Box 3: The World Economic Forum’s Global Project on Inclusive Growth
In many countries, the gap between rich and poor is widening, youth unemployment is rising, and access to basic services remains a challenge. Even in several fast-growing developing countries, it appears that growth has not made a notable dent in income inequality or poverty, and the vulnerabilities associated with these problems remain entrenched.1 The global community is calling for change—for solutions that foster economic growth in a more inclusive manner.
The question of how to unlock new sources of productive employment and strengthen the contribution of economic growth to improvements in broad living standards is becoming an increasingly important concern for political and business leaders in developed and developing countries alike. However, although international consensus on the need to develop new approaches in this respect is widespread, very little in the way of concrete policy guidance has emerged from the G-20 or from international institutions. There is a growing need for analytical frameworks and evidence-based solutions suited to this purpose.
The economic fundamentals that have accompanied high and sustained economic growth are well known and form the basis of the World Economic Forum’s 12-pillar model of competitiveness. Nevertheless, the economic debate on inclusive growth is still taking shape, and the Forum is playing an active role in disentangling the complex relationship between growth and equity, building on its existing benchmarking and sustainability work. The mechanisms through which growth-enhancing policies impact poverty and inequality are difficult to unravel, however. Several policy areas have been identified as “win-win” or “super pro-poor” in that they have both a positive effect on growth and a negative effect on inequality, while others remain inconclusive.2
For example, policies and structural reforms should provide equality of opportunity so that all segments of society can participate in its growth by expanding and improving labor, technology, and capital in order to raise living standards. Increasing affordability and access to high-quality education and training, and providing access to credit and other incentives for small business development, are among the most effective instruments available to governments for achieving progressive growth. These should be complemented by policies that redress some of the inequalities in outcomes, particularly those experienced by poor and vulnerable segments of the populations, through attention to areas such as provisioning public services, establishing a progressive tax code, and providing basic social and labor protections.3
The international community has made significant progress in defining inclusive growth. However, agreeing on a comprehensive and more actionable framework remains an ongoing challenge. One widely accepted definition of inclusive growth involves output growth that is sustained over decades, is broad-based across economic sectors, creates productive employment opportunities for the majority of the country’s population, and reduces poverty.4 Reductions in excessive income inequality have also emerged as a prerequisite for inclusive growth, supported by mounting evidence that inequality undermines growth.5 In summary, inclusive growth is about both the pace and pattern of economic growth.6
The World Economic Forum’s Global Project on Inclusive Growth aims to mobilize a better response to this challenge by drawing on its multiple, relevant capabilities in partnership with key international organizations to build on this initial framework and push the policy agenda further. Specifically, it will seek to assemble a comparative analysis of the extent to which countries make use of the wide spectrum of policy incentives and institutional mechanisms that influence the pattern and pace of broad-based progress in living standards.
An initial framework includes areas such as creating an enabling environment for human capital formation, reinforcing the wage and productivity growth link, fostering entrepreneurship and investment, reinforcing business and political ethics, promoting gender parity, reviewing fiscal policy (tax code and social protection), and providing improved public services and infrastructure. Once completed, this framework will be used as a point of departure for a series of policy dialogues among policymakers, business leaders, and other opinion shapers. The goal is to establish a more concretely actionable foundation for policy by giving countries a clearer relative sense of the extent to which they are exploiting the policy space and the best practices available to them on the basis of the recent experience of their peers or the historical experience of other relevant countries. By doing so, the Global Project on Inclusive Growth aims to shed light on the full spectrum of policy levers available to promote social participation in the process and benefits of economic growth without dampening incentives to work, save, and invest.