How to rebuild the global economy Kristalina Georgieva
Chris Anderson: I get now to introduce
one of the most powerful
women in the world.
I mean, if we are to escape
from the mess that we’re in right now,
she is going to play a major part
in helping us do that.
She’s the head of
the International Monetary Fund,
a delight to welcome here
Kristalina Georgieva.
Kristalina, welcome.
Kristalina Georgieva:
Great to be with you, Chris.
Thank you for having me.
CA: So you just took on
this role late last year,
and within four months,
boom, COVID arrives.
That is one heck
of an introduction to a new job.
How are you doing?
KG: Well, I find strength in action.
And at the Fund,
we have been, from day one on this crisis,
leaning forward with everything we have
to provide lifelines to countries,
and that means to people and businesses.
Already, we have received over 90 requests
and we have offered, to 56 countries,
critical financial packages.
CA: You’ve described this pandemic
as a crisis like no other.
In what way a crisis like no other?
KG: Truly like no other.
First, never before
we will inflict on the economy
consciously so much pain
to fight a virus and save lives.
We are asking businesses not to produce
and consumers not to go out and consume.
At the Fund, we labeled this
“the Great Lockdown.”
Second,
never before
there would be such
a rapid change of fortunes
practically for everybody
around the world.
In January, I was in Davos,
talking about “anemic growth,”
growth of three percent.
In April, during our spring meetings,
it was already minus three percent.
In January,
we predicted 160 countries
to have positive income per capita growth.
Now it is 170 countries
with negative income per capita growth.
Now this, we call “the Great Reversal.”
Very painful.
And three, uncertainty.
We always live with uncertainty, Chris,
but this time,
it is the uncertainty
of a novel coronavirus
that policymakers have to integrate.
We at the Fund combine
epidemiological projections
with our traditional
macroeconomic modeling
to see through that uncertainty.
I must add to this,
I very much hope that when we go
on the other side in the recovery,
we can use a new term
and call it “the Great Transformation.”
Make the world a better place.
CA: Well, I’ll be excited
to come on to that in a bit.
But in this moment
of responding to the crisis,
the main tool that seems
to have been executed,
at least by the rich countries,
has been this massive economic stimulus,
to the tune of trillions of dollars.
Is that a wise response?
KG: It is a necessity.
And you don’t hear the Fund
often telling countries,
“Please, spend.
Spend as much as you can.”
And that is what we do now.
We do add to that,
“And keep the receipts.
Don’t lose accountability
to the citizens, to the tax payers.”
The reason financial
injection is necessary,
these fiscal measures of almost
nine trillion dollars are necessary,
is because when the economy
is standing still,
unless there is help,
unless there is monetary policy stimulus,
firms are going to go massively bankrupt,
people would be unemployed,
the economy would be scarred.
When we go to the other side,
this scarring is going to make
the recovery much more difficult.
So that is a wise thing to do,
and it helps the fact
that central banks in major economies
have been acting in a synchronized manner
and that fiscal stimulus
came really, really fast.
This is how we see people
being able to go through this
very, very tough time.
CA: But how far can it go?
Because it’s been described,
in a sense, as “printing money” –
governments are issuing
more and more bonds
that have to paid back at some point.
There’s this term, in economics,
of the Minsky moment,
where things can go very well for a while,
as everyone believes that, you know,
that the train can keep running,
the cycle can keep turning,
you know, that governments
have all this money.
At some point, though,
doesn’t that break down?
Do you worry that we may be
nearing a Minsky moment,
where, like Michael in Mary Poppins
grabs his tuppence
and starts a run on the bank.
Is there stress in the international
financial system now
that concerns you,
that makes you feel that we may be
running out of headroom?
KG: Of course, this cannot go on forever.
I, for one, have trust in our scientists,
I think we will see breakthroughs,
and we will see also people in businesses
getting accustomed to social distancing,
to micromeasures that protect
from spreading the disease.
We have seen very massive injection
in health systems,
so hospitals can actually
treat people that are coming for help.
Obviously, if it is to go
for a very long time,
we would be worried.
