We need economic growth to pay for the things we need in life – education, health, housing, roads. But how to ensure that growth benefits everyone, without further widening inequality and exclusion?
Six years into the greatest economic crisis of our lifetimes, governments need to tackle high debt and deficits while sowing the seeds of sustainable and more inclusive growth. But just how can they pull that off with 200 million people unemployed and young people particularly hard-hit, inequality on the rise and so far fragile signs of a return to economic growth?
The crisis has raised real questions about how we measure the health of our economies and societies. Even before the crisis hit, there were questions about whether GDP alone is enough to tell us what is happening. Inequality widened in most OECD countries during the boom years, something that was not captured immediately, for example.
There are also real questions over what we should be measuring to capture how our societies and economies are evolving. The crisis has also led governments to look at whether the systems put in place to measure and manage national economies and international trade in the 20th century need overhauling to be useful in the 21st century knowledge economy.
It is easy to say that in policy planning we need to move away from a narrow focus on growth to a broader notion of well-being and inclusiveness, but how do we go about it? Projects such as the OECD Better Life Initiative and Better Life Index, and the various happiness and well-being indices being developed at national level are a start, but only time will tell how well they capture overall wellbeing and progress.
If we know that the benefits of growth do not automatically trickle down to generate more equal societies, we need to adopt a new inclusive approach to policymaking that looks at the social as well as the economic effect of policy actions.
In the case of young people, the question is not just whether our education systems are equitable, and how far they are delivering a good education at all levels of society. The basic skills that young people need for the 21st century workplace are also changing, so the whole issue of what we learn and whether the skills on offer match the needs of the job market is also important.
Inclusive growth also means making the best use of all resources, young, old, men and women. Labour market, education and training programmes must all work to maximise opportunity and inclusiveness.
At the international level too, our systems need revisiting. The way trade flows are measured, for example, dates from a time when essentially Country A produced and exported something, whether bananas, bicycles or boots, to Country B. But globalization and Internet technologies have changed all that – how do you determine the country of origin of a car or a mobile phone whose hundreds of components can come from multiple other countries, and be partly assembled in several places?
Work on this began as a result of the crisis, and the OECD with the WTO in January produced the first figures measuring this more complex reality which may call into question our assumptions about just who has the biggest trade surplus with whom, not to mention who is creating jobs where.
Taxation is another area where the crisis has shown that existing systems have not kept pace with global reality. The existing rules on how companies were taxed for activities outside their home country were drawn up in the pre-globalisation era and designed to ensure that companies were not penalized by paying tax twice on the same earnings. