OOur political leaders, business titans and top economists keep saying they want answers to this slippery little thing of inclusive growth. This will again be a big question this week at the World Economic Forum, which has asked me to be one of its six co-chairs. Davos is a good place to catch people’s attention.
Oxfam calculates that by next year, for the first time, the wealth of the richest 1% of the world’s population will exceed that of the remaining 99%. This is shocking proof, if more was needed, that far from any theory and bluster about inclusive growth, our current system is wired to do the exact opposite: enrich the most powerful. Either we fix this now in a controlled way, or it will fail later, with unknowable but likely chaotic consequences. Political instability and violence should give us more reasons to tackle inequality, poverty and exclusion, rather than new excuses not to.
Inclusive growth should enable the poorest in our societies to get a bigger slice of the pie at the expense of the richest. Inclusive growth should translate into more and better paid jobs and quality services for all, including health and education. This should involve helping developing countries find new competitiveness in goods and services so that they can capture a greater share of the benefits of globalized trade. This means that policymakers actively discriminate in favor of small and micro enterprises where most people work – small traders, street makers, herders, home-based businesses, smallholder farmers, fishers, etc
It is perhaps easy to be bamboozled or even bored by economics. But these are not economic problems to be solved: they are essentially political. And political dynamics are informed by, and help to inform, the behaviors of the public and businesses that drive our world every day. While we must understand and appreciate the need to treat all countries differently, in order to achieve the reforms that will trigger inclusive and sustainable growth in our world, we need the same end result: good governance at the top. The power of ordinary people is perhaps the most important force needed to achieve this.
Companies exist, in large part, to make a profit, and as a result they actively push for policies that could distort inclusive growth, such as legislation to limit competition, transparency and tax burdens. In a new report Oxfam is releasing ahead of Davos, we mapped out the lobbying efforts of the biggest companies in the ultra-profitable financial and pharmaceutical sectors. In 2013, in the United States alone, the financial sector spent more than $400 million on lobbying. In 2012, he spent $571 million on the US election campaign. The pharmaceutical industry spent $487 million. In Europe, the financial sector has spent 150 million dollars to put pressure on European institutions. I believe public pressure should be a powerful force on politicians and regulators to enact rules that will bring big business to heel. At Oxfam, we are also particularly interested in the need to revamp international tax systems to ensure that the wealthiest individuals and companies pay their fair share.
To reach the most marginalized people in our societies, it is crucial to have effective social protection systems. Major improvements in this area are needed. Inclusive economic growth must also be environmentally sustainable. While technological innovations are important to help reduce the cost of changing production and consumption patterns, these new advances must also be made accessible to poor and developing countries, not just wealthy elites. Good, far-sighted policies can ensure that green growth also becomes inclusive growth.
I believe that the new economic and development policies needed by the emerging world must be carried out by the emerging countries themselves. Economist Dr Joel Ruet looked at successful experiences of inclusive growth in Ethiopia, Thailand and Brazil. He notes that Brazil has lowered levels of inequality through national cash transfer programs, in exchange for parents keeping their children in school and receiving regular medical care. In Ethiopia, the government has overseen the doubling of agricultural production through the smart use of foreign investment and a better distribution of national income. Meanwhile, Thailand halved its poverty levels between 2001 and 2006 through targeted support for agriculture and food security. Dr Ruet also sees encouraging trends in Vietnam, Ghana, Chile, Mali and Colombia.
I recently participated in a public panel with Lady Lynn Forester de Rothschild, Managing Director of EL Rothschild and Chair of the Coalition for Inclusive Capitalism. She said: “Extreme inequality is not just a moral wrong. It undermines economic growth and threatens the financial performance of the private sector. Everyone who gathers in Davos and wants a stable and prosperous world should make tackling inequality a top priority. I am okay. In many ways, the world is making tremendous progress in the fight against global poverty, and we can celebrate that. But inequality acts as a brake; we must counter it before these gains are reversed.
Winnie Byanyima is Executive Director of Oxfam International.
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