For now,
what we are projecting
is that there would be
a gradual reopening –
we see it already happening
in a number of countries.
And we project for next year, 2021,
a partial recovery.
Not a full recovery, unfortunately,
but coming to a better place.
Now, what helps us
is something that I
don’t particularly love,
but I see it as a positive feature –
very low interest rates,
in some cases, negative –
that allows this injection
of fiscal measures and liquidity
to be sustained over a number of years.
And for now, we do not see on the horizon
any return to increase in interest rates.
So low for longer,
and that is, in that environment,
a helpful feature.
CA: I mean, the financial crisis of 2008
came perilously close to breaking
the entire financial system –
arguably, it did that.
By most people’s calculation,
this is a far worse impact
to the economy overall.
Did the world learn something from 2008
that has helped us so far
be resilient this time?
KG: What the world learned
is that the financial system
has to be tested
and then strengthened to withstand shocks.
And that is helping us tremendously today.
The banking system is resilient,
and even in the nonbanking
financial institutions,
there is more attention paid
to how far can you go
without running into trouble.
I would say,
if you look around the world,
the most important lesson then
was “build resilience to shocks.”
Those who have done it cope now better.
And those who have not done it
are in a much tougher spot.
And actually, for the Fund,
what we are praying
is that we will come out of this crisis
with this lesson about resilience
being spread beyond the banking system,
so we actually have
this crisis-management mindset
for a world that is inevitably
going to be more shock-prone,
because of climate
and also because of the sheer density
of economic and social life on our planet.
CA: In your role,
you’re paying special attention
to the situation in developing countries.
And it does seem that they’re facing
a really terrible situation right now.
Many of them have significant debt
denominated in dollars.
In the current crisis,
their currencies are depreciating
against the dollar,
making it nigh impossible for them
to execute the kind of injection,
stimulus injections,
that the rich countries are doing
and seems to be the only way out.
So that seems like
a really dangerous cycle.
Is there any way to break that cycle?
KG: Well, let me first separate
countries that have built
strong fundamentals.
And now in this crisis,
as we are receiving incoming data,
not very many, but there are still
some positive surprises,
and they come from countries
that have built stronger buffers,
stronger fundamentals,
have been more disciplined
during good times.
But indeed, we do see
quite a number of emerging markets,
developing countries,
faced with multiple pressures.
They had the hit from the coronavirus,
many of them with weak health systems.
Then, they have the high level
of indebtedness,
from before the crisis,
which creates a much more difficult
environment for them.
Then, many of them
are commodity exporters.
Commodity prices, oil price,
they went down very dramatically,
that hits them again.
Many rely on remittances.
Remittances shrunk some 20 to 30 percent.
And then you have a number of countries
that are highly dependent on tourism.
Tourism is the hardest hit sector,
or one of the hardest hit.
So, very tough for these countries,
but this is why institutions like mine
have been wisely created.
The IMF, the World Bank,
the regional development banks,
we work very closely together
in this crisis.
The IMF, fortunately,
that was one of the lessons
from the 2008-2009 crisis –
make sure that in the center
of the financial safety net is an IMF
with financial strength.
We have four times
more money to lend today
than we had then.
From 250 billion to one trillion dollars.
And of course,
we are deploying these funds
exactly for the countries
that need us the most.
And we did one more thing.
With David Malpass,
the president of the World Bank,
we called for a debt moratorium
for the poorest countries
to their official bilateral creditors.
And people tend to say,
“Oh, we don’t work together,
it’s not good enough.”
But here is an area
where we made this call in late March,
and in mid-April,
the G20 agreed on this moratorium.
Amazing, we had the Paris Club, China,
the Gulf countries,
all agreeing that we should not
suffocate the poorest countries
by asking them to pay their debts
when their economies are standing still.
CA: Is it possible
that some developing countries
are overdoing the lockdown policy?
I mean, if large numbers of your citizens
are already struggling to stay alive,
isn’t it almost like a death sentence
to order them not to leave their homes?
