Yesterday I attended the lecture by the Managing Director of the IMF, Christine Lagarde, at ESMT Berlin. Andreas Dombret, Executive Board Member of the Deutsche Bundesbank, introduced Mme. Lagarde, who absolutely needs no introduction. Some facts about Lagarde is worth sharing. She was the first female Finance Minister of a G8 (then G7) country and the first woman to monitor global monetary policy. Lagarde is elegant, charming and witty with a great sense of humour. She is a strong woman in the man’s world. She is feminine and tries not to look masculine unlike other female public figures that we know. This is what we need in the business world-a female touch. Not many women in politics or corporate world looking like men. We need women who look like women, who behave like women. We also need more men to bring out their feminine side to the world.
Going back to the lecture; Mr. Dombret set the tone with his introduction and made four key points. The first one is education. Low skilled workers’s education is critical. Then he urged the policy makers to adapting current policies to technological changes. Thirdly, he pointed to the synchronization of cultural and organizational changes with the advances in technology. And finally he emphasized the need for exchange between the international organizations and technology experts. Then he left the floor to our Speaker, Christine Lagarde.
Lagarde started by sharing the three new papers by the IMF, the first one being the Chapter 3 of the World Economic Outlook 2017: Understanding the Downward Trend in Labor Income Shares. Anybody interested in how much of the income goes to labor and its downward trend over the years should consult this study. The second one is a joint study by the IMF and WTO released just recently, Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment and the third one is a report on productivity, it is mainly about how productivity has decelerated over the last decade and its impact on growth. This last study is not released yet I believe, I could not locate it.
Then Lagarde moved on to the problem of inequality, an issue area which has been at IMF’s radar in recent years. According to the Fund, reducing inequality is its headline concern. There is a heated debate on IMF’s commitment for those of you who would like to read more. It all started after my dear colleague Alex Nunn and Paul White’s paper appeared in the Journal of Australian Political Economy. Skepticism about IMF’s high level rhetoric prompted two academics; Frank Stilwell-a political economist and Christopher Sheil-a historian both affiliated with the University of Sydney to tackle the issue in a highly controversial commentary appeared in the Conversation and the Huffington Post. Stilwell and Sheil discussed Nunn and White’s study as well as Thomas Piketty’s famous book and concluded that the IMF as an institution does not practice what it preaches.
Going back to the lecture, Mme Lagarde started by imagining how, we, the people in the audience, began our day with references to Uber and then imagining our future with references to driverless cars, 3D printing machines and robots…She gave these examples to show the perils of innovation the most important being the uneven distribution of the benefits it offers. She then quoted the writer William Gibson who once said, ‘The Future is already here. It’s jut not evenly distributed’and moved on to the promises of innovation. She urged everyone to embrace innovation not to fear it. Her message was clear: Embrace it and adapt to it to succeed, do not retreat from it. She then put our knowledge to the test with a multiple choice question about the company with the highest market capitalization among GM, Volkswagen and Tesla. Of course the answer is TESLA. In fact, Tesla and Elon Musk came up again and again in the lecture as a model.
According to Lagarde, all professions are affected by technological revolutions but some more than others. Chefs and teachers seem to be doing fine. Well I would disagree with her on that point. As a teacher/professor myself, I think our profession will
Governments and entrepreuners need to cooperate more-joint ventures bringing the government, the industry and the university/research together are needed. Unfortunately there is no magic formula. All you can do is to embrace change and help labor force to adapt to it. 5 category areas (sometimes she refers to them as principles) in which policies are needed:
1. Policymakers should lead with confidence, inspire confidence and give right signals to the industry. They should provide certainty for companies to do business.
2. Entrepreuners should invest in the future and policy makers need to remove all barriers to trade, competition, invest in research and development-public investment (e.g. internet)
3. Ensure access to financing-put the mechanisms in place to facilitate the cleaning up of the balance sheets of the businesses
4. Expand opportunities for all-government should help improve the skill sets of the low skilled labor.
5. Welcome the next generation to the workforce-programs that expand maternity leave, senior citizens’ inclusion in the workforce after retirement.
Some main points: 2/3 of the children of this generation will have professions that are unknown to us today.
Displaced professions and jobs
Techtonic shift from less dynamic to more dynamic/emerging economies
The rise of artificial intelligence
Population decline and demographics
German education has become a model for economies worldwide (Dual education)
Singapore’s skills future program-grants given to citizens to continue life long education
Denmark-unemployment scheme and active labor policies
Conclusions: Old ways of doing things are gone. Retreat and hide is not in the cards. Embrace change
For the full lecture please visit
You can see me on the 49th minute asking a question to Lagarde!