Transcription
Chris Anderson: I get to introduce one of the most powerful women in the world. If we are to escape from the mess we're in, she will play a major part in helping us. 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: You took on this role late last year, and within four months, boom, COVID arrives. That's one heck of an introduction to a new job. How are you doing?
KG: I find strength in action. At the Fund, we've been leaning forward from day one on this crisis, providing lifelines to countries, people, and businesses. We've received over 90 requests and offered critical financial packages to 56 countries.
CA: You've described this pandemic as a crisis like no other. In what way?
KG: Truly like no other. First, never before have we consciously inflicted so much pain on the economy to fight a virus and save lives. We're asking businesses not to produce and consumers not to consume. At the Fund, we labeled this "the Great Lockdown." Second, never before has there been such a rapid change of fortunes worldwide. In January, I was in Davos, talking about "anemic growth," three percent. In April, during our spring meetings, it was minus three percent. In January, we predicted 160 countries to have positive income per capita growth. Now it's 170 with negative growth. We call this "the Great Reversal." Very painful. Third, uncertainty. We always live with uncertainty, Chris, but this time, it's the uncertainty of a novel coronavirus that policymakers have to integrate. We combine epidemiological projections with macroeconomic modeling to see through that uncertainty. I hope that in recovery, we can use a new term: "the Great Transformation." Make the world a better place.
CA: I'll be excited to discuss that. But in responding to the crisis, the main tool used by rich countries has been massive economic stimulus, trillions of dollars. Is that a wise response?
KG: It is a necessity. You don't often hear the Fund telling countries, "Please, spend. Spend as much as you can." But that's what we're doing now. We add, "And keep the receipts. Don't lose accountability to citizens, to taxpayers." These fiscal measures of almost nine trillion dollars are necessary because when the economy is standing still, without help and monetary policy stimulus, firms will go bankrupt, people will be unemployed, and the economy will be scarred. This scarring will make recovery much more difficult. So it's a wise thing to do, helped by central banks acting synchronously and the stimulus coming quickly. This is how people can get through this tough time.
CA: But how far can it go? It's been described as "printing money"—governments issuing more bonds that have to be paid back. There's the Minsky moment, where things go well for a while, everyone believes the train can keep running, the cycle keeps turning, governments have all this money. At some point, doesn't that break down? Do you worry we're nearing a Minsky moment, like Michael in Mary Poppins starting a run on the bank? Is there stress in the international financial system that concerns you?
KG: Of course, this cannot go on forever. I trust our scientists; we'll see breakthroughs, and people will get accustomed to social distancing and measures that protect from spreading the disease. We've seen massive injection into health systems. Obviously, if it goes on too long, we'd be worried. For now, we project a gradual reopening—we see it happening in many countries—and a partial recovery in 2021. Not full, unfortunately, but better. Low interest rates, in some cases negative, allow the fiscal measures and liquidity to be sustained. For now, we don't see interest rates rising. Low for longer is helpful.
CA: The 2008 financial crisis nearly broke the entire financial system—arguably, it did. This has a far worse impact on the economy. Did the world learn something from 2008 that has helped us be resilient this time?
KG: The world learned that the financial system has to be tested and strengthened to withstand shocks. That's helping tremendously today. The banking system is resilient, and even in non-banking financial institutions, there's more attention paid to risk. The most important lesson was "build resilience to shocks." Those who did cope better. Those who didn't are in a tougher spot. For the Fund, we hope to come out of this with this lesson spread beyond the banking system, having a crisis-management mindset for a shock-prone world because of climate and the density of economic and social life.
CA: You're paying special attention to developing countries. They seem to be facing a terrible situation. Many have significant debt denominated in dollars. Their currencies are depreciating against the dollar, making stimulus injections impossible. That seems like a dangerous cycle. Is there any way to break it?
KG: Let me separate countries with strong fundamentals. There are some positive surprises from countries with stronger buffers. But many emerging markets and developing countries face multiple pressures: the coronavirus hit, weak health systems, high indebtedness, low commodity prices, shrinking remittances, and tourism collapse. Very tough. But institutions like mine were wisely created. The IMF, World Bank, and regional development banks work together. The IMF, one lesson from 2008-2009, is to have financial strength. We have four times more money to lend today—one trillion dollars instead of 250 billion—and we're deploying it for countries that need us most. With David Malpass, we called for a debt moratorium for the poorest countries to official bilateral creditors. People say we don't work together, but in late March, we made this call, and in mid-April, the G20 agreed. Amazing. The Paris Club, China, the Gulf countries all agreed not to suffocate the poorest countries.
CA: Is it possible some developing countries are overdoing the lockdown policy? If citizens are already struggling to survive, isn't it a death sentence to order them to stay home?
KG: One of the most heartbreaking conversations is with leaders who must choose between people dying from the virus or from hunger. It's dramatic. Where a large part of the economy is informal, lockdowns in advanced economies aren't applicable, but even there, countries are doing well with social distancing. Many African countries stepped up preventive measures early. They learned from Ebola and prior crises that hygiene helps. Solidarity with these countries is important, and we're there for them.
Whitney Pennington Rogers: Thank you. We have questions from the community. Bill Elkus asks about inflation from the stimulus, Kristalina.
KG: At this point, we're not worried about inflation in advanced economies and most emerging markets. We worry about countries with weak fundamentals, no access to foreign exchange, where the only solution is our help or their central banks printing money. Why not worry about inflation in advanced economies? Because countries with hard currency are putting liquidity in place but not seeing a big expansion of demand pushing prices up. We don't see inflation jumping up. Consumers aren't consuming aggressively, demand isn't strong, and these societies are mature in exercising policy options. But in poor countries that, out of desperation, print money, inflation will be there. Zimbabwe is an extreme case, and I worry about other countries. We're determined to engage with these countries early. Would debt restructuring be necessary to prevent desperation?
