Christine Lagarde

Christine Lagarde Facts and Information

Important Points

• Lagarde became the first woman to be elected as the head of the IMF.
• Managing Director of IMF during a European fiscal crisis and global downturn creating a HUGE demand for IMF financial and policy support.
• Succeeded Dominique Strauss-Kahn as Managing Director in May 2011.

The Rundown

Christine Lagarde is a woman who has control of a very large purse!  If money makes the world go round it’s because of Christine Lagarde. As managing director of the International Monetary Fund (IMF) she is one of the most powerful women in the world economy. Lagarde was formerly a French finance minister. She took over the IMF in May 2011, after the previous Managing Director Dominique Strauss-Kahn was arrested in connection with charges of sexually assaulting a New York room attendant. (Charges against him have since been dismissed, but he isn’t going to make a comeback soon – there are similar charges he is battling in France!)

Christine Lagarde was named the first female head of the IMF at a time when the world is in fiscal shock – the Euro is in crisis, America has massive debt and the needs of the developing world continues to grow. As manager of the IMF she has the whole world’s finances in her hands and has a lot of power over the “purse strings.”  The IMF lending capacity was recently tripled to $1 Trillion. She can use this money to stabilize currencies of developed countries and provide loans to low-income countries to help them develop their economies and reduce poverty. 

As IMF Director she is also the world fiscal’s watchdog and cheerleader for economic reform. The goal is to promote global growth and economic stability by encouraging countries to adopt sound economic policies. She supports a wide range of issues - from negotiations to save the Euro, recommending the US reduce debt, asking China to reform the yuan or supporting Egypt’s recovery. Check out her twitter site http://twitter.com/lagarde to see what hot spot sees trying to cool down (or to see what she   buys at Turkish Bazaars, in downtown Washington, D.C, and in French villages,  Oh, la, la!)

Specific policies as of Oct 2012:
-Conduct negotiations to save the euro and bail out Greece.
-Encourage countries to pledge resources to the IMF
-At the Rio +20 summit Lagarde warned that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.
In order to understand Legarde’s role in global affairs, the next section describes the IMF’s role in global finance.  You may also want to check out Jim Yong Kim and IMF’s sister organization, the World Bank at http://www.plaidavenger.com/leaders/profile/jim-yong-kim/.  Since both the IMF and World Bank have a common membership and a global mandate for poverty reduction, they work together on many issues. 

International Monetary Fund (IMF)
The IMF is essentially a massive bank set up after World War II to lend money to countries in financial trouble and help countries with international trade. The IMF describes itself as “an organization of 188 countries (as of April 2012), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.

So what does this mean? IMF is like a Doctor who gives bitter medicine to countries who need fiscal medicine. The goals of the Fund is to promote stability, to help resolve crises when they do occur and to promote growth and alleviate poverty. To achieve these goals IMF lends money on certain economic conditions. The conditions generally involve some type of fiscal reform such as establishing debt ceilings or changinW exchange rates. 

Where does the IMF get their money? It’ s the quota system!  Each IMF member country is assigned a quota, or contribution, that reflects the country’s relative size in the global economy. Each member’s quota also determines its relative voting power. The US has the largest quota (17.17% ) giving it veto power over major IMF decisions. Since decision-making at the IMF reflects each member’s relative economic position in the world, wealthier countries that provide more money to the fund have more influence in the IMF than poorer members that contribute less. Reform of the quota system has become a hot topic for developing countries who claim the IMF policies support developed countries more emerging market economies such as Brazil. 

In general. there are three different views of the IMF -  The Good , the Bad and the Ugly. The first view is that World Bank is a vital organization. In this viewpoint, the IMF is one of the few organizations designed to provide global financial management advice to help countries avoid economic collapse.  The second view is more critical and takes the perspective that the IMF has a noble mission but is not effective. This view considers that the trillion dollar IMF resources are inadequate to alter the global economy.  In addition, many of the policies may be well intended but may have unintended consequences and may even be counterproductive. One example would be IMF fiscal constraint conditions that cause unemployment creating government instability. This is one of the reasons why you see street protests against the IMF, some reforms considered necessary by IMF may not be understood or popular in the country receiving IMF funds. The third view and the most radical view is that the IMF is a part of an international finance system which exploits the world’s poor. It’s that globalization issue again! Global markets offer greater opportunity for people to tap into more and larger markets around the world but the benefits for developing countries may not be realized. Poorer countries often have difficulty integrating into the world’s economy and are often left out of globalization benefits increasing the income gap between the high and low income countries.

• Christine Lagarde on Charlie Rose Mar 8, 2012