KG: Well, Chris, one of the most
heartbreaking conversations I would have
is with leaders of countries
where they have to stare in the face
a choice of people dying from the virus
or dying from hunger.
And it is a very dramatic
situation for them.
Where you have a very large
part of your economy
being informal,
where people live hand-to-mouth every day,
the lockdowns we have
in advanced economies
are not quite applicable,
but even there,
countries are doing really well
in social distancing
to the extent it is possible.
Many of the countries in Africa
were very early to step up
preventive measures.
Why?
They learned from the Ebola,
they learned from prior crises
that hygiene,
taking any measure you can really helps.
So again, I cannot stress enough
how important is solidarity
with these countries.
How important it is for my institution
to be there for them in a timely manner.
And we do it.
CA: Whitney.
Whitney Pennington Rogers:
Hi there, thank you,
this is a wonderful conversation,
and we’re starting to see
some questions coming from the community.
The first one we have is from Bill Elkus,
and it’s a follow-up to something
you were mentioning earlier,
related to the stimulus, Kristalina.
What are the prospects for inflation
from such a large stimulus?
KG: At this point,
we are not worried about inflation
in advanced economies
and in the majority of emerging
market economies.
We do worry about inflation
in countries that have weak fundamentals,
no access to foreign exchange easily,
where the only way to address the crisis
is our help
or their central banks
printing more money.
And sometimes it’s
a combination of those two.
Why I don’t worry about inflation
in advanced economies?
Because countries
that have their hard currency
are putting liquidity in place,
but at the same time,
they’re not seeing
a big expansion of demand
and prices being pushed up.
So for these countries,
at least for the observable future,
we don’t see a way of going,
like after the Second World War,
in inflation jumping up.
The consumers are not consuming
so aggressively,
demand is not that strong,
and these are societies
where there is a lot of maturity
in how they exercise their policy options.
But if you are a poor country,
that out of desperation,
with no access to markets,
no access to hard currency,
ought to somehow put money supply enough,
then inflation is going to be there.
A very extreme case is Zimbabwe,
and I do worry there may be
other countries.
So this is why we are so determined
to engage with these countries early.
And also look at some
of the high-debt countries.
Would it be necessary,
on a country-by-country basis,
to restructure debts
to prevent that moving
in a desperate direction?
WPR: Thank you.
And we have one more question
that I wanted to share from our community.
This is from Keith Yamashita,
and it’s about how we all can
be involved in some of this change.
“You are tasked with macro-economic
and funding efforts.
What should we do as citizens
to help renewal and recovery?”
KG: Well, it is incredibly important
for all of us citizens –
and aside of being the head of the IMF,
I am also a global citizen –
that we are to bring that notion
of solidarity in a moment of crisis.
I loved the way this segment
was musically backed,
and it was “Lean on Me.”
It is very important
that we do create that sense –
“we are in this together,
we will get through it together.”
And please, speak up on that.
I was, for many years,
crisis commissioner,
and one thing I learned
is that the majority of people
are positive, good people.
You can lean on them.
And there is a minority
that is hateful and fearful
and also very loud.
So, good people, speak up.
Spread that sense of
“we are in this together,
we’ll get through it together.”
WPR: Thank you. I’ll come back later
with other questions.
CA: Kristalina, I’d love to expand on that
and just ask you a bit more
about leadership, actually.
You know, when people think
of the nations that have performed best,
they often refer to –
when I say best, best in response
to the current pandemic –
they often refer to Germany, New Zealand,
South Korea, Taiwan, Denmark and Norway.
When they think of those
that have performed worst,
they often think of Spain,
Italy, the UK, Belgium,
Sweden, Iran, Brazil, Russia
and the United States.
All of that second group are run by men,
all but one of the first group
are run by women.
Is that a coincidence?
KG: Well, now,
speaking a bit subjectively as a woman,
I do believe that women are great
to lead in a crisis.
They are more likely to show empathy,
to care about the most vulnerable people
and to be able to speak about that.
They are decisive.
I can say that for myself,
we take energy from action.
And we don’t tend to,
kind of, mourn and complain
too much.
So there is perhaps something to be said
about the value of gender
equality for the future.
