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Christine Lagarde, the head of the International Monetary Fund (IMF), gave a speech concerning the global economy last Tuesday in Frankfurt, Germany. The speech covered several facets of international business and economics, including free trade, political risks to worldwide economies, income inequality, and recent policy actions. Above all, Lagarde emphasized the overall state of the global economy, claiming that the current pace of economic recovery and growth is much too slow. Lagarde warned that unless more is done to kickstart economic growth, the global economy will fall behind. Her speech precedes, and perhaps sets the tone for, the IMF and World Bank spring meetings, set to take place in Washington D.C.
At the beginning of the year, the IMF predicted a global growth rate of 3.4 percent; Lagarde claims that the number has decreased since then. The IMF may have to revise its forecasts as a result, considering it predicted global growth in 2017 to increase even further. Lagarde cited China's economic slowdown and reduced commodity prices as potential reasons for the slowdown. While she states there is no immediate danger for the global economy, she warns major nations to stay rigid in their economic policies. Lagarde praised the European Central Bank and the Bank of Japan for utilizing negative interest rates as a catalyst for growth. She encouraged other nations to invest further in infrastructure and innovation, and directly addressed the United States in advocating for a higher minimum wage and expanded income tax credits.
One particular policy Lagarde stood firm for was free trade. The United States in particular has witnessed a public backlash toward free trade agreements, with claims that these agreements kill common jobs and favor the wealthy. While Lagarde agrees income inequality is a global problem, she does not subscribe to the thought that doing away with free trade is the solution. Instead, Lagarde claims slow growth is a main contributor to inequality, and that global cooperation is the key to resolving this. She asserted that spurning international business to champion domestic business would make the problem worse, saying such alternatives to global trade "would have a tragic course".
Lagarde will most likely expound her opinions in the IMF spring meetings, set to take place in the coming weeks. The IMF and Lagarde will be working further with nations worldwide in revitalizing the global economy.
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