The basis of trade, an exchange of goods and services, has existed for millennia across almost all variants of modern humanity. Moving beyond a literal exchange of goods for food became necessary when economies grew in complexity and specialization to the degree where a medium of exchange with a commonly understood value was needed (likely around the same time someone took a job other than farming). Thus money was invented to fill an obvious need. As economies continued to grow in scope and money rose in popularity, the capacity to amass wealth and wield the power it provided saw the development of institutions and systems that would protect and manage the concept of value. Early banking systems focused on trading grains to merchants and farmers, a far cry from the current practice. Grain is still traded – but in futures contracts on commodities markets, where the price of goods is determined through a combination of automated trading and turbocharged bankers.
These improvements have lead to greater efficiency and an almost universal improvement in quality of life across the planet. Economic and financial systems have arisen and connected across the globe, resulting in the development of a world more interconnected than ever before. Closer union has proven a deterrence to war, an engine of opportunity and a driver of prosperity than has taken entire nations from the brink of collapse. Like any market, there are winners and losers – but none can attest that the world would not be a safer, more accessible place were it not the creation and integration of the global economy.
But market losers have faces and families. Too easily dismissed, we forget that the men and women residing in the nations facing recession and collapse do not share the same views of the system. For them, it is one that crushes freedom by conflating wealth and power, resulting in a loss of political and economic power to those being oppressed. For them, it is a system ruled by multinational corporations who destroy entire regions to enrich faceless shareholders. For them, it is a system that fosters inequality, pushing those who are no longer deemed valuable into a state of perpetual instability, where they cannot find employment or take advantage of any opportunity that may exist. For them, this is a system that disadvantages and oppresses, where bureaucrats and elites profit from their misery and they are left to starve.
Capitalism has winners and losers. But thought has gone into developing reform strategies to make the game more equitable. The popularization of Inclusive Economic Growth over the years proves this – defined by the OECD as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society”, it is both quantifiable and readily measured. Through a series of key performance indicators (KPI), economies can be benchmarked and compared.
Three key sections – growth and development, inclusion and intergenerational equity and sustainability – provide the framework for determining what it entails to be an inclusive economy. Through quantification and measurement of performance, the World Economic Forum has developed an annual Inclusive Development Index that captures data from 109 nations around the globe and compares to averages of the last five years. Separated into developed and developing nations, the divide is distinct.
8 of the top 10 most inclusive nations in the world are European, with each Scandanavian state found in the top 6. Amongst developing nations, Lithuania was ranked highest, flanked by Azerbaijan and Hungary. Great Britain and the United States were ranked 21st and 24th respectively.
But does focusing on inclusive economic growth go beyond political speech and make a discernable impact on economic growth and poverty levels? Overall, GDP growth rates are above average amongst highly ranked nations, with a notable trend towards liberal economic policies showing more significant results. Some benefit strongly from wealth in key industries – oil and gas, banking, metal fabrication – whereas others benefit from government stability. A notable trend is that nations above are traditionally not viewed as active players in global affairs, and have relatively mono-ethnic domestic populations. Whether these factors play a substantial role is indeterminate, but it is likely not a coincidence.
In the case of the United States, boosting the inclusivity of growth within the nation was one of the few issues both candidates agreed upon in the 2016 Presidential election. The most commonly cited statistic outlining wealth distribution within the nation’s borders is the percentage of overall wealth going to the top 1% of earners, but it does not paint a complete enough picture. By the mid 1980’s, income inequality saw a 5:1 ratio of real earnings from rich to poor. For the following 15 years, the incomes of poor households increased 0.06% annually before falling again in the early millennium. Throughout this time, rich incomes steadily increased year-on-year by 0.83% annually. Through these times, technological automation and globalization likely played a role, but do not paint the entire picture – both of these factors would have had uniform cross-border impacts and fail to explain why inequality grew at a faster rate in the United States than in both Great Britain and France over the same time period.
If inclusive growth is measured by ensuring inclusion in the workforce, developing solutions that are built to advantage individuals long-term and creating an environment that prioritizes opportunity for people of all ages, policies must be designed with people in mind. Easing the regulatory burden is important – but regulations exist to protect those who cannot otherwise protect themselves, or to create rules around use of common resources. And the ugly truth is that we may trade the grain today, but we are still responsible for ensuring that these is enough for everyone to go around tomorrow.