Kristalina Georgieva starts to sing, in Bulgarian, right there at the table — quietly, but firmly, the way you might sing to a child on absolutely her last lullaby of the evening. It is a song she wrote as a teenager in the late 1960s, in her grandparents' village in the mountains in communist-era Bulgaria, when she ran out of shelves in the local library and started reading philosophy. She finishes a couplet, then translates.
But what is the value of Kant and Spinoza If somebody else writes predictions for me?
The translation itself has a metre, and she looks at me as she stresses the first syllable of each dactyl. The song, with its playful plea for self-determination, was "almost political", she says. "Of course, I would sing it and I would go home and say, 'My God what have I done?' "
On the day we have lunch, Georgieva, 67, is celebrating her first anniversary as managing director of the International Monetary Fund. The position itself comes with enormous responsibility — to save the world during a financial crisis. But it has very little formal power. The IMF can't do too much lending without the consent of its most powerful members; so whoever runs the fund has only the right to persuade presidents and prime ministers to act. Georgieva's job is perfectly, maddeningly, political.
And right now it's especially important. In the coming week, the IMF will update its forecasts for global growth. When it last did this, in June, the fund's economists anticipated drops in 2020 of 8 per cent in the developed world, and 3 per cent in emerging economies, referring to "synchronised, deep downturns". The fund said on Tuesday that the outlook was "less dire than expected", but has also warned that if the global recession turns into a global financial crisis, things could get worse.
In her first year, Georgieva is already facing the most horrific version of every IMF chief's basic challenge: how do you persuade rich countries to help out poor ones? And if you can do that, how do you attach the right strings to make sure the help sticks? And if you can do that, how do you make sure the poor countries trust that help from the IMF is sincere, when in the past it has caused further destruction? She will have to do all this with informal power, as the kind of person who will write you a song.
In high school she had amused classmates by composing gently counter-revolutionary marches for when they had to drill with broken rifles in the summer. She sang me her song about Spinoza to illustrate a point. As a child and then a young professor in Sofia, she had more power than she thought at the time. "People like me were very useful," she says. "We created the impression that there was more freedom than we actually had."
She has invited me to Tonic at Quigley's, a bar in an old drugstore tucked away in the urban campus of George Washington University, a short walk from the IMF's headquarters in Washington. There's a place like Tonic near every American college; students can stop by for an appropriate lunch when their parents are in town, then return for pitchers when their parents are safely back at the hotel.
Now that humans no longer touch each other, there are too many ways to say hi. On the back patio at Tonic, I go in for the elbow tap. She says she prefers hand on heart or yoga-style palms pressed together. We try all three, then sit at opposite ends of two tables that have been pushed together. We are separated by an arrangement of squash and sunflowers. We agree to push it aside.
Without looking at the menu, she asks our waiter what the soup of the day is. "I'm not big on lunches, I need to tell you this," she says. "Usually, my preferred lunch is soup." She has a history of low blood pressure, and prefers to get through her work with as little in her stomach as possible. "You eat, your blood concentrates into processing the food," she explains, "and there isn't enough left for your brain."
Georgieva's mother's family had owned land and a hotel that was nationalised by Bulgaria's communists. Her father's family could claim a lineage from before the arrival of the Turks. This meant that she came from two suspect classes of people. Her parents did not join the party. As a child, for her own protection, she was kept in the dark about her grandparents.
In her twenties, when Georgieva was an assistant professor at Sofia's University of National and World Economy, she helped receive a delegation from Japan. "None of us had ever seen anybody from Japan before," she says, "so, of course, we treated the Japanese with everything we could" — dinner, wine. "So they got a little drunk, and one of them at the end of the dinner said, 'You are lucky you don't know how poor you are.' "
It was the first time she had thought about being poor, Georgieva says, and she decided that the problem with Bulgaria in the 1970s, under communist strongman Todor Zhivkov, wasn't scarcity. The problem was low productivity — people didn't have the freedom to become good at their jobs. "We were living in an environment in which there was no competition, so you can't really get the best and the brightest, outside of maybe sports," she says. "And that was actually our biggest limitation, not so much the material stuff."
"Of course," she adds, "scarcity economy is a problem. Not even so much because of limitations of what you consume. But because it is the outcome of limitations of how your productive resources are used." She offers her own family as an example. After Zhivkov stepped down in 1989, after 35 years in power, development in Bulgaria lagged behind other eastern European countries, and the country endured a bout of hyperinflation in 1996-97.
"My mom's savings disappeared," she says. "Life-long savings: gone in a couple of days, having to queue, virtually for survival. I would get up at four o'clock in the morning to line up to buy milk for my daughter. I don't get up at four o'clock, she goes hungry."
There are still [Russian] towns and areas where structural unemployment only gets cured because people reach the end of their lives — they die
The waiter has been hovering. Georgieva orders her vegetable soup of the day. "And then, of course, I'm going to have the tots," she says.
"Tater tots" are a staple of American school lunches: tiny chunks of potato — the "tater" — wadded in a clump the size of a wine cork — the "tot". They are salted and fried golden, and everyone loves them. I start with an order of tots for myself, then add what had been my plan for lunch: the now irrelevant chasteness of a house salad.
Traditionally, and particularly within the IMF, economists have argued in favour of the scarcity of austerity — a conscious decision to cut deficits. First, the argument went, wages and prices would adjust down. Then, without any more looming debt crises, citizens and investors would have more confidence in that country and place their bets, buying things and paying for more buildings and machines to make the economy productive again.
