Challenging global economic conditions, including a combination of low growth, a limited number of jobs, and rising inequality, are fueling the rise of nationalism and populism that are a threat to global cooperation, IMF Managing Director Christine Lagarde said in a speech at CGD.
“The greatest challenge that we are facing now is the risk of the world actually turning its back on global cooperation,” warned Lagarde, “the cooperation that has served us well.”
Speaking at a special CGD event entitled "Redoubling our Resolve for Global Development," Lagarde directly referenced the recent vote by the UK to leave the EU and echoed the current political climate in the US. But her speech, "Doubling Down on Development," was designed to underscore the importance of global cooperation to help the poorest countries in the world.
Almost one year on from the adoption of the Sustainable Development Goals, she warned, a group of 60 low-income countries “would suffer particularly as a result of that risk [of a breakdown in global cooperation].”
In a CGD podcast recorded after her speech, Lagarde pointed to one immediate effect of the dissatisfaction with globalization and integration amongst people in rich countries: the large post-Brexit drop in the exchange rate of the British pound, she said, has instantly reduced the value of UK development assistance by around $1.9 billion (other CGD colleagues Owen Barder, Michele de Nevers, Matt Collin, and Matt Juden have recently written and spoken about other potential effects).
The head of the IMF, who is also a former French finance minister, told the audience at CGD that she regretted the decision made by British voters. Later, when asked during the podcast if a recession in the UK was now inevitable, she responded that “in the bad-outcome scenario, yes, the country would be in recession. We certainly hope that this bad-outcome scenario will only be a scenario and will not become reality.”
Lagarde will head shortly to the G20 finance ministers meeting in China, where she said she will urge the world’s richest countries to implement the “right policies” so that “the 1.3 billion people living in low-income countries developing countries will have greater opportunities than ever before to benefit from, and contribute to, the global economy. It’s not just good news for them, it’s also good news for the other six billion inhabitants of the planet, because they will all benefit from this.”
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.