WPR: Thank you. Keith Yamashita asks what citizens can do to help.
KG: It's incredibly important for all of us—and aside from heading the IMF, I'm a global citizen—to bring solidarity in a crisis. It's important to create a sense of "we are in this together, we will get through it together." Speak up. For many years, I was a crisis commissioner, and most people are positive and good. You can lean on them. A hateful and fearful minority is loud. Good people, speak up. Spread that sense of togetherness.
WPR: Thank you. I'll come back later.
CA: Nations performing best in response to the pandemic are often Germany, New Zealand, South Korea, Taiwan, Denmark, and Norway. Those performing worst are often Spain, Italy, the UK, Belgium, Sweden, Iran, Brazil, Russia, and the United States. The second group is run by men, all but one of the first group by women. Coincidence?
KG: Subjectively, as a woman, I believe women are great leaders in a crisis. They show empathy, care about the vulnerable, and are decisive. We take energy from action. There's something to be said about the value of gender equality for the future.
CA: Is there something about embracing nuance that women might be better at? Men often say "let's win, let's conquer," but in this situation of probabilities and complex dials, are women better at handling nuance?
KG: We need everyone, a mixture of experience, knowledge, and predisposition. Men and women together. Different perspectives make for better decisions. Women are more willing to compromise and be corrected. That's a huge advantage in uncertainty.
CA: Talk about your leadership. You were a European Commissioner, dealt with humanitarian crises, and witnessed Bulgaria's transformation. What lessons do you bring?
KG: I learned many things. Three highlights: First, preparing for a crisis—thinking of the unthinkable and acting with foresight. "Build Back Better" should be "Build Better Before." Second, collective action—working together, seeking and offering help. Third, we don't know our internal strength until we are hit. We are resilient, especially together. This gives me optimism.
CA: Talk about the IMF's role in recovery. What can your organization do?
KG: Three things: First, good diagnostics and pathways forward. We have a policy action tracker for 193 countries. Second, financial first responder. We have significant financial firepower and multiple instruments. Emergency financing is doubled for this crisis, with one condition: pay doctors, nurses, hospitals, and protect vulnerable people and parts of the economy. Third, we help countries build capacity for good policies. After the financial crisis, we helped with debt management, fiscal management, transparency, and accountability. We're 3,000 highly professional, incredibly committed people. It's "all hands on deck," a digital deck these days.
CA: This is a global crisis. Unlike 2008, there seems to be less global cooperation. Are you worried?
KG: My preoccupation is bringing the membership together. We have almost the whole world—189 countries—and I'm impressed by their responsiveness. I presented a strong package of measures to expand the IMF's role. We doubled emergency financing, tripled concessional financing, and got grants for debt relief. We need to focus on bringing the world together and act on it.
CA: The IMF depends on financing from its members, key members. You spoke of a trillion dollars—from Special Drawing Rights, drawing currency from members. Hasn't there been pushback from the US to block raising that money?
KG: The trillion dollars is from quotas and the ability to move money from advanced economies and lend it at low or zero interest to emerging markets. The US, in their two trillion dollar stimulus package, included support for the IMF. Special Drawing Rights is something we don't yet have consensus on. It was done in 2009, issuing liquidity to everyone. Many voices, including mine, say it may be good to do now. It's not just capricious. The problem is that when we issue them, advanced economies get 62 percent, and some say, "Can we do something more directed to those who need it?" Everything is on the table. As the crisis unfolds, we need to do more.
WPR: Yavnika Khanna asks which countries will be resilient in the Great Transformation: those with popular leaders or sound financial systems?
KG: Both matter. Countries with strong fundamentals are going through this with less trauma. Leadership matters. The winners will be those who see this as an opportunity—digital transformation, a low-carbon footprint, and a more climate-resilient and equitable economy. We saw inequality increase after previous pandemics. Will we let it go up again? Hundreds of millions would prefer a simpler, fairer, more sustainable world.
WPR: Sarah Rugheimer asks what positive shifts you see in two to 10 years.
KG: First, I hope fiscal policy will be geared towards green and equitable recovery. Second, integrating what we learned about virtual work. We can shrink our carbon footprint. Third, more attention to universal health access and strong social safety nets. Investing in people is the best investment.
CA: Hearing your energy is inspiring. Many wouldn't expect to hear the head of the IMF emphasize solving the climate crisis and tackling inequality. Do you believe this crisis could lead to a great transformation? People will feel it's your job to sound positive. Do you see a path forward, and what timescale are we talking about?
KG: I learned from the transition from central planning to markets that it's tough, long, painful, and takes turns. I don't expect miracles. But we're at a point where people demand safety and security and a society not torn apart by conflict. After a war, we see the world coming together. Why not after a pandemic? We can make mistakes, but we have an obligation to try.
CA: If you could inject one idea into everyone's mind or world leaders, what would it be?
KG: Optimism. Build a better world. Possible, desirable, we must do it.
CA: Optimism as a stance, a determination to make it so.
KG: Chris, do I have one minute, or am I done?
CA: One last thing in one minute.
KG: Watch "Bridge of Spies." The lawyer says things are bad; the spy says, "Would worrying help?" My message: it's tough, but worries won't help. Positive action will. Stay positive.
CA: Thank you. Your energy and determined optimism are inspiring. We wish you the best in using your position to help us out of this mess. Thank you, Kristalina, for being at TED.
WPR: Thank you, Kristalina.