The Landscape for Global Business

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1:11ADDY IGNATIUS, Editor in Chief of Harvard Business Review Welcome to HBR Quarantine. I'm Adi Ignatius, Editor in Chief of Harvard Business Review, and my co-host is Josh Macht, who heads product and innovation for Harvard Business Review. We created HBR Quarantine a few months ago to connect with our subscribers and fans who suddenly found themselves in lockdown. We've used the show to talk about the most pressing problems facing us all, the COVID-19 pandemic, the Black Lives Matter movement and racial injustice more broadly in the workplace, and the path to economic recovery. This is our final week before we're going to take a two-month break for the summer.

1:46We have two amazing guests this week. Today, we'll be speaking with Kristalina Giergieva, who is the Managing Director of the International Monetary Fund. We'll be talking about prospects for business recovery. And then this Thursday at 3 p.m. Eastern time, our guest will be Dr. Anthony Fauci, America's most prominent infectious disease specialist. We thank you all for viewing, for being part of the show. And like always, we invite you to send questions today in the comment box for Kristalina Georgieva. So first, I want to do a quick sponsorship note. In the current crisis we're living, if the current crisis we are living through has taught us anything, it is that academic institutes, research and policy centers, hospitals, as well as the general public need to work together to find local solutions to global challenges.

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3:11So before we bring in our special guest, Kristalina Giergieva from the International Monetary Fund, I just want to set the stage a little bit. We're at a moment now where the global economy has been battered by the pandemic and the lockdown. In the U.S., the path for economic recovery seems uncertain. Many businesses reopened in May and June, helping to spark a quick rise in consumer spending. Some in the White House are still predicting a strong V-shaped recovery this year. But we're also still seeing a surge in COVID-19 cases in various American states. In some, the rate of hospitalizations is rising as well, meaning the problem is not just that we're testing more people and finding more positives.

3:51As a result, some state governors are backtracking now on measures to reopen the economy. U.S. Fed Chairman Jerome Powell is speaking today to the House Financial Services Committee, saying a full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities. The International Monetary Fund itself released figures last week forecasting that the overall world economy will shrink almost 5 % this year and that there'll be a$12 trillion loss globally to the world's economies this year and next. Plus, the poorest countries are likely to be hit hardest. The IMF predicts that the U.S.

4:32economy will shrink 8 % this year while rebounding 4.5 % next year. So, you know, here we are in the U.S. States are opening. States are closing. It's very confusing. Josh, I want to bring you in. And, you know, what are you seeing in your home in the great state of Massachusetts? Commonwealth of Massachusetts. Yeah, Commonwealth of Massachusetts. We miss you, Adi. I mean, it feels like it was things were going well here. And you can see all that and read all that. Hey friends, Olivia from Oli. Between new routines and the ultimate group project known as parenting, you need science-backed solutions that work with your life.

5:08That's where Oli comes in. Start your mornings off right with Maltese made to support nutrition and immune health. Choose from our lineup of gut-supporting probiotics, and we've got occasional sleep support to help the whole fam chase their big dreams. Head back to class with the number one gummy supplement brand. Stock up on Ollie.com today. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs.

5:36It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Statistics online. But of course, now you just have this sense and I think it's pretty clear the virus is not under control. People are moving around. Areas all over the country are spiking and that's hugely problematic.

6:15You know, people are and you still we still see that we just fundamentally don't have this thing under control. So for our conversation today, you know, I think there's just so much of this backdrop of uncertainty that makes them really. I'm really eager to talk with Crystalina about more about, you know, economic recovery in light of the uncertainty of the virus. Yep. So let's figure it in one second. Regular viewers know that we like to show a tick tock video each episode that captures the moment we're living in. So here's one that shows a store near Miami, Florida that is exclusively devoted to all things COVID.

6:51Why not? Yips, tick tock, when I dance. On that demon time, she might start her OnlyFans. Big B and that B stands for bands if you want to see some real. Would you go to that store? You want to go to that store, Adi? I mean, it's got everything COVID-19. I mean, it's probably a great business model. So let's bring in our special guest. This is Kristalina Georgieva, who's managing director of the International Monetary Fund. She was born in Bulgaria. She trained as an economist, including at the Karl Marx Higher Institute of Economics in Sofia. She earlier served as CEO of the World Bank, and as its interim president, she has headed the IMF for a bit less than a year.

7:32So Kristalina, welcome to HPR Quarantine.

