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

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.