With the global economy at risk of recession, the man for the job is a woman. Since 2011, Christine Lagarde has been managing emergencies as head of the trillion-dollar International Monetary Fund. Before that, she was France’s finance minister during the Great Recession. In November, she will take on a new crisis as president of the European Central Bank, trying to keep the world’s second largest economy stable as it is battered by trade wars, Brexit and historic uncertainty.
Last month we spent time with Lagarde in France and in Washington D.C. during a rare pause between jobs. She was surprisingly candid about the danger of a global recession, the threat of nationalism, and what she says is a big question mark in the global economy, President Donald Trump.
John Dickerson: When you think of the challenges to the global economy, where is Donald Trump on that list?
Christine Lagarde: I think he has many keys that would unlock the uncertainty and the risks.
John Dickerson: What are some of those keys that he has?
Christine Lagarde: I think the biggest key that President Trump has is in relation to predictability and, and certainty of the terms of trade. It’s the unknown which is hurting, because you can’t adjust to the unknown. So what do you do? You build buffers. You build savings. You wonder what comes next. That’s not propitious to economic development.
John Dickerson: People stop taking risks.
Christine Lagarde: Yeah, they sit on their cash.
The IMF, the International Monetary Fund, which Christine Lagarde led for eight years, says the instability caused by the U.S.-China trade war is the main reason why global growth is estimated to fall this year to its slowest pace since the 2008 financial crisis.
Last week, President Trump announced preliminary steps to a partial deal with China. But the biggest and toughest issues remain.
John Dickerson: The trade war between the United States and China, is it possible that it could tip the global economy in the wrong direction?
Christine Lagarde: It’s certainly going to give a big haircut to the global economy. And if you shave off, you know, almost a percentage point of growth that means less investment, less jobs, more unemployment, reduced growth. So of course it has an impact.
John Dickerson: What’s gonna happen?
Christine Lagarde: My very, very strong message to all policymakers is please sit down like big men, many men in those rooms and put everything on the table, and try to deal bit by bit, piece by piece, so that we have certainty.
Christine Lagarde has spent her career telling men what to do. And she’ll keep doing that as the first woman to head the ECB, the European Central Bank. It’s like the U.S. Federal Reserve but for 19 countries known as the Eurozone.
Last month, Lagarde invited us to visit her in Normandy, France, near where she grew up.
John Dickerson: Across the channel in Great Britain they are in the middle of Brexit. What does Brexit mean to you?
Christine Lagarde: To me personally, it’s a source of great sadness. And to see them drifting away from the European Union is sad.
At the ECB, Lagarde will be tasked with keeping Europe, the world’s second largest economy, afloat in the midst of Brexit.
John Dickerson: What will the fallout be economically?
Christine Lagarde: It will affect both the UK and certain countries in the European Union, Ireland in particular, Germany, the Netherlands. And everybody will be a little less well-off as a result.
John Dickerson: Why is that important to Americans, if the European Union thrives?
Christine Lagarde: If things go wrong in one part of the world, it is going to affect the rest of the world as well. We buy American products in huge quantities. The United States buys European products in huge quantities. Massive numbers of European firms have set up shops in the US. Vice-versa. We penetrate each other’s markets.
If there is a core belief that guides Lagarde’s life, and her economic outlook, it’s that “we are all in this together.”
Christine Lagarde: You know, when I was growing up I think there was a huge gratitude towards the Allies, the Americans…
It was here on Omaha Beach where Americans landed on D-Day in 1944.
Today, Lagarde hears echoes of the anger that led to World War II, in nationalist leaders who turn their countries inward, shoving everyone else away.
Christine Lagarde: Nationalism in Europe is associated with very, very horrible developments that always led to war.
President Trump at Rally: You know what I am? I’m a nationalist. OK.
John Dickerson: President Trump has called himself a nationalist. He’s proud of the nationalist label. This is a big debate. This is the central debate, you could argue, on the global stage as countries decide, “Maybe this idea of interconnectedness is not so wonderful.”
Christine Lagarde: International trade, connections, movement of people and movement of capital has taken hundreds of millions out of poverty. Now, some people in the advanced economies might say, “Pooh. What do I care?” Well, of course we care for the person next door. And because of the interconnections, next door is not down the pathway, next door is everywhere around the world. And if my neighbors from across a border are feeling desperate, are starving, are fighting, there will be consequences back at home.
John Dickerson: Do you think the president who believes in walls gives a strong argument to people who make the opposite case from the one you make?
Christine Lagarde: But you know, what can walls do about pandemics? What can walls do about terrorism? What can walls do about climate change and destruction of the environment? This is not the answer to the global questions and issues that interconnect, whether we like it or not.
But that message enrages people who don’t want global bureaucracies like the IMF telling them how to live their lives and who think leaders like Lagarde are elitist and out of touch.