Bring more women for this world
of more crisis ahead of us.
CA: It’s obviously hard to make
generalizations about gender of any kind,
but I mean, is there also,
almost, something
about the embracing of nuance,
that women might be
better at that than men?
Men are often, it’s like,
“let’s win, let’s conquer,”
and in a situation like this,
where it’s all probabilities,
it’s like, there are so many
complex dials to turn
on this dangerous pandemic machine
that we’re trying to wrestle.
I mean, are women better
at handling nuance?
KG: Let me say something, Chris.
We need everybody,
and we need this mixture of experience,
knowledge and predisposition.
Men and women coming together.
I find it that it is great
to have different perspectives
when we make decisions.
Then, the chances of making
a good decision are higher.
So we need each other,
but we also need to recognize
is that yes, there are certain things,
I have seen it time and again,
women are more willing to find
a pathway to compromise,
they’re more willing
to be corrected if they’re wrong.
Say, “Oh, OK, that’s a good point,
let me integrate it
in the way I think about it.”
And when you are in uncertainty,
that is a huge advantage
in decision-making.
CA: So perhaps talk a bit more
about your own leadership in this moment.
I mentioned you’ve only recently
come to this job.
Before that, you were
European Commissioner,
you dealt with humanitarian crises
in more than one part of the world.
And in your own country, Bulgaria,
you witnessed the wholesale
transformation of the country,
both politically and economically.
What lessons can you bring
from your past experience
to this moment?
KG: Well, there are many things I learned.
I was very fortunate
to have these multiple experiences
for the job I have now.
But let me highlight three.
First, how critically important it is
to prepare for a crisis.
Kind of, think of the unthinkable,
and then act with some foresight
when a shock hits you.
You have a title for this series
called “Build Back Better.”
I actually would like
to modify it, if I may,
and I would talk
about “Build Better Before.”
Preparedness, prevention,
pay off big time.
The second –
and not necessarily in priority,
it is as important –
is collective action,
working together.
Seeking help, offering help.
Makes a huge difference in an emergency.
And the third is something
I learned time and again.
We don’t know our internal strength
until we are hit.
We are so resilient,
we are so able to withstand shocks,
especially when we come together,
that this always gives me
this sense of optimism
that, as hard as it is,
we can overcome it.
From the days when my country
collapsed, the economy collapsed,
I would get up at four o’clock
in the morning,
queue to buy milk for my daughter,
to the days when I would see
Syrian refugees in terrible situations
helping each other,
to today, when I’m the head of the IMF,
that internal strength,
our power of resilience,
the more we are together,
the more it is amplified.
CA: Actually, could you talk a bit more
about the role of the IMF,
especially as we look forward
to trying to recover from this?
What specifically can your organization do
to take us forward?
KG: So there are three things
that are quite unique for the IMF,
and they’re really so important
in a time of crisis.
The first one is to give a good
diagnostic of what is happening
and what is the way forward.
Let me just say, in this crisis,
in the very first weeks,
we put together, we call it
policy action tracker, for 193 countries.
What actions are countries taking,
how they can learn from each other,
so we can be more effective together.
We are adding to it, now,
actions for responsible reopening
of the economies
exactly with that purpose.
What we are known best for,
we are the financial first responder.
We are coming in this incredible shock
with very significant financial firepower.
And what people don’t know
is that the Fund has multiple instruments.
Emergency financing
is the one we doubled for this crisis.
And it is no conditionalities.
We are asking one thing, Chris.
Pay your doctors
and your nurses, your hospitals,
protect your most vulnerable people
and parts of the economy.
That’s it, this is the condition.
And the third thing we do at the Fund
is to help countries
have the capacity for good policies.
After the financial crisis,
we helped many countries
to have good debt management,
good fiscal management,
transparency and accountability
to improve the performance
of public finance.
So the Fund is not a very big organization
by any standard,
we are some 3,000 people.
Highly professional, incredibly committed.
When you use the expression
“all hands on deck,” that’s us.
And it is a digital deck,
it is a digital deck these days.
