20130123_CL
Source: World Economic Forum
URL: http://www.weforum.org/sessions/summary/resilient-dynamism
Date: 23/01/2013
Event: Christine Lagarde: The next generation will be "roasted, toasted, fried and grilled"
Attribution: World Economic Forum
People:
- Christine Lagarde: Managing Director, International Monetary Fund
[Excerpt.]
Christine Lagarde: Now let me now turn to my second point. I see that as a major aspiration of a new generation and a new global economy - stronger inclusion. You've heard it over and over. What does it mean? We live in a participatory world, where the young generation expects tolerance, respect, fairness and opportunities.
Let's just look at a few examples. From the yearnings on the Arab streets for greater dignity and opportunity, to the brave cry of a young woman for education and equality, to the heartfelt urge for justice and respect from the Indian women - these demands must be met. Now what does it mean, in terms of economic policy? Well, it begins with growth. But it has multiple dimensions and I'll come to them in a minute.
But it's not any growth, as you've heard many times - it's growth that actually benefits all, where all can actually benefit from prosperity, where the economic adjustment, when necessary, can be borne by all, so that the burden is fairly shared. I would like to quote Franklin Roosevelt at this point. He once said "The test of our progress is not that we add more to the abundance of those who have much, but it is whether we provide enough for those who have too little." Inclusive growth, wherever I have been in the last 18 months, is one of the top priorities of policymakers. So I'm not surprised, Klaus, that in the most recent survey by the World Economic Forum, the top concern - the top risk was severe income disparity. You said it yourself. Excessive inequality is corrosive to growth, it is corrosive to society.
We, nor policymakers, have not paid enough attention to inequality. Now all of us, including at the IMF, thanks to research that was conducted recently, have a better understanding that a more equal distribution of income allows for more economic stability, more sustained economic growth and healthier societies, with stronger bonds of cohesion and trust. This research is confirmed by findings, it is referred to by many dignitaries and academics, actually. What is less clear is how you achieve that inclusive growth.
I would certainly, for myself, put universal access to education as an unconditional, non-negotiable starting point. Beyond that, I believe that you should also add the social safety nets that we advocate in many instances, including in countries that have programmes. And in some cases, minimum wages can also help.
Now above all, inclusive growth will be tested against the acid test of unemployment. As we know from the latest ILO numbers, there is currently in the world 202 million people looking for a job, and two in five of the jobless are under 24. Now if we have any priority, it is that one, because that will actually achieve a lot of the other objectives that we have.
But as I said, inclusion has other dimensions than just growth. Gender inclusion is critically important and, frankly, too often neglected by policymakers. And I wish there were more men to actually argue that case of gender inclusion. In today's world, it is no longer acceptable to block women from achieving their potential. Think about this - women control 70% of global consumer spending, 50% of cars are bought by women, 50% of computers are bought by women and 85% of all other consumer goods are bought by women. This is not the top of the pyramid, as one said before - it's the market.
And all studies point to the economic benefits of full female participation in the labour force, in the economy, in society. One recent study estimates that by simply raising - simply, if it was that simple - but by simply raising women's employment rates to the level of men, GDP would jump significantly, by 5% in the US, 9% in Japan, 10% in South Africa by 2020, and the numbers are even more staggering for India or Egypt, for instance. The evidence is clear - when women do better, economies do better. So policymakers would be better off doing some good for women, to make sure that economies actually do better, and they should remove obstacles to the path of women, integrating the economy.
Second point of inclusion, after gender, and that's one that we will hear about over and over, not this year but next year and the year after. We need a greater sense of solidarity amongst and across generations. We need to be cognisant of the legacy we are leaving to those who come after us. Now one of those legacies is with us, at highest levels since World War II in the advanced economies - 110% - and that is the debt. Average debt to GDP ratio in advanced economies, at the moment, is at 110%. That's what we'll leave for the generations to come. And debt is a matter that we will be talking about in the next few years.
More important, even, than debt, because potentially more detrimental, is climate change, which is by far the greatest economic challenge of the 21st century. The science is sobering. The global temperature in 2012 was amongst the hottest since records began in 1880, and we should make no mistake - without concerted actions, the next generation will be roasted, toasted, fried and grilled. And it's on us to avoid that.
So we need growth, we need green growth, we need growth that is inclusive, that is job-creating and that is gender-inclusive. Green growth - that's one of the reasons I'm so keen that at the IMF we try to get the carbon pricing right, and that we push as much as we can the elimination of subsidies for fossil fuel energies. I know how difficult it is, and there are countries here sitting in the front row that have done it courageously, but it's clearly in the interest of the next generation.