John Dickerson: What happens though, when somebody says, “Madame Lagarde, you are the global elite?”
Christine Lagarde: I think I’m also a very regular, down-to-earth person and I’m proud to participate in the intellectual effort that we put in order to bring about that stability financially so that people are protected. People are more secure.
At the European Central Bank, Lagarde faces weak growth spurred by a slump in manufacturing, raising fears of a European recession.
What’s worse, Lagarde’s main tool to stimulate the economy, lowering interest rates, may be useless. That’s because, in Europe, rates are already negative — which was once unthinkable.
Christine Lagarde: There’s a limit to what central bankers can do. There’s a limit to how far and how deep you go into negative territory.
John Dickerson: So there’s a bottom?
Christine Lagarde: There’s a bottom to everything, but we’re not at that bottom at this point in time.
President Trump likes the idea of low, even negative, interest rates. So much that he’s spiked the decades long tradition of presidents not interfering with the Federal Reserve, even calling the chairman, Jerome Powell, and his colleagues “boneheads” for not cutting rates more.
Lagarde’s advice for the president? Be cautious.
Christine Lagarde: When the unemployment rate is at 3.7%, you don’t want to accelerate that too much by lowering interest rates. Because the risk you take is that then prices begin to go up. You have to be very careful. You know, it’s like navigating a plane. And you have to watch everything, altitude, speed, winds. And that’s what a central banker has to do.
John Dickerson: If you’re a pilot looking at all of those delicate measures, do you want a leader behind you saying you’re a bonehead?
Christine Lagarde: A central bank governor does best his job if he is independent.
John Dickerson: You’ve met President Trump, would you talk to him about this, and make the case that you’ve had about independence of central bankers?
Christine Lagarde: Absolutely.
John Dickerson: And what would you say?
Christine Lagarde: Market stability should not be the subject of a tweet here or a tweet there. It requires consideration, thinking, quiet and measured and rational decisions.
And for those qualities, Lagarde instructs, bring in the women. They are better at judging risk, she believes, famously saying if the investment bank Lehman Brothers, which triggered the 2008 financial crisis, had been “Lehman Sisters,” the whole mess might have been avoided.
Christine Lagarde: Do you know how many women are president of banks? Two percent. This is ridiculously low because women around the world, in most families, women generally handle the money. And they do that pretty well. There is a clear correlation between good, solid management, good attitude towards risk, and the number of women on board and executive boards as well.
Christine Lagarde: Poverty is sexist and we have to remember that and make sure that women are not forgotten.
Now 63, Lagarde has become a global force. Not just for what she says about women, but because she acts on it. For the first time in its history, Lagarde has tied IMF loans to improving conditions for women in countries like Argentina and Jordan.
And take a look at what the IMF staff looks like now. Under Lagarde the percentage of women working at the IMF has grown to 44%.
She’s charming, but exacting. Lagarde has locked conference room doors, not allowing anyone to leave until consensus is reached. And she has announced she will not attend meetings where she is the only woman in the room.
John Dickerson: You once described yourself as bossy. You know, bossy is now a dirty word.
Christine Lagarde: I don’t mind. (LAUGH)
John Dickerson: You don’t mind–
Christine Lagarde: You know, sometimes you have to be a boss.
John Dickerson: Is there a French idiom for bossy? That feels like a very American word.
Christine Lagarde: You use boss in French, C’est Le Boss. Elle est Le Boss. But there is an element of respect about it when you say it in French. “C’est le boss.”
As volatile as the global economy may be, Lagarde is not. She is controlled, even on vacation. At her home in Normandy she gave us a glimpse of how finely calibrated that control is.
John Dickerson: You have learned how to pretend you’re drinking wine when you’re not drinking wine.
Christine Lagarde: Yes. Yes.
John Dickerson: How do I pretend to drink wine but not drink it?
Christine Lagarde: Oh okay, I’ll show you. I’ll do it with water. So you go. You have to smell. Terribly important. Then you go, you move it around to check the color. Then you go very important. Watch this here, you go. I didn’t drink anything.
John Dickerson: That’s dangerous. You’re going to keep your wits about you.
Christine Lagarde: Yeah.
Glasses were raised weeks later to honor Lagarde’s time at the IMF. She bid farewell to an institution formed in America to ensure global cooperation. As she starts her new job she worries that the country which has helped preserve stability during her lifetime may now be the one weakening it.
Christine Lagarde: I was brought up as a citizen of this world. The risk I see is that the United States is at risk of losing leadership. And that would be just a terrible development.
John Dickerson: Because?
Christine Lagarde: Because it has been a force for good, and for those principles that I respect highly: the rule of law, democracy, free market, and consideration for the individual, and– and respect.
It’s the same message the Allies sent to the world 75 years ago on these shores: we’re all in this together.
Produced by Denise Schrier Cetta. Associate producer, Katie Brennan.