitment to the global public good and identifying mutual interests and solutions.

Conclusion: Responsibility and Commitment

Call to action for Washington: reminder of responsibility and commitment that can be addressed in the city (Washington, D.C.).
Specific policy request: support for IMF reform—"the international community has agreed to reform the IMF to increase the representation of the emerging market countries—more in line with their increased role in the global economy." Call upon the U.S. Congress to approve the 2010 quota and governance reforms.
Rhetorical closing: evocation of John Maynard Keynes at Bretton Woods—"The brotherhood of man will have become more than a phrase." A pledge to avoid another "nightmare" and strive for a renewed multilateralist commitment.
Final note: speaker's personal stance—"I am a multilateralist by upbringing, conviction, and profession."

Source: Economic Diplomacy and the Need for a New Multilateralism by Christine Lagarde, Managing Director, International Monetary Fund (Acceptance Speech, Washington, D.C., October 29, 2014).