Man. Youre being entrusted with something so precious. What eric went through to get this story out, what he went through in order to reach the conclusion of that book is immense and is very precious. Its not just precious because of what he and patti achieved, its also the fact that hes representing an awful lot of other men who have been silent on the subject. We have a whole generation of people. So hes a voice for them. Charlie christine lagarde, managing director of the imf and the new movie called the railway man, next. Theres a saying around here you stand behind what you say. Around here, we dont make excuses, we make commitments. And when you cant live up to them, you own up and make it right. Some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where its needed most. But i know youll still find it, when you know where to look. Captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. applause charlie good to be here in washington at the meeting of the imf with the managing director christine lagarde. What do you hope to accomplish here in this meeting . At this meeting, there will be 188 representatives of the membership of the imf. Its pretty much the Global Economy is in washington for three days, and we are at the point where the economy has turned the corner or is turning the corner, rather, of the Great Recession, and we know that everybody has more to do, so they need to talk to each other, to explain what more theyre going to do, how its going to impact on their respective economy and what how it will affect the others economy and there will be one particular issue that i hope we can address which is the reform of the imf and making sure we find a way forward to strengthen the institution and make sure that the membership stays together, including with the leadership of the u. S. I assume, also, that the fact that there are central bank people here, there are finance ministers here, but part of the message that comes out of here is for a larger community, a political community, as well as an investment in Financial Community that exists outside of government and nongovernment organizations. Right. Charlie where are we in terms of the Global Economic recovery . Okay. Global growth, weve seen it go from 3 to 3. 6 to probably 4 between 13, 14 and 15. So theres progress, positive. Not strong enough, no exponential, but positive. Thats why i say its turning the corner of the Great Recession. The u. S. Is doing reasonably well. Our assumption is that it will deliver a 2. 8 growth in 2014, which is not our potential. The United States could do better than that and certainly create more jobs, but at least its moving at a reasonably good state. Its not hampered by the fiscal break there was last year and the private sector is beginning to unleash and return to investments and job creations. The euro zone is finally turning the corner as well. Its turning positive. It had been negative for a few years. Its now positive, and the core countries are doing certainly better. Germany being the best of the lot. The southern countries of the euro zone, such as spain, italy, greece, are finally delivering positive growth results as well. If you look at the emerging market economies, they are slowing down a bit, but they are still cruising at about 5 growth, which is, you know, almost double the growth of the United States. Now, if you look at what they present compared to the Global Economy, theyre 50 . 50 of the Global Economy is in the hand of emerging and developing market economies, and if you assume they grow at that 5 , they are gaining traction and strength. Charlie so, therefore, they should play a larger role in the imf. Thats one con queens, youre right. But it also means that their policy and the impact of, say, the fed Monetary Policy on them matters not just for themselves but the Global Economy given the size they represent. Charlie weve had tapering in the United States by the federal reserve. Yes. Charlie youve urged the central bankers in europe to do what . For quite a while at the imf, we have encouraged the European Central bank to be very conscious of the risk of sustained low inflation, which we believe would be hurting growth, jobs and not particularly helpful for the service of debt. I was very encouraged to see that, after having praised the generosity of the imf last week, my friend mario has indicated that aware of the inflation risk, he would be prepared to take measurers appropriate and in due course, and i trust his judgment to do the right thing at the right time. Charlie you seem to be saying to the world and the Global Economy, lets make sure that we maintain low Interest Rates. We are saying that we feel that interests will remain low for probably a bit longer than we think. Charlie than you think is necessary . Than we think is necessary and that everybody expects, and i think we have to prepare for that and be very attentive to the risks that it creates on markets when you have, you know, not benign but very relatively easy financing, and, at the same time, growth picking up. That could create, you know, spots on the markets where there is a little bit too much exhilaration, exuberance, if you will. Charlie the big question here and for the United States and for the Global Economy is how do you create growth . And, as a subset of that, or, rather, a key consequence, how do you create jobs . Because we still have 200 Million People looking for jobs in the world. Well, its a task that the president of the g20, the australian presidency, has decided to tackle with the Australian Energy about it. And the australian presidency has asked us