Christine Lagarde is known for her diplomacy. But the IMF's managing director was just a little bit rude with her hosts during her visit to Canada earlier this month. The world ought to get used to it.
On Sept. 14, the day after she dined with Prime Minister Justin Trudeau and members of his cabinet in Ottawa, Lagarde said, 'Thank you,' with a finely honed critique of Canada's efforts to make women a bigger part of its economic life. Trudeau may be the first Canadian leader to appoint as many women cabinet ministers as men, but he can do much better, Lagarde wrote in a blog post. The percentage of men in the labour force is 10 percentage points greater than that of women, and the IMF reckons that is contributing to Canada's chronically weak productivity rates by limiting the size of the labour pool. "Canada must improve its labour productivity, which is about 20 percent below the level in the United States, and is growing at less than 1 percent per year," Lagarde wrote. "Women are part of the solution."
Canada's prime minister, a self-described "feminist," wouldn't have been used to being criticized over his gender policies. Lagarde praised Trudeau for his "clear commitment" to equality. But she also pointed out that Canada trails many of its peers in spending on early-childhood education and said that Trudeau's child-benefit program — a centrepiece of his successful election campaign — could be better targeted to help women join the workforce. "It is not the right thing to do, it is the smart thing to do," Lagarde said.
Future hosts of the IMF's popular leader can expect similar treatment. Lagarde, who earlier this year was reappointed to a new five-year term, has tired of letting governments off the hook for ignoring the fund's best advice. From now on, the cost for presidents and prime ministers who want to bask in the spotlight of one of the world's most influential people will be public reminders of the things they could be doing better.
"We are going to be more specific," Lagarde told me in an interview at the G20 summit in Hangzhou, China, which preceded her trip to Canada by about a week. In other words, she intends to start naming names; bestowing praise when it is warranted, but also making a point of highlighting the areas where the IMF thinks specific countries could do more to increase economic growth. "A general message doesn't pay tribute to the specificity of each and every country," Lagarde said.
I had asked Lagarde how she could snap the world's leading economies out of their post-crisis lethargy. The interview took place on the morning of Sept. 6. Less than a week earlier, the IMF had published a particularly harsh critique of the G20's efforts to boost global economic growth. The IMF warned that the risk of stagnation had grown and that a "more forceful" response from governments was needed. The G20 was unmoved. Leaders attempted to hide their unwillingness to act behind a curtain of verbiage: Thomas Bernes, a distinguished fellow at the Centre for International Governance Innovation, described the Hangzhou communique as "indecipherable." Lagarde said the response in the room to the her message as mixed: some leaders agreed with her, while others thought she was being too pessimistic. Whatever the sentiment behind closed doors, the statement suggests that complacency prevailed.
So rather than treat the G20 as a like-minded group of engaged countries, Lagarde intends to single them out, one by one, for criticism. Her visit to Canada was telling. The IMF has no quarrel with Canada. In fact, she describes Canada as a "good student." Since winning a majority of parliament's seats almost a year ago, Trudeau has plunged the country into deficit to invest in infrastructure. The IMF for several years has been begging countries with "fiscal space," such as Canada, to do just that. For Lagarde, Trudeau's success is an example for others: Exhibit A of how fiscally conservative electorates can be persuaded to support something other than austerity. "Canada stands out as making a sensible and positive contribution to the world," Lagarde told me.
Earlier in her tenure as the IMF's leader, Lagarde might have been content to focus on the positive with a country such as Canada. The fact that she went out of her way to criticize one a perceived favourite will strengthen the her ability to be an honest broker in dealing with some of the global economy's bigger players. One of those will be Germany, a country with at least as much fiscal space as Canada, but one that continues to defy the IMF's call to use it.
When we spoke in Hangzhou, Lagarde listed Canada, South Korea, China and Germany as countries that "can and should" use fiscal policy to boost economic growth. "Some of them are doing it, not all," she said.
I asked he which "one" wasn't. "Figure it out," she said, smiling.
Three of those countries have announced spending programs in the past year. Only Germany has not, although it will be spending considerably more than budgeted to absorb the flight of Syrian refugees.
"All of them are using it," Lagarde added. "Let's put it that way. We have to be fair. All of them are using it, but some are very minimal."
