Chang­ing times for the US’S high-power women

All is not right with the eco­nomic world – and two lead­ing fe­male tech­nocrats are un­der pres­sure

The Daily Telegraph - - Letters to the editor - JEREMY WARNER FOLLOW Jeremy Warner on Twit­ter @jere­my­warneruk; READ MORE at tele­­ion

As the seat of US gov­ern­ment and power, Wash­ing­ton DC en­com­passes a mul­ti­tude of dif­fer­ent things; one of them is that of home to the world’s two most high­pow­ered fe­male tech­nocrats – Chris­tine La­garde, man­ag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund, and Janet Yellen, chairman of the Fed­eral Re­serve, Amer­ica’s cen­tral bank. Both are out­stand­ing ex­am­ples of fe­male em­pow­er­ment, pi­o­neers in many re­spects. Even as lit­tle as a decade ago, it would have been hard to imag­ine any­one but a man fill­ing these po­si­tions.

Yet one is fight­ing for her con­tin­ued rel­e­vance, while the other is fight­ing for her job. The rough and tum­ble world of men, it would seem, is not so eas­ily van­quished.

Start with the IMF. This is an or­gan­i­sa­tion that only really comes into its own dur­ing mo­ments of acute fi­nan­cial stress. Born out of the rav­ages of the Sec­ond World War, its func­tion is to act as a lender of last re­sort to gov­ern­ments around the world, to tide them over dif­fi­cult times and thereby sup­port eco­nomic sta­bil­ity and sound money. The rest of the time it does... well, not very much, and be­yond back­ing wor­thy causes and po­lit­i­cally cor­rect pol­icy po­si­tions, of­ten strug­gles to make its voice heard at all.

To­day’s rel­a­tively be­nign eco­nomic con­di­tions are one such lull. As noted in the IMF’S lat­est World Eco­nomic Out­look, the global econ­omy has en­tered some­thing of a sweet spot. An ap­par­ently sus­tained re­cov­ery has es­tab­lished it­self, with some 75 per cent of the world, as mea­sured by GDP, ex­pe­ri­enc­ing an up­swing.

After years of eco­nomic tur­moil, this is ob­vi­ously very wel­come, but it leaves the IMF twid­dling its thumbs in search of a role. It is per­haps this sense of pur­pose­less­ness that ex­plains the or­gan­i­sa­tion’s bizarre con­ver­sion to the cause of higher taxes on the bet­ter off.

O’sul­li­van’s First Law – after the for­mer Mar­garet Thatcher speech writer John O’sul­li­van – holds that “all or­gan­i­sa­tions that are not ac­tu­ally Right-wing will over time be­come Left-wing”. The United Na­tions scur­ried off to the Left years ago, cul­mi­nat­ing in a far­ci­cal re­port ac­cus­ing the UK of breach­ing in­ter­na­tional hu­man rights with its ac­tu­ally rather tame aus­ter­ity poli­cies.

The IMF seems to be go­ing the same way, re­leas­ing anal­y­sis this week sug­gest­ing sig­nif­i­cant scope in ad­vanced economies for in­creased taxes on high earn­ers, wealth, prop­erty and cap­i­tal. Get­ting the IMF to sup­port the idea that taxes can be raised with­out dam­ag­ing growth marks a key break­through for the Left. It’s been lob­by­ing for such a change for years, and has fi­nally pre­vailed, quash­ing the pre-ex­ist­ing or­tho­doxy.

The IMF used to be thought of as a cap­i­tal­ist stooge, yet to­day the or­gan­i­sa­tion seems al­most wholly cap­tured by “right on” groupthink. In back­ing higher taxes, the or­gan­i­sa­tion takes on Don­ald Trump, who is go­ing the other way with plans for root and branch tax cut­ting. After a cat­a­strophic se­ries of bad calls and wrong-headed pol­icy pre­scrip­tions, the IMF thereby risks fur­ther loss of po­lit­i­cal le­git­i­macy with its ma­jor share­holder and fun­der.

Still, Ms La­garde is at least safe in her job, even if re­garded as ir­rel­e­vant by Trump’s White House. If a crim­i­nal con­vic­tion can’t dis­lodge her, noth­ing will.

The same can­not be said of Ms Yellen of the Fed, whom the pres­i­dent vowed to sack on the cam­paign trail, ac­cus­ing her of sup­port­ing the Democrats with low in­ter­est rates and by ramp­ing up the stock mar­ket. Now in of­fice, he finds that he rather likes low in­ter­est rates, and he just loves the soar­away stock mar­ket, which he no longer re­gards as a prod­uct of Yellen’s mone­tary in­con­ti­nence but as a pos­i­tive judg­ment on his own pres­i­dency. He might even keep her, he said re­cently.

But noth­ing is ever sim­ple with Mr Trump. He has also been talk­ing to an in­ter­est rate hawk, Kevin Warsh, about the job. Who­ever ends up with the post will be drink­ing from a poi­soned chal­ice. For a start, they’ll have Mr Trump breath­ing down their neck, at­tempt­ing to bend pol­icy to his own po­lit­i­cal pur­pose. Trump’s sup­port for an in­de­pen­dent Fed has al­ways looked ques­tion­able. He may yet be the pres­i­dent who fin­ishes it off.

As­sum­ing he doesn’t suc­ceed, there is also the del­i­cate task of rais­ing rates with­out trig­ger­ing a cri­sis. The Fed has al­ready gone much fur­ther than any other ma­jor cen­tral bank in at­tempt­ing to “nor­malise” mone­tary pol­icy after the lax­ity of re­cent years, and in the months ahead wants to go fur­ther still, rais­ing in­ter­est rates and con­tract­ing its bal­ance sheet. After years of gorg­ing on cheap money, the fi­nan­cial mar­kets are puffed up to the point of ex­plo­sion. Re­mov­ing the steroids threat­ens the very same cri­sis the Fed has been try­ing to avoid. Whether the in­ter­na­tional will still ex­ists to let the IMF do its job when the storm even­tu­ally breaks must be open to ques­tion.

Things are turned up­side down. Old or­tho­dox­ies and cer­tain­ties are be­ing swept away, and de­spite the cur­rent eco­nomic sweet spot, all is cer­tainly not right with the world.

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