Georgieva has flipped that argument on its back: the adjustments people have to make during periods of austerity don't fix the problem; they are the problem. Austerity and autocracy offer comparable challenges. In both cases, it's not that people buy less. It's that for reasons outside their control, they can't be productive. And both leave what economists call "scarring," a long-term drop in productivity as people lose skills, health and hope. Productivity is hard to create in the first place. It's also hard to get it back when it's lost.
Looking at the economic collapse that has followed this year's pandemic, she's worried about scarring, and thinks back to Bulgaria in the 1990s. The country's industries had been inefficient, but they were at least still major employers. "Once they got wiped out," she says, "the scarring impact on communities, on whole cities: devastating and long-lasting." In the Russian Federation, a region where she served as director for the World Bank in the mid-2000s, "there are still towns and rural areas where structural unemployment only gets cured because people reach the end of their lives," she says. "They die."
The IMF didn't suddenly turn away from austerity under Georgieva. Already under Christine Lagarde, its previous managing director, the fund's researchers chipped at the arguments for austerity, showing how it failed to produce the growth it promised. But Georgieva, having lived through a time of scarcity herself, is now offering an alternative. The old plan for a country in trouble was to let a natural adjustment run its course so that it could emerge more productive on the other side. She wants to soften the pain of transition, avoid the scars that come with collapse, preserve productivity and invest public money in it where possible.
"You map out where the impact is going to be," she says. "You can't just boom: transform. And if you do that, your economy's doing better because you are making better use of your productive capital." Macroeconomists trained in Boston or Chicago or Frankfurt tend to assume that economies just boom: adjust. For Georgieva, the adjustment itself is everything: "I do believe that there is not only no substitute for experience, but there is no substitute for the emotional intelligence you build by being part of a community or society in grave difficulty." It is the cleanest of stilettos. You barely even see it go in.
My tots arrive, a basket big enough for four drunken undergraduates. She asks whether she's getting the same size. The waiter confirms that she is. "Ooohhh," she says, "Okey dokey. We will enjoy. Thank you." The waiter disappears. She gestures at my basket. "So here goes my light lunch."
In January 2019, Olivier Blanchard, the IMF's former chief economist, presented a simple argument that represented a significant departure for both macroeconomists and politicians. Interest rates are low, he said, so if you have a plan for infrastructure spending, it might not be a sin to borrow. I bring this up, and Georgieva says that after the pandemic hit, Blanchard had got in touch with her. "He was concerned that the fund may be too slow to recommend increased spending, and I think he found that he was knocking on an open door."
In the early months of the pandemic, she says, "I don't know how many times I would go, publicly, and I would say 'Spend. Keep the receipts. But spend.' "
"We know now the parameters of this crisis better," she continues. "Policymakers can start targeting this support to increase the effectiveness of spending." This language is new, too. The IMF has started to talk about not just spending levels overall, but about the "quality of spend". I ask her what quality spending is, and she comes up with a list familiar to any development economist as ways to improve productivity: research, education, health, rural roads. "You use your money to remove obstacles to growth," she says.
These used to be considered nice things for a country to buy, if it has the space in its budget. Now they are worth creating space for. I ask Georgieva to be absolutely clear: is the fund willing to tolerate deficits, if they're spent on the right things? "Absolutely," she answers. "Yes. Yeah."
There is no substitute for the emotional intelligence you build by being part of a community or society in grave difficulty
The tater tots are extraordinary — crisp, nostalgic, perfect. Georgieva goes easy on hers, but if you are a student on your way to Tonic tonight, I urge you: lay down a layer of tots before you pick up your beer.
The IMF isn't just a think-tank. It offers financial assistance, although its conservative, controlled maths has always ensured that the countries most likely to need it are least likely to receive it. Within a week of our meeting, the IMF has released chapters of its annual report urging rich countries to take on debt for quality spending. But that leaves an open question for the rest of the world, the countries that don't enjoy the same access to capital markets as the US, or Europe or Japan.
"The fund needs to have a big bazooka," she says, referring to the total of about $1tn the IMF has in its various lending programmes. "One trillion," she says, "not peanuts. One trillion."
Starting next year, about 40 per cent of that will sit in the fund's New Arrangements to Borrow, or NAB, a programme she describes as "the haves helping the have-nots" — rich countries lending to poor ones. Her first priority when she arrived at the fund was to extend and double the NAB, an agreement signed in January. She has been alerting member countries that she is going to ask to use it. "It is possible that activation is within months, that is, by the end of the year. So people need to know that in advance."
Georgieva does believe, however, that the fund can turn to developing economies with another carrot: improve the quality of the spending you do have, focus on productivity, and you might become a candidate for what she calls "enlightened self-interest" — if you get in trouble in the future, another country might directly offer to float you from some of world's total $11tn in central bank reserves.
The idea of encouraging more countries to feel more responsible for their neighbours in a financial crisis might feel optimistic. Yet it is impossible to look at Georgieva's own history of surviving within large international organisations — briefly at the head of the World Bank, as a commissioner for the European Union — and call her naive.
When she started as a World Bank economist in the 1990s, she says, her first job was to help speed up the removal of leaded gasoline from eastern Europe and the former Soviet Union. "And now there are kids . . . in Europe, they're smarter, because of course lead affects your IQ, because the bank hired me and I could do this work," she says. "The mistake we often make is to try to zero in on the naysayers and try to convince them, rather than empower and excite the agents of positive change and just" — she laughs as she searches for the words — "ignore this noise."
Written by: Brendan Greeley
© Financial Times