Stronger inclusion

Let me turn to what I see as the second major aspiration of the new generation and the new global economy: stronger inclusion. Our close-knit world is a participatory world. The new generation demands opportunities for all and insists on tolerance, respect, and fairness for all.

Just look at some recent examples—from the yearnings on the Arab Street for greater dignity and opportunity, to the brave cry of young women for education and equality, and to the heartfelt urge of Indian women for greater respect and justice. These demands must be met.

What does it mean for economic policymakers? It means that we need more fairness in economic life, more inclusion. This has numerous dimensions.

At its core, it relates to growth. Surely we have all learned by now that it is no longer enough to focus on growth alone. We need all people to share in rising prosperity—and, by the same token, share fairly in any economic adjustment needed to achieve or restore prosperity.

As Franklin Roosevelt once said: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

Inclusive growth is certainly a top concern of policymakers. The message is resonating widely.

I was not surprised, therefore, to see that the World Economic Forum’s most recent survey puts “severe income disparity” at the very top of global risks over the next decade. Excessive inequality is corrosive to growth; it is corrosive to society.

I believe that the economics profession and the policy community have downplayed inequality for too long. Now all of us—including the IMF—have a better understanding that a more equal distribution of income allows for more economic stability, more sustained economic growth, and healthier societies with stronger bonds of cohesion and trust. The research reaffirms this finding.

What is less clear is how we achieve more inclusive growth in practice. Certainly, universal access to decent education is the non-negotiable starting point. Beyond that, I believe policies such as robust social safety nets, extending the reach of credit, and—in some cases—minimum wages can help.

Above all, inclusive growth must also be job-rich growth. This is really a symbiotic relationship—we need growth for jobs and jobs for growth. Right now, 202 million people are looking for work, and two in five of the jobless are under 24. Relieving this sense of desperation must be the over-riding goal of everything we do.

Inclusion has other dimensions too.

Gender inclusion is critically important, and, frankly, too often neglected by policymakers. In today’s world, it is no longer acceptable to block women from achieving their potential. Think about it: women control 70 percent of global consumer spending.

All studies point to the economic benefits of full female participation in the labor force, in the economy, in society. One recent study estimates that by simply raising women’s employment rates to the level of men, GDP would jump significantly—by 5 percent in the United States, 9 percent in Japan, 10 percent in South Africa, 27 percent in India, and 34 percent in Egypt.

The evidence is clear, as is the message: when women do better, economies do better. So policymakers and economic leaders must do better in supporting women. That means we must tear down all obstacles in the path of women, even the subconscious obstacles of the mind.

One other point on inclusion: we need a greater sense of solidarity across generations. We need to be cognizant of the legacy we are leaving for those who will come after us. One such legacy is public debt, which now hovers around 110 percent of GDP among the advanced economies—the highest level since World War II. We owe it to the next generation to put in place credible plans to reduce this burden on them.

Even more important is the issue of climate change, which, in my view, is by far the greatest economic challenge of the 21^st century. The science is sobering—the global temperature in 2012 was among the hottest since records began in 1880. Make no mistake: without concerted action, the very future of our planet is in peril.

So we need growth, but we also need green growth that respects environmental sustainability. Good ecology is good economics. This is one reason why getting carbon pricing right and removing fossil fuel subsidies are so important. This too is an element of inclusion.

Date: 2014-12-29; view: 765