Christine Lagarde, the head of the International Monetary Fund, has warned that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.
Ahead of the Rio+20 Earth summit later this month, she said the rich should restrain their demands for higher incomes while there are still 200 million people worldwide looking for a job and poverty is on the rise.
Giving her clearest backing yet to green taxes and a range of measures to protect the environment, she argued for taxes on petrol-guzzling cars among a range of green measures to tackle climate change.
“It has been 20 years since world leaders first went to Rio to commit to the noble goal of protecting the planet for future generations. And now, 20 years on, we will be journeying back to Rio to affirm our commitment to sustainable development – the idea that we should strive for economic growth, environmental protection and social progress at the same time,” she said in a speech in Washington on Tuesday.
“The idea that different economic, environmental and social objectives can be seen as distinct aspects of a single vision, essential parts of a connected whole.”
But she said the current economic crisis in Europe and slowing growth worldwide, coupled with the growing threat from climate change and social tensions could wreck the efforts of leaders to chart a more sustainable future.
“Over the past four years, we have been mired in the worst economic crisis since the Great Depression. And we are not out of it yet.
“In fact, tensions are on the rise again, and financial stability risks have once more moved front and centre. Great uncertainty hangs over global prospects.
“Too many regions today are still stuck in a trap of low growth and high unemployment,” she said.
“Right now, 200 million people worldwide cannot find work, including 75 million young people trying to take their first step on the ladder of success.
“So we need a strategy that is good for stability and good for growth – where stability is conducive to growth and growth facilitates stability.”
Lagarde, a right-wing former French finance minister, recently caused a storm of controversy after she accused Europeans of blocking progress to end the current financial crisis. Asked if she sympathised with Greeks impoverished by austerity measurers demanded by Brussels, she said the children of Niger were more her concern. It also emerged that Lagarde pays no tax on her $467,940 (£298,675) a year salary.
Ahead of the summit, she said taxes on petrol and other carbon fuels could raise billions of dollars for green investment projects. “Right now, less than 10% of worldwide greenhouse gas emissions are covered by formal pricing programmes. Only a handful of cities charge for the use of gridlocked roads. Farmers in rich countries are undercharged – if charged at all – for increasingly scarce water resources.”
She added: “Many countries continue to subsidise polluting energy systems. These subsidies are costly for the budget and costly for the planet. Countries should reduce them. But in doing so, they must protect vulnerable groups by tightly focusing subsidies on products used by poorer people, and by strengthening social safety nets.”