Christine Lagarde, managing director of the International Monetary Fund, cautioned at the World Economic Forum in Davos that Europe must continue to guard against a relapse in 2013.
Speaking at an event honoring women leaders hosted by Credit Suisse in partnership with Newsweek and The Daily Beast, Lagarde was joined by Egyptian human rights activist Dalia Ziada, who discussed the challenges women face in the Middle East.
“2013 will be a make or break year,” Lagarde said. “2012 was tough. A lot happened in Europe, a lot happened in the U.S. and there is clearly a lot happening in Asia.”
Whether the current year will be make or break depends, according to Lagarde, on “whether or not policy decisions that were made in the past year, which have stabilized financial markets, will translate into improvement of the real economy and whether policymakers will continue to implement those decisions.”
The United States’ recent deferral of the debt ceiling until May 18 is just one example of moving these decisions ahead: “This is okay, but it’s just short-term momentum. Policymakers have to stay focused on the medium-term plan to reduce debt. The same goes for Japan,” Lagarde said.
In Europe, although 2012 saw many policy actions such as the institution of the European Stability Mechanism, more work remains. “We need to make sure we guard against relapse – which will happen if we don’t keep at it. More importantly, it’s not time to relax.”
Ingredients for a Stable Economy
Trust and confidence are crucial to avoiding a relapse and setting the course for global economic stability, Lagarde explained. “Trust is a crucial factor for the economy. It has been eroded, and in order to rebuild it you need to face reality constantly. You need to tell people the truth – that’s what they want.”
As the first woman to head the IMF, Lagarde also stressed that for strong and healthy economic growth, women must be able to access education, have the right to choose and to enter into politics and the corporate world.
“I’m very much a supporter of diversity and women,” she said. “Here are some numbers: 50 percent of cars and computers and 85 percent of consumer goods are bought by women. It’s not a claim about anything – it’s just the market. And the market reality shows that women make critical decisions.”
Will a Quota Work?
While it seems easy enough to say the world needs more women in leadership positions, questions remain about whether it will actually happen and whether the global economy would improve as a result.
The debate ties in with the current, controversial drive to increase the number of women on corporate boards in Europe. Although a European Commission suggestion to implement a 40 percent quota comes up against deep-rooted assumptions about gender roles, statistics also support the need for balanced leadership. Research by Credit Suisse, for example, suggests that companies with at least some female board representation perform better than those with no women on the board.
While in favor of the European Commission’s proposal, Lagarde said that “the suggestion to reach a 40 percent quota of women on boards by 2020 is a bit too high, considering the current number of women on boards, which is around 11 percent.”
Lagarde suggested that a drive to ensure that women are better represented in corporate boardrooms faces significant obstacles.
“The first barrier is existing networks – businesses tend to favor those already in the network,” Lagarde said. “The second barrier is in women’s minds – they will typically question whether they are up to a job before diving into it. I am no different, but sometimes I just have to grit my teeth and get on with it.”
Where There’s a Woman, There’s a Way
Apart from being guests of honor at the women’s leadership dinner, Christine Lagarde and Egyptian human rights activist Dalia Ziada might not seem to have much in common. While one is trying to stabilize the global economy, the other is fighting for equality in a troubled land. Their approaches to transformation may be different – top-down versus bottom-up – but each woman inspires change in her respective sphere.
At the forefront of the pro-democracy movement in Egypt, Ziada played a pivotal role in helping sweep long-serving Egyptian President Hosni Mubarak from power.
“Women participated in every moment of the revolution,” she recalled. “If it were not for women, it was not going to happen.”
Following the revolution, Ziada ran for parliament. Although she did not succeed in the 2011 elections, Ziada believes that a few years of politics under her belt will help her chances in future contests.
Until women are in power in Egypt, Ziada does not believe “there can be a proper democracy.” She acknowledged that “men are telling the women to go home, that they want to build democracy,” even though, as she put it, “women have a vision” and care deeply about the future of their country.
Knowing what’s next is easy for Ziada: “What we need to do now is teach women and young people how to build up a democracy.”