[Podcast] Christine Lagarde’s call for action – IMF World Economic Outlook

In today’s podcast we are going to be speaking about the IMF World Economic Outlook, which is a publication that was release by the International Monetary Fund in October of 2018. I actually want to focus this conversation a little more on the press conference that was delivered in the World Economic Forum on January 21st of 2019, where a panel was held with directors of the IMF – the Managing Director Christine Lagarde, she is very well known, but she also had the support of an economic counselor, who is the director of their research department, in order to deliver the sort of information that we are going to review today. What I think was very interesting – the highlight of this study, of course – will be Lagarde’s message because she introduced us to the study. She gave us an overview of what is actually happening in the global economy. But she had a very strong call for action and, of course, when that comes from Christine Lagarde I think that we need to focus and pay attention. She is a powerful woman, she is running the IMF, and it was very interesting to see her out there and deliver this message.

In the beginning she tried to make this analogy between cross-country skiing with the global economy. It was quite interesting, it was kind of cute to see her – such a powerful woman – come down and say: “here,” – in a very educational manner – “this is what we expect from the economic environment. We want predictability, less risk. We want things to run smoothly, just kind of like cross-country skiing”, which is a personal practice. So that was quite interesting.

But Lagarde did not have a very exciting message to tell us. She actually had some unfortunate news for the global economic environment. She told us, here, we have to deliver this message that we are downgrading the growth forecast since october 2018, because risks are on the rise and we have some bad news on the trading front, so we have some threats in the trading environment which is sort of escalating all sorts of problems and risks in the global economy and for that reason they had to announce a further downward revision of the forecast that was published in October. This is pretty much because of the significantly higher risks.

Higher trade tariffs and rising uncertainty over future trade policies. That is a big issue that is one of the key sources of global economic risks. Lower asset prices, higher market volatility, which these three combined are tightening financing conditions and that is including for advanced economies. And this is in a scenario of high debt burden in both private and public sectors are carrying a high debt load right now.

But she does give us the message that we are not facing a global recession right around the corner. This does not mean that a major downturn is happening. But what is happening is that a sharper decline in global economic growth is happening, there are many issues, including geopolitical worries as well.

But she says that this scenario actually shows us a very clear message for policy-makers. One is that they need to address remaining vulnerabilities. And two, is that they need to be ready if a serious slow down were actually to materialize. So, if a recession is actually to materialize, policy-makers need to be ready. Third message is that policy-makers need to harness existing growth momentum, and she is very emphatic. She says, yes, there is growth momentum, so we need to take advantage of that and harness these sorts of opportunities.

Policy-makers also need to work on reducing high government debt, and she is making a point here that this opens space to fight future downturn in the global economy. So, economies need to be ready if that comes to take place.

As far as monetary policy, they should be data dependent and exchange rates should be allowed as shock absorbers, and I thought that that was kind of interesting because of the whole conversation behind exchange rate manipulation. Next message is about economic reforms. They need to be in place in order to push growth, specially in labour markets and infrastructure investments.

So, these were the messages that she believes that this risky scenario is showing us. But she also makes a point in saying that if we must deliver the promise of the digital revolution, it has to be inclusive to all people, including measures to help workers that are displaced because of the automation of work, and we also need to create opportunities for women and young people.

She has a very important point here on International Cooperation. She said that for efficient and effective collaboration in the international system we have to increase our efforts in resolving the shared problems and that meaning, we need to fix the global trading system. There is a call for action here for the G-20 saying that they have to deliver results. This is a call for the World Trade Organization reform. I think this took place in Buenos Aires. She says that we need to collaborate in fighting corruption and tax evasion, and also, collectively address climate change.

Now, one very interesting message, I think she nailed in closing her speech talking about something that she calls New Multilateralism. And that was brilliant, because she runs away from the term globalization. Because people have been feeling very uncomfortable about the globalization topic, and globalization issues. Countries are becoming more nationalist driven, and she puts this here that is not becoming a unit, it is staying multilateral but acting together. And I thought that that was quite brilliant. She gives us a new perspective on globalization. Kind of running away from the term, but still sticking to togetherness. Kind of nice. And that includes macroeconomic policies and structural reforms that need to be applied to many economies in the world.

Now, going back to the report. In October of 2018, the IMF had this projection of global growth at 3.7% in 2019 and they reduced that to 3.5% in 2019 and then they also reduced to 3.6% in 2020. Now this is for global growth. The growth in advanced economies is forecasted at 2% in 2019 and 1.7% in 2020. And then emerging markets and developing economies at 4.5% in 2019 and 4.9% in 2020.

Both in the report and the press conference, they really put emphasis on the rising trading tensions and then the policy uncertainty that raise concerns about the global economic prospects, because these factors could actually lead firms to postpone or forgo capital spending, and then hence slow down economic growth and investment and demand.

One very interesting point in the report – and this is where I am going to close this podcast with – is the point that the IMF is now keeping an eye on increasing market power. They also think that this is a risk for economic growth. They said that the concerns about corporate market power is growing pretty much for two reasons. One is because, in the past decades, there has been some macroeconomic trends that can be somewhat the fault of corporate behaviour. Low investments, despite of rising corporate profits, declining business dynamism, low productivity growth and falling labour income. This is quite interesting because they pretty much raise a flag here saying, here, we have to review the behaviour that is happening in the private environment, we have to follow up on actions that are going to change this sort of trending behaviour. And, I mean, if we are talking about Corporate Diplomacy, there is a lot to be talked about on here – activities and strategies that need to be built in order to respond to such a claim that corporate market power can actually account for these macroeconomic trends that are not so positive for the overall economy.