7:35Kristalina Georgieva:Thank you very much for the invitation. Wonderful to join you. Excellent. So you took over the IMF nine months ago. This is the definition of a trial by far. What have these sort of insane nine months taught you? Well, the most amazing thing is that when I started nine months ago, it feels like ages ago, my biggest worry was that growth was anemic, only 3.4 % projection for that year. And here we are today, our projections for 2020 minus 4.9%. For me, it was like my whole life I had been building up skills to deal with a massive crisis. You mentioned I was born in Bulgaria, and I lived through a dramatic economic collapse in the 90s.

8:32Kristalina Georgieva:I still remember getting up at 4 o 'clock in the morning to queue for milk for my daughter. And then a part of my experience is being crisis commissioner. For five years, I had front row seat in all the calamities, earthquakes, conflicts, hurricanes, floods. That's what that taught me, and I'm applying it here at the fund. Very important lesson. Anticipate crisis will come. You don't know when, you don't know what, but it will be there. Act early and act decisively. And that is what we have done at the fund. And Adi, we have deployed so far emergency financing for 72 countries. Never in the history of the IMF we have done so much so quickly.

9:36Kristalina Georgieva:And we are ready to do as much as necessary to be part of this putting a floor under this crisis, especially for the most vulnerable countries. Cristalina, I mean, we clearly have to get through the crisis, and I like the way you're framing it in terms of moving swiftly. But global trade was already under... Hey, friends. Olivia from OLLI. Between new routines and the ultimate group project known as parenting, you need science-backed solutions that work with your life. That's where OLLI comes in. Start your mornings off right with Maltese made to support nutrition and immune health. Choose from our lineup of gut-supporting probiotics, And we've got occasional sleep support to help the whole fam chase their big dreams.

10:20Head back to class with the number one gummy supplement brand. Stock up on Ollie.com today. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast.

10:53That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. A lot of pressure with nationalism. The pandemic comes along, really slows things down. I just wonder, from your point of view, are we at a moment where sort of the globalism or global trade has kind of peaked, or is there recovery ahead as we get past COVID, and what has to happen to get there?

11:19Kristalina Georgieva:You're bringing a very important question. Before the pandemic hit us, we had significant problems to wrestle with. One is the fraction in trade and tensions that have already stepped on the brakes of trade and global integration. Another one is low productivity growth from where this anemic growth I spoke about in the beginning originates. We also had in 2019 a very serious problem with protests, people on the streets, mostly driven by a sense of inequality, unfairness in societies. None of these things have gone away. And as we are thinking of coming out of this crisis, it would be prudent to put in place policies and actions that help us to be stronger, more resilient on the other side.

12:25And that includes trade and broadly international cooperation.

12:32Kristalina Georgieva:So you know it. It is very straightforward, very simple. When we trade with each other, we are all better off. When we don't, costs go up, incomes go down, and poverty spreads. So we do have to be relentlessly working on addressing the root causes of disappointment with trade and globalization. We know them too. One is that trade and agreements have not evolved with the economy. Our economy today is much more based on services. E-commerce is exploding. Intellectual property matters a lot. None of these things are integrated in trade agreements. So no wonder people are not pleased. And then we have the issue of fairness.

13:34Kristalina Georgieva:As we expand these interactions, are we making sure that everybody benefits? And the answer is no. We have seen that country by country by country, and it has had ramifications also in the political landscape. What can we do? Okay, the problems we can diagnose, what can we do? Well, one, we do need to build a consistent resolution of the problems we have. I really very much hope that whoever takes the helm at the World Trade Organization would drive reforms and change. To organizations like mine, we have to be candid at the level of countries and in global discussions around the problems that are there, not gloss over them, and then work on how they can be resolved.

14:36Kristalina Georgieva:And three, you, everybody who is in communications, we have to give people very clear answers as to why that matters. So here is one. If you are poor, it matters to you much more than if you are rich. If you are poor, trade.

15:24These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast.

15:55Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.

16:00Kristalina Georgieva:Global trade shrinks the price of what you pay by three-fourths, two-thirds to three-fourths. In other words, you benefit tremendously. If you're rich, you benefit, but it is one-third to one-quarter cheaper what you buy. So we have to be out there on this and not shy away from this discussion, not be afraid to engage, even if people are angry and they press us, stay engaged, make sure we don't lose the benefit of trade that has served the world for thousands of years. So let me jump in. Well, first of all, if you just joined us, this is HPR Quarantine. Our special guest is Kristalina Georgieva, the managing director of the International Monetary Fund.

