Navigating the Age of Uncertainty: Lagarde delivers 2026 Mundell Global Risk Memorial Lecture

On Thursday, Rector Dehousse welcomed Christine Lagarde, President of the European Central Bank (ECB), to SAIS Europe for the 2026 Robert A. Mundell Global Risk Memorial Lecture. The auditorium was filled with students, faculty, staff, and special guests, including members of the Mundell family.

Mundell's Legacy and the Euro

Introducing Lagarde, Dehousse noted that she has led the ECB since 2019 and previously served as Managing Director of the IMF and French Finance Minister. Lagarde is the woman "who represents the Euro system on the international stage."

In her opening remarks, President Lagarde honored the legacy of Mundell (1932–2021), a Nobel laureate and former SAIS faculty member. She addressed Mundell's theory of optimum currency areas, which suggests that regions benefit from a shared currency if they possess high factor mobility. She observed that while skeptics use Mundell's early work to criticize the Eurozone, they overlook his later shift toward optimism. Mundell argued that the act of sharing a currency would itself compel economies to become more integrated. "The Eurozone," Lagarde stated, "can be seen as the very project he believed in most."

From Measurable Risk to Systemic Uncertainty

Lagarde addressed how the modern concept of risk was born in Italy, when 15th-century Venetian merchants developed early forms of marine insurance. This shifted the perception of maritime loss from "bad luck" to "under-insurance," making danger measurable and providing the confidence necessary for investment. However, Lagarde argued that we are now moving from an age of measurable risk into an age of rising uncertainty. While the international system previously weathered recurring shocks, current disruptions may change the system itself, rendering past risk-measurement data obsolete.

The Dual Forces: AI and Fragmentation

Lagarde identified two primary drivers of this increasing uncertainty: technological innovation and geopolitical fragmentation. She warned that while AI could increase European productivity, it must be weighed against geopolitical fragmentation––which could drastically hinder it. Drawing a historical parallel to the 1920s, she reminded the audience that despite massive technological advances like electrification and mass production, world trade dropped significantly due to the fragmentation that preceded World War II.

According to Lagarde, this look at history reveals that technology innovation and geopolitical fragmentation should not be considered separate from another. They interact. She states: "Capturing the upside of the one force, might imply managing the downside of the other." Today, she emphasized, AI development is inextricably linked to global trade. The supply chain is highly specialized: critical raw materials are largely extracted in China, the U.S. leads in chip design, the Netherlands holds a monopoly on lithography equipment, and Taiwan manufactures the vast majority of advanced chips.

Attempting to build AI-infrastructure in isolation would cost over one trillion dollars in up-front investment. Further, she cautioned, national AI champions cannot survive through domestic demand alone. Global fragmentation risks degrading the functioning of the technology itself. Lagarde concluded: "At precisely the moment when the case for international cooperation is strongest—the will to cooperate is at its weakest. That is a mistake."

A Three-Layered Path Forward

Closing her remarks, she proposed a three-layered policy approach: reforming global institutions, deepening cooperation among allies, and maintaining minimal cooperation with rivals. The latter being the most difficult but most essential task. Echoing Mundell's determination, Lagarde encouraged the audience to fix multilateral institutions rather than abandon them. In realms where the "cost of failure is at its highest," she noted, "if one layer of cooperation weakens, the others must hold."

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hosted by Professor Renaud Dehousse


BY INVITATION ONLY

Robert A. Mundell (1932-2021) was a member of the Johns Hopkins SAIS international economics faculty and taught at SAIS Europe for four years, during the period 1959-2001. Much of his pioneering work in monetary dynamics and optimum currency areas, which resulted in his Nobel Memorial Prize in Economic Science in 1999, was conducted during his time in Bologna.

The Lecture is part of the broader Johns Hopkins SAIS Global Risk Conference which has been made possible with the generous support of Mr. James K. Anderson, SAIS Europe Alumnus and Advisory Council member, and Johns Hopkins University Trustee.

CHRISTINE LAGARDE

Christine Lagarde is a French politician and lawyer who has been the President of the European Central Bank since 2019. She previously served as the 11th Managing Director of the International Monetary Fund (IMF) from 2011 to 2019. Lagarde had also served in the Government of France, most prominently as Minister of the Economy, Finance and Industry from 2007 until 2011. She is the first woman to hold each of those posts.