And then the second reason about the rising concern in the market power of corporations is that the rise of tech giants has raised questions about whether this trend – of the tech giants becoming more powerful – and if this trend continues, the IMF is saying that we need to rethink the policy that is needed in order to maintain fair and strong competition. I thought that it was very nice to put in the context of Corporate Diplomacy. So, there is a lot that could be explored in this report. This increasing market power session in this report itself is evidence that government is becoming aware and it actually wants to tackle the sort of increase in power for private environment. And all sorts of strategies that have to be built, not because the private environment needs to win in the game. We actually want a balanced governance strategy nowadays.

Snowden’s appeal for public debates on Global Governance and Big Data

It is quite unfortunate to be an observer of such an important discussion not taking place at the level it should be in our global arena. All the fuss that took place over Edward Snowden’s courage of standing up and speaking his mind to global spectators on unethical practices executed by a governmental institution – and please note the intended broad purpose on using this particular expression – have been slowly phasing out while the guy humbles his way into simply re-establishing a safe place to live and stay.

Despite the reaction of the multilateral positioned public, what is really in question here is his reasons for “whistleblowing” his way out of a comfortable and well privileged life. Edward Snowden bet his life-worth of professional opportunities with a specific purpose: a better world. And leaving aside the counterbalanced debate on realism versus idealism views, the young professional stood up for an entire generation that has been raised alongside massive worldwide political and intellectual efforts on constructing the very foundation of the long emerging ethical social models of democracy and sustainable development.

By undertaking a close analysis on his original interview, it becomes clear that his statements over his motives behind the decision of acknowledging the public about the abusive surveillance practices that take place at high level authority tables are not only genuine, but also well reasoned:

“But if you realize that that’s the world you helped create and it’s gonna get worse with the next generation and the next generation who extend the capabilities of this sort of architecture of oppression, you realize that you might be willing to accept any risk and it doesn’t matter what the outcome is so long as the public gets to make their own decision about how that’s applied.”

And particularly interesting is his further observation that explores, even if not intentionally, but to the core of political science theories, the dual conflicting concept of personification versus personalization of power, that, if not duly comprehended and rightly suited at both the individual and collective levels, may alienate the governmental body from its people.

When the interviewer stated that many people would possibly consider Snowden being in Hong Kong as to “seeking to aid an enemy of the United States”, he responds by correcting the assumption of China being an enemy: “It’s not. I mean there are conflicts between the United States government and the Chinese PRC government but the peoples inherently we don’t care. We trade with each other freely, we’re not in armed conflict, and we’re not trying to be. We’re the largest trading partners out there for each other.” When then he defends his choice of Hong Kong for its tradition on free speech and political manifestation, closing his interview by exposing his worries of no change after the disclosures, and such continuing abuse of authority leading to a world of tyranny.

Indeed, Snowden may not see any change in the short term. It seems as his outbursting plead for public criticism can’t mobilize enough of a critical thinking mass for debating over sciences of such complex nature, and rather technically untapped by the majority of society. The regular individuals out there who have been having their everyday personal information collected, stored, and analysed by governmental agencies most of the time don’t even read privacy policies from the medias through which they communicate. In fact, most people wouldn’t know what to do, where to go, nor have the means in order to face the organizations that are yielding their data into third party systems.

Private organizations and businesses, on the other hand, have a lot to lose by not demanding proper multilateral discussions in order to set the grounds and benchmark enforced policies on ethical practices for the use of the fast evolving information technology structures. Thus, it seems like many of us have been underestimating the historical importance of Snowden’s individual efforts, made at such a high personal cost, to call the attention of global institutions to the inexistence of formal data governance laws and agreements.

To my utmost understanding, Snowden is the empowered high technical guy who throughly understands, by experience, the intangible magnitude of big data use, and urged the world to publicly discuss its cross-border political implications.

Cross-cultural business in the advent of an interactive global economy

Do you have the necessary skills to lead in a global economy? Don’t fall into the traps of undermining cultural differences, when in fact, you can insightfully optimize your business development effectivesness by mapping your stakeholders’ cultural differences.

This Harvard Business Review’s IdeaCast on Cross-Culture Work in a Global Economy can help you sharpen up your cross-cultural business relations understanding by shedding light on how complementarily functional cultural differences can be when it comes to developing professional capabilities such as methods of communication, ways of problem-solving, sharing knowledge, and managing meetings in this emergingly interconnected global business environment of ours.

According to Erin Meyer, the author of the HBR article Navigating the Cultural Mindfield and the book The Culture Map: Breaking Through the Invisible Boundaries of Global Business, the world is becoming evermore about complex multi-cultural interaction.

A good example of the importance of having different approaches to business is the following extract from the interview as it describes, from an informal culture’s perspective, a highly disciplined business culture. “They are so rigid, so inflexible, they are so focused on the structure and puntuality of things that they are unable to adapt as things change around them.” This extract is particularily interesting when immersed in a social environment where self-deprecating the local culture has become the norm, such as in places like Latin America, and particularly in Brazil, where adaptability is a solid cultural trait.

Cultural differences are part of a diverse world that has been described as a source of conflict in Huntington’s The Clash of Civilization. But with the global advent of East meeting West simultaneously with North meeting South for multilateral negotiations, cultural differences are not only important to be considered when mediating political purposes, but to be applied as competitive advantages in diplomatic business encounters as much.