to modellize, if you will, an improvement of Global Growth by 2 Percentage Points over the next five years, which would put everybody in a much better position. Now, we did do that, and we identified what should be done in terms of key Structural Reforms, in terms of normalization of Monetary Policy, in terms of rightlypaced fiscal consolidation, and that coordinated approach, with the right policies, can actually deliver 2 Percentage Points more in five years. But countries have to charlie to the overall Global Economy. Yes. Charlie and what are those Structural Reforms you think are central . They will differ on a countrybycountry basis. But let me give you an example. You have countries where unemployment has been almost structural. If it is structural, then a structural reform is needed. And you have countries with dual labor markets where the protected people under contract have the benefit of longterm employment, and all the others are on fixed term, limited term, interim and clerkships and thats a dual contract not conducive to growth or job creation. So thats one set of reform. It would apply to a country like spain who has just taken that reform, but also to south africa who has had indeemic unemployment and to other European Countries for sure. Other Structural Reforms take to countries like brazil or india that have big bottlenecks. You know, you want to create a big, new retail system in india. Fine. But you need to have the infrastructure, the warehousing, the way to take stuff from where it is stored to the retail sector. Brazil is now, i think, tackling this issue because they have the world cup, the limited games and have to move from building stadiums to roads to airports. Those bottlenecks have to be cleared and thats not so much in the structural reform buckets but in the infrastructure. Charlie i read a recent piece by Larry Summers in thats good reading. Charlie yes, in the financial times. And he was talking about the idea that the most important thing you can do today for growth is an investment in infrastructure, not only because it will create some demand in the economy and jobs, but also it helps economy expand. You share that view of his . I dont think that we have a onesizefitsall solution, go for infrastructure and it will work. Its a bit more complicated than that and on a percountry basis. But given that there is lowcost financing still for the moment and given that the Capital Investment has been low over the course of the next five, six years when countries had really tightened their belt and forgotten about investing in infrastructure, forgot about investing in capital, for some of the countries, those who with can afford it, its not a bad idea. The u. S. Is one that could look at it. Germany is one that could look at it as well. Now, one would think germany germany can certainly invest in improving its electricity grade system and charlie speaking of europe, has the imf take an different attitude about the British Economic reform and its program of austerity so that you are not how shall we say this admonishing them . You know, we revised our projection for the u. K. Significantly. Charlie yeah, the highest projection there. Its a very high projection. Frankly, we are delighted that the u. K. Is growing at that speed, at that pace and we certainly hope it can consolidate rather not consolidate fiscally, but strengthen that growth Going Forward and make it three engines powered. For the moment, its predominantly driven by consumption. Charlie yes. Also, when the u. K. Has to export more, the u. K. Has to invest more, and im sure they will be looking at it. The numbers are beginning to rise, which is good. Charlie two things about reform you have talked about and then well talk about fiscal reform. One is women and what they had to the job force. I just saw your women in the world conference in new york. Right. Charlie help us understand what more ideas to make sure that women are more involved in the bork force will do for Global Economy. Ill give you the example of two countries, charlie. One is japan, the other one is korea, and then i could think of other examples, but those two are critical because they present the same aging phenomenon to a society where people are aging, where the tolerance for immigration is not very high, and where there is woman power force, not manpower force. So the way to approach the issue is Women Joining the job market. Theyre highly educated and as competent as their male colleagues. But there is no infrastructure, no Daycare Centers and there is a cultural reluctance to accept the idea. I was pleased to see both the Prime Minister and the president have both decided to embark on the journey of including women in the workforce, making sure that they have the facilities and access to the daycare center. I was just talking to the vice premier and Prime Minister of japan who assured me it will be in the next appropriation in june and many cities in japan are putting in place structures tto if facilitate that. We have numbers to document what the result would be if women were given same access as men to the jobs market. Charlie as i remember, the Economic Growth rate for japan is about 1. 