The World Economic Forum - our collaborator in the Symposium on Inclusive Growth and Development - recently released its first Inclusive Growth and Development Report which presents a new framework for assessing countries’ efforts to foster economic growth that raises the living standards of entire societies.
The report states that all countries are failing to exploit opportunities to reduce income inequality without harming growth. Some key takeaways:
All countries have room for improvement
There is considerable diversity in performance not only across but also within countries. No country scores above average for its peer group in all 15 sub-pillars and only a few come close.
It is possible to be pro-inclusiveness and pro-growth at the same time
This is demonstrated, for example, by the fact that several of the strongest performers in the Forum’s Global Competitiveness Index also have a relatively strong inclusive growth and development profile.
Fiscal transfers can be helpful – but so can other policies.
Many economies with high levels of tax and redistribution are highly competitive. However, use of policy space in other areas could reduce the need for these levers.
Effective promotion of social inclusion is not solely a luxury of high-income countries
In many sub-pillars – such as business and political ethics, financial system inclusion, and educational quality and equity – some developing countries do better than others with much higher incomes.
There are significant regional similarities
This suggests a strong role of shared culture, historical traditions or political-economy reflexes, in areas such as tax systems in Eastern Europe and educational equity in Latin America.
The current debate on inequality is unduly narrow and polemical
The debate usually focuses on redistribution and upskilling labor, but these are only a minority of the policy options available to “structurally adjust” an economy for inclusive growth. Several other crucial factors relate to improving the investment and business climate. Therefore, it is possible, even necessary, to be pro-labor and pro-business; pro-growth as well as pro-equity.