CA: I mean, this is a global crisis.
A lot of people are worried
that unlike perhaps even in 2008,
where it really did seem
there was a lot of global cooperation,
there’s actually, in some worrying ways,
less this time?
Are you worried about
how crucial is that
to getting us through this?
KG: I mean, my preoccupation is,
in our mandate,
in my area of responsibility,
bring the membership together.
We have almost the whole world,
189 countries are our members,
and so far, I am very impressed
by how responsive the membership has been.
I put in front of them in the spring
a package, very strong package of measures
to expand the role
of the IMF in the crisis.
Everything that we ask for –
we ask for doubling emergency financing,
we got it.
Very interesting.
We ask for tripling
concession of financing.
Exactly because, you know,
like the virus hits people
with a weak system the hardest,
the crisis hits weak
economies the hardest.
So we wanted to triple
concession of financing.
Within one month, we got it.
We asked for grants for debt relief,
we got it.
So what I’m trying to say here
is that we need to focus
on ways in which we bring
the world together.
And then act on that.
Rather than complaining
that maybe not everything
is the way it should be,
do your duty to the global community.
CA: Well, indeed.
And the IMF is dependent
on the financing from its members,
its key members.
KG: Yes.
CA: I mean, you spoke
of the trillion dollars
that you are looking to make available
to nations that need it.
As I read it, that comes from –
you’ve got these units
called Special Drawing Rights.
You basically draw
a currency from members.
And hasn’t there been pushback,
though, from the US,
to block that effort
of raising all that money?
KG: So the one trillion dollars
is from our quotas
and also from our ability to move money
from well-to-do members
from the advanced economies
and lend it at very low or zero interest
to the developing emerging markets.
And we had this one trillion
and what was very interesting,
not everybody noticed that –
the US, in their two trillion
dollars stimulus package,
included the support for the IMF.
The Special Drawing Rights
is something that we, indeed,
don’t have yet consensus
among the membership to do.
It was done during the 2009 crisis,
issuing liquidity,
and it goes to everybody.
And there are many voices,
including mine –
I spoke to the G20 about that –
that are saying, well, that may be
a good thing to do now.
It is not being supported for reasons.
It is not just capriciously.
The problem with Special Drawing Rights
is that when we issue them,
they go to all members,
and the advanced economies
get 62 percent of the new allocation,
and there are some that are saying,
“Can we think of something
that is more directed,
or exclusively directed
to those who need it?”
But, Chris, everything
is on the table for us.
As the crisis unfolds,
we need to do more,
we bring the membership to do more.
CA: Whitney.
WPR: We actually have a question
from the community
that builds on what
you’re discussing right now.
Yavnika Khanna asks,
“Which countries will prove to be
resilient in the Great Transformation:
those with popular leaders
or those with sound financial systems?”
KG: You know, they both matter.
Countries with strong fundamentals
are clearly going through this crisis
with less trauma than those
that had weak fundamentals to begin with.
And of course, leadership matters.
How you mobilize a country
for action matters.
In my view, what we would see
on the other side,
the winners would be those
who think today of this crisis
also as an opportunity.
Clearly, digital transformation
is a huge opportunity.
Moving to e-learning, e-government,
e-payments, e-commerce,
linking small and medium-sized enterprises
through digital to consumers,
big winner.
Secondly, I very much hope
that we would come on the other side
with a low carbon footprint
and a more climate-resilient economy.
Those who move in this direction,
they would reduce the risk
for themselves and the world.
From this other crisis,
that we are not talking
so much about these days,
but it hasn’t gone anywhere.
And you know, if you don’t like pandemic,
you are not going to like
the climate crisis at all.
And also, countries that are thinking
of how to make the economy in the future
a fairer economy.
In other words,
we have been seeing inequality
building up before this crisis.
My colleagues
who have researched pandemics
have a very bitter lesson for us.
After pandemics,
after H1N1,
after SARS, after Zika,
inequality goes up.
Well, are we going to let
inequality to go up, up,
after this crisis?