4. Yeah, thats right. They could certainly do with a bit more. Charlie are they on the right track, do you think . You know, they have planned on doing this threearrows strategy. The first arrow was to double inflation, moving it from below to 2 , doubling the monetary mass, approaching on the markets by this central bank of japan. They are doing it and its showing results. Inflation is up. The second arrow was to address the fiscal situation, because they have a clear deficit and they need to have a broad base from which to raise revenue because revenue is, you know, not very high in japan. Taxation is relatively low. They just did that april 1. They need to do more. I asked the question to the vice premier and Prime Minister, i said, where is the third arrow . You showed me its on the way and many of them will actually be appropriated in the month of june. So were following that very carefully. Charlie you also talk here at this meeting about income and equality. Yep. Charlie and what can be done and whats the impact of it and whats the risk of it Going Forward. We are looking at income equality because we believe it is macro critical. In other words, its raising a point where it really can have a destabilizing and detrimental impact on the growth of economies and on economies in general. So weve done two critical studies in my view, because we are looking at it not from a political or ideological angle, were just trying to understand the fact and the relationship and the correlation. And the two studies are, one, is inequality, excessive inequality hurting growth, and the answer seems unambiguously yes, its hurting sustainable growth. And the second study we did which goes against conventional wisdom was is redistributionn policies, if correctly articulated, redistribution policies are a break on growth. Which is conventional wisdom. Everyone assumed if you do redistribution then people will not be attracted to producing more, earning more, doing more, because the more is going to other people. Charlie in the United States, they talk about when you raise the minimum wage, is that going to have an impact on employment overall. We have also minimum wage, but we have looked at redistributive policies articulated around more progressive taxation, more spending on education, on health care to make sure that people have equal opportunities rather than unequal opportunities, and those studies really clearly indicate that that level of distribution or that category of redistribution is supportive of growth. Charlie you have also said that its important to come to almost closure with respect to certainty on financial regulation. Yes. Charlie where are we . By the way, charlie, its one of the very, very few issues where i am in agreement with the financial marketplace. Charlie yes. They also want certainty. Were not talking about the same certainty. Charlie go ahead. Why is certainty necessary . So that they know how much reserve they much keep . How much capital they must raise . What is the level of liquidity and what will be the powers exercised by supervisors . They need to know where they are operating. We are threefourths of the way there, but the job is not completed, yet. There are, as usual, the trickiest points are left for the last hour, and i would put in that category the cross border resolution regime, for instance, the resolution applicable to the very large financial institutions, the globally systemic financial institutions. I would put in there the appropriate control and supervision of shadow banking, which is, you know, significant increase both in the u. S. And china, for instance. And i would also put in there Real Transparency and clear regulation and supervision of the derivative markets and system. Charlie do you believe that the United States and dodd frank is a movement in the right direction . Any piece of legislation and i dont want to, you know say its good, its bad, its 80 right, but its not yet implementable or implemented. There is still a lot of interpretation. Charlie and voluminous. Yes. As usual, the secondary legislation and then the interpretation book is going to be even bigger than the voluminous dodd frank act. Its comprehensive but im not sure very broadly applied or understood. Charlie let me come back to the governments and imf and increasing membership and responsibilities and the agreement that took place at the g20. Where do we stand on those very important things about the 21st century . You hear more and more that if you have as large economy as china has or brazil or it should have a large piece at the table. Charlie right. Is that going to happen . That was initiated in 2010. Charlie right. Strongly pushed by all members, certainly very strongly pushed by the nate, and we all agreed on a reform that was to be completed in 2012. Charlie right. Were not there yet. Charlie why not . Were not there because the u. S. Has not ratified. You know, im being very blunt because, you know, we have been sort of cute about it for a while, but its essentially because, at the moment, the United States has not ratified. And its charlie is there a difference between the executive branch and the yeah. Charlie legislative branch . I think its a perennial difference, but, you know, for some reason we have been a bit of Collateral Damage of the difference we see at the moment. You know, its an International Commitment that was made by the country. The United States is my biggest shareholder. It does exercise leadership in many situations and, when it did, historically, it was quite often helpful, and now we are stuck. So i very much hope that the leaders who are attending the meetings this week, the Prime Ministers and president s back at home will be calling on the United States. There is two things. One, there is proper representation of the membership so that china has the right seat at the table, brazil is duly represented, south africa has the right seat and so forth, and the imf has secured, longterm resources, rather than, you know, being the man who is asked to ext