More aspiration than action: Searching for inclusive growth

“We’ve been talking about inclusive growth for many years,” Charlotte Petri Gornitzka admitted. “But while we have been talking we have seen that development is going in an opposite direction. We see inequalities increasing, we don’t see inclusive growth increasing.”

Gornitzka, chair of the development assistance committee at the OECD, made this comment to set the stage for an issue briefing on inclusive growth at the World Economic Forum (WEF)’s annual meetings in Davos this year. Some governments, she noted, have taken it as a priority; others are struggling to go from words to what they mean.

“It’s more aspiration than action, currently,” added Richard Samans, a member of the WEF managing board and head of its Centre for the Global Agenda.

Samans went on to unveil the WEF’s 2017 Inclusive Growth and Development Report, released for this year’s annual meetings. Coauthored by Samans, the report lays out 12 key performance indicators (KPIs) for inclusive growth. GDP is a top-line measure for growth, necessary but not sufficient, the report says; the 12 KPIs can serve as a bottom-line measure for growth. The report rolls up the indicators into the WEF’s new Inclusive Development Index (IDI), ranking 109 countries, splitting them into advanced economies and developing economies.

But perhaps most importantly the report ties the KPIs to 15 areas of policy action that are key for driving growth with equity – “a policy ecosystem [showing] how you can infuse your growth process with more equity instead of trying to compensate for it after the fact,” Samans said at the briefing.

The KPIs and the policy action areas are familiar to many policymakers, business leaders and researchers, especially those that have been studying this policy area. KPIs include good life expectancy, median household income, income GINI, wealth GINI and carbon intensity of GDP. Policy action areas include health-related services and infrastructure, financial system inclusion, small business ownership, the tax code and social protection. To see the KPIs and policy action areas tied together so explicitly is perhaps an indication that the urgency of addressing uneven growth has finally reached a new tipping point.

That urgency was reflected in the sentiments of IMF managing director Christine Lagarde, backed up by outgoing U.S. vice president Joe Biden, regarding the middle classes in crisis, as the Guardian reported.

Back in the issue briefing on inclusive growth, Claver Gatete, minister of finance and economic planning for Rwanda, said that the task of addressing 15 policy action areas necessitates being responsive to constituents.

“Before you even talk about inclusive development, you have to understand your society, what are their needs,” he said.

Perhaps the listening comes easier in Rwanda thanks to the fact that the Rwandan parliament is 64 percent women, which Gatete noted.

In Rwanda, one inclusive growth policy area Gatete remembers addressing early on was access to finance. The specific issue was that women didn’t own anything. Rwanda had to reform its law to make sure women had access to land. Now, he said, 18 percent of Rwandan land is owned solely by men, 26 percent solely by women and the rest held under shared ownership or government-owned. With title deeds, women could go to the banking system with collateral and a measure of formalization.

Today, the WEF’s Inclusive Growth and Development Report notes that Rwanda businesses have relatively good access to finance. In effect, the report adds to the argument that women’s access to land ownership becomes more than a gender issue, more than a human rights issue: It’s a growth issue, because of how it affects access to finance.

In another session, on “Governing Globalization,” Quartz editor Kevin Delaney led the panel through a discussion on which responsibilities for inclusive growth fall on governments and which on business. Some of the panel questions came via recorded video submission from women in Singapore, Romania and India.

Once again, responsiveness came up. “We really need to revisit the framing and political processes around … the democratic process vis-a-vis long-term problems,” said author and economist Dambisa Moyo. “Healthcare, education, pensions, these are all long-term problems and yet [in certain countries] we have elections every two years.”

Moyo repeatedly alluded to two connected points: Emerging markets have contributed more than 80 percent of global growth since the 2008 financial crisis; and in most emerging market countries, most of the population is in agriculture and/or the informal sector, with limited connectivity to globalization – though here’s one way technology can help. Institutions, whether they are businesses or government, and especially international institutions like the IMF, need restructuring to reflect these realities, according to Moyo.

“We need to really think hard about how we craft the message that globalization is a good thing,” she said. “To have global institutions that are focused on and dominated by 12 percent of the world’s population does not reflect the interests of many other people around the world, whether it’s through labor or capital, who do need to have a voice in those discussions.”

In the same discussion, Wipro Limited CEO Abidali Neemuchwala noted the responsibility to reskill workers. “In the 30–50-year-old demography, there [are] a couple of decades left before retirement,” he noted. “It’s an area where a lot of work still needs to be done.”

“It’s a broad responsibility,” added Brad Smith, president and chief legal officer at Microsoft. “In this day and age, you’re just not a healthy business if your employees aren’t constantly learning.”

In terms of action items, Smith implied that this responsibility may necessitate broader support for education or re-education from business or government. He cited a June 2016 study from Georgetown University’s Center of Education and the Workforce, which found that between 1989 and 2016, total employment grew by 31 percent, from 114 million to 149 million jobs, a net increase of 35 million jobs, yet the number of jobs for workers with a high-school diploma or less actually declined by 13 percent, a loss of 7.3 million jobs.

“Protecting jobs is a dead end street,” added Stefan Löfven, prime minister of Sweden. The focus, he said, must be on protecting workers – providing a social safety net on which to land, and access to relevant education that meets the needs of future jobs. Automation is coming, but chronic joblessness doesn’t have to come with it.

Coming back to the WEF’s Inclusive Growth and Development Report, education and skills is pillar number one in its policy action framework.

Skilling future workers was also the focus of a session on the impact of the “fourth industrial revolution” on women. Saadia Zahidi, member of the WEF executive committee, framed the discussion by referencing last year’s WEF report on the future of work. She noted that rapid advances in technology and automation brought on by the fourth industrial revolution favor industries that lean toward employing men.

Dr. Mary Boyce, dean of engineering at Columbia University’s Fu Foundation School of Engineering and Applied Science, was optimistic. She said that while the problems facing us in the era of the fourth industrial revolution impact billions of lives, they do so in a personal, tangible way – problems in climate and sustainability, human health and technology.

“I look at the impact of engineering and applied science on all aspects of humanity. This is a very motivational message. I think it will draw women in a great way to these job opportunities that are going to be emerging in the coming decades,” said Boyce. “I think we have an opportunity to shift the stereotype to attract women into all kinds of engineering.”

Boyce touted Columbia’s own success in recruiting women to its engineering programs: 40 percent of its undergraduate engineers, 30 percent of its masters’ program engineers and 25 percent of its doctoral program engineers are women.

“The presence of women also attracts other women,” she added. “That’s a tipping point.”