16:55If you have questions for her, please put them in the comments box, and we'll get to some questions later. So basically what you're saying is the old adage, you should never waste a good crisis. But I want to ask you specifically, I know some of your most important causes are addressing inequality. and fostering a kind of a green development plan. Practically, you know, economies, you know, leaders are trying to survive, trying to get their economy from negative into positive. So how do we use this crisis? How do we actually make progress in these areas that you care so much about?

17:34Kristalina Georgieva:Well, we know that governments, especially in advanced economies, as well as central banks have demonstrated they are capable of decisive action. What they have done by accommodative monetary policy, massively expanding liquidity, and huge fiscal measures when we put the economy in standstill has been remarkable. and it needs to be appreciated for the incredible help it has given us in this crisis. We have now almost 11 trillion, I'm sorry, I'm still struggling with these huge numbers we have to operate with. We have$11 trillion in fiscal measures, and we have at least$6 trillion in asset purchasing.

18:34Kristalina Georgieva:What we know is that because of these actions, we have not faced massive bankruptcies and we have not faced massive unemployment that could have led to tremendous increase in inequality. So action is being taken. Going forward, we also know that governments will have to put in place fiscal stimulus. And we hear in different places, the European Union has a planned 750 billion euros recovery plan. The UK is talking about massive stimulus. Here in the United States, the number that is being mentioned is about a trillion of additional measures. Question is, how would this money be used? We can just throw it around willy-nilly and businesses will do well, or we can be strategic about the direction to travel.

19:36Kristalina Georgieva:And I personally believe that as it has been done during the global financial crisis, we have to think how we strategically deploy this stimulus. There is clear priority to prevent a climate crisis that can be catastrophic. And we know. Hey friends, Olivia from OLLI. Between new routines and the ultimate group project known as parenting, you need science-backed solutions that work with your life. That's where OLLI comes in. Start your mornings off right with Maltese made to support nutrition and immune health. Choose from our lineup of gut-supporting probiotics, and we've got occasional sleep support to help the whole fan chase their big dreams.

20:20Head back to class with the number one gummy supplement brand. Stock up on Ollie.com today. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at Indeed.com slash podcast.

20:53That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

21:00Kristalina Georgieva:Oh, what are the investments that need to be done in low carbon climate resilient development? And And they happen to be job, many of them, job-rich investments and innovation-rich investments, all very good for the future. Deforestation has been a major problem, land degradation, mangroves have been destroyed massively. We need to have building insulation to reduce emissions. There are many, many things that smart stimulus can generate private investments and the jobs that we need to also deal with the risk of deepening inequality. And then we have the thinking that governments ought to do about growth prospects for the future.

21:54Kristalina Georgieva:And one thing this crisis is telling us is that the digital transformation is accelerating. think. So you do need to think about equality through access to digital. And we have seen, for example, in this crisis, how that is helping businesses to thrive. And we have seen in China how it has helped to more quickly return to growth on the basis of massive digital infusion for businesses. Underlying is investing in people. And you spoke about universities. Today is the time to say, okay, for the next crisis to be agile and resilient, it is so critical that people are healthy, they have access to healthcare, that they are able to to function in an agile manner and that learning can be done remotely.

23:03Kristalina Georgieva:Also, we learned that there has to be automatic social safety net, a stabilizer, that if there is a shock, people don't fall off the cliff with all the consequences for demand for the economy, but also for growing inequality. So they are very practical policies. And if we are determined, we see some of these policies now being applied in different places. We ought to transmit this learning very rapidly, not to miss on this chance. And I can tell you, if we miss, history is not going to judge us kindly. Christalina, I'm curious how you guys are in the business of economic forecasts. It seems so difficult as an outsider to think about that when we don't really understand this virus.

24:00So how do you factor that into these? Because we're being told, like, think about me or you or all these different recoveries, but we don't really know the big part of the story.

24:13Kristalina Georgieva:This is such a great question. What we are doing at the IMF is very radically changing the way our models provide projections for us to share with the rest of the world. We are integrating in macroeconomic models epidemiological projections, and then we are relying to fine-tune these projections to high-frequency indicators that we used before and now we use much more. In other words, tapping into big data, things like electricity consumption, pollution levels, tells you where industry and transport are.

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26:31Kristalina Georgieva:Revitalizing, using data on hotel bookings, on travel, things like publishing advertisements for jobs, what the recruiters are telling us in terms of movements in the job market, mobility data from cell phones, all of this fits into our gigantic macro models. And even with this, I must stress what you said in the beginning, we are at a time of unusually high uncertainty. Why? Because all of this helps us to establish the past and then try to look into the future. But it doesn't quite tell us whether policies would be smart, whether the responses would be well targeted, whether reopening would be done in a responsible manner.