Christine Lagarde and the challenges of the 21st Century

For this year’s Dimbleby Lecture broadcast on the BBC, Managing Director of the International Monetary Fund, Christine Lagarde, used the relationship between 1914 and 2014 to draw parallels between the apocalyptic events which shaped the twentieth century and the recent global meltdown.

She described the events of 1914 as the harbinger of thirty years of economic and political upheaval and disaster. Technology, instead of offering solutions and uplifting the human spirit, was used to crush both freedom of thought and action. Men, women and children – indeed whole nations – were mobilized to destroy each other.

Lagarde went on to argue that the 1944 Bretton Woods agreement was an economic and political watershed. The 44 Allied nations were determined to build a lasting peace and to forge institutions which would be robust in both creating and defending a new world order in which cooperation would rule the day.

Because of this common vision, we have seen seven decades of relative peace and growing prosperity, economic and financial stability with diseases eradicated, child mortality decreased and hundreds of millions lifted out of poverty. The dismal predictions of Thomas Malthus that world population growth would reduce any net increase in economic welfare proved to be largely unsubstantiated.

Flash forward to 2014 and we are coming out of the deepest recession in modern memory. We are living through a time of change every bit as momentous as that of our forefathers. We are moving from the industrial age to the hyper-connected digital age. But will we pass the test in terms of securing the same degree of international collaboration? In response, Lagarde has called for a new multilateralism for the 21st century.

There are some grounds for optimism. The sheer interconnectedness of countries through global supply chains and financial links means that we all have a stake in maintaining stability. Three billion people are connected via the internet, three million e mails are sent per second and the mobile mindset is established everywhere. The highest rates of mobile penetration are in Africa and Asia. Therefore there is a much greater degree of awareness of other cultures, and a much more aware population with a sense of world developments beyond their village, community and country. This brings a whole new meaning to David Attenborough assertion that the fundamental difference between man and the rest of the animal kingdom is our ability to communicate.
Other grounds for optimism include the way in which large numbers of people are better educated, they travel widely and it is much less possible to control the media.

However, Lagarde also draws our minds towards some of the dangers. Interconnectedness can and does spread contagion, whether from the toxic impact of sub prime debt in America or the impact of over borrowing across the economies of Europe.

Building on her arguments we have three main challenges – demographic shifts, environmental degradation and income inequality. In order to tackle all three we need more investment in education – not just for the young but for the whole population.

Young populations in Africa and South Asia will grow rapidly, but China, Europe and Japan will be aging and this is a shift we need to respond to through investment in lifelong learning.

As for environmental degradation there is real evidence that where countries are investing in environmentally friendly technology they are able to reduce their carbon footprint and generate economic growth and jobs. Phasing out our energy subsidies is part of the answer but so is mass education about how individuals can make an impact alongside the development of intermediate technologies which require less capital and more labour.

The third issue – that of income inequality – poses the biggest current threat of all.

According to Oxfam, the top 85 richest people in the world own the same amount of wealth as the bottom half of the population. In the words of Lagarde ‘we need inclusive growth’. Sustainable growth depends upon us making the best use of the available talent pool and this includes women.

The International Labour Organisation (ILO) estimates that around the world 865m women are being held back. The boost to per capita incomes would be substantial if more of these women were being properly educated and allowed to take a full part in the economy and society.

In 1914 we had the suffragette movement which led to the right for women to vote. In 2014 there was worldwide outrage there was when Malala Yousafzai was shot in Pakistan because she wanted to go to school. The world has made progress in developing women’s rights, by there is still more to do. There is no room for complacency.

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