And if we do,
we are damaging
the fabric of our societies,
and my sense is that hundreds
of millions of people in this crisis
would much prefer
to have a simpler, fairer,
more equitable world to live in,
and definitely, a more sustainable world.
CA: Mm.
KG: Those would be the winners.
WPR: Definitely.
And just one more question
from our community,
before turning it back to Chris
for some final questions here.
You know, this one
is from Sarah Rugheimer.
And the question is,
“What do you see as the main potential
positive shifts / changes
in this world
from this pandemic, say,
two to 10 years from now?”
KG: Well, I touched upon it a little bit.
First, I hope to see fiscal policy
to help us recover
to be geared towards green recovery
and more equitable recovery.
And that is something
that is in the hands of policymakers.
It can be done.
Secondly, I very much hope to see us
integrating what we have learned
from the crisis,
in terms of virtual work.
My organization, the IMF,
well, we can shrink
our carbon footprint dramatically
just by sustaining the practices
we are developing now,
and we will.
I certainly hope to see, in the future,
much more attention to two things
that we saw in this crisis are essential.
Universal access to health in some form,
strong health systems,
as well as strong social safety nets,
built as automatic stabilizers
in a time of shock.
And by the way, it is cheaper
if we do it in this way.
The bill for everyone
is going to be smaller.
And also, I very much hope
that this notion of investing in people,
recognizing that now that we see
this horrible tragedy,
the loss of lives,
that investing in people
is the very best investment we can make.
CA: Mm.
WPR: That’s great.
CA: So, see you again
in a minute, Whitney.
Kristalina, it’s so –
It’s so inspiring, actually,
hearing the energy and stuff,
the energy that you’re bringing to this.
I don’t think many people coming into this
would have expected to hear,
from the head of the IMF,
this emphasis on, you know,
“Let’s solve the climate crisis,
let’s tackle inequality and injustice.”
Do you really believe that this moment,
this crisis could help lead us
into a great transformation?
People will feel it’s your job
to sound positive,
you have to do that.
Do you really see the path forward
that we can get through this,
and what sort of timescale
are we talking about here, Kristalina?
KG: Well, you know, one thing I learned
from the transition I lived through,
the transition from central
planning to markets,
is it is tough, it is long, it is painful
and it is a road that takes turns.
So I don’t have an expectation
of miracle from here to there.
But I genuinely believe that we are now
in a point of our history
when people demand from their leaders
safety and security
and a society that is not
torn apart by conflicts.
And that is actually not unusual to see.
So, I would turn the table
a little bit on you, Chris.
After a war,
we see the world coming together
and building a better world.
Why not after a pandemic?
And yes,
we can make mistakes and not take
the right road to travel.
But we certainly have an obligation
to try to get on that road.
CA: So if you could just inject –
KG: And everybody matters for that.
CA: So if you could inject one idea
into the mind of everybody,
or into to the world leaders
who listen to you,
what would that idea be at this moment?
KG: Optimism.
Build a better world.
Possible, desirable, we must do it.
CA: That sounds like
optimism as the stance,
not just a naive belief
that it will happen,
but a determination to make it so.
That’s what you’re calling for.
To use that as the motivation
to pull us all forward together.
KG: Chris, do I have one minute,
or I’m done, I need to go?
CA: If you want to say one last thing
in one minute, alright, go.
KG: I want to say one thing.
To recommend to the audience
to watch the movie
“Bridge of Spies.”
There is a part in the movie
in which the two main actors,
the lawyer and the Russian spy,
talk to each other.
The lawyer says, “Things are very bad,
it looks like you may hang.”
The spy is very calm.
Lawyer says, “Aren’t you worried?”
The spy answers, “Would it help?”
So my message is, it is tough,
but worries won’t help.
Positive action will.
Positive, stay positive,
so that’s my message.
CA: Well, I have to say thank you.
It’s incredibly inspiring, actually,
to see your energy
and your determined optimism,
let’s call it that.
I think we wish you the very best
as you use your position to help
get us out of this mess.
Thank you so much, Kristalina,
for spending time here at TED.
Thank you.
WPR: Thank you, Kristalina.