Economy Faces Triple Threat to Sustainable Future, Says Lagarde

Economic, environmental, and social challenges require immediate attention

Sustainable development first needs macroeconomic and financial stability

Getting prices right must underpin green economy

“The global economy is still rocked by turmoil, with uncertain prospects for growth and jobs. The planet is warming rapidly, with unknown and possibly dire consequences down the line. Across too many societies, the gap between the haves and have-nots is getting wider and strains are getting fiercer,” she said.

Lagarde addressed an audience of policymakers and journalists at the Center for Global Development in Washington, D.C.

With these formidable challenges facing the world, Lagarde urged efforts toward economic growth, environmental protection, and social progress at the same time. “Different economic, environmental, and social objectives can be seen as distinct aspects of a single vision, essential parts of a connected whole,” she said.

Twenty years after the 1992 Earth Summit in Rio de Janeiro, Brazil, Lagarde will be taking this message back to Rio where the Rio+20, United Nations Conference on Sustainable Development is taking place next week.

World leaders, along with thousands of participants from governments, the private sector, and civil society will come together in Rio to discuss ways to reduce poverty, advance social equity, and ensure environmental protection.

Getting the basics right

For sustainable development to work it must spring from macroeconomic and financial stability, which in turn paves the way for robust growth and a productive economy, Lagarde said.

“So we need a strategy that is good for stability and good for growth—where stability is conducive to growth and growth facilitates stability,” she said

Yet many regions of the world today remain stuck in a trap of low growth and high unemployment, and great uncertainty hangs over global prospects. The International Labor Organization estimates that right now 200 million people worldwide cannot find work, including 75 million young people.

Lagarde called on policymakers in Europe to take decisive steps to break free of the crisis there.

“First, they need to rekindle demand today, to get the growth engine up and running again. Second, they must make sure that any spark to demand today leads to sustained growth tomorrow, which means reforms on the supply side to boost the productive capacity of the economy,” she said.

The rest of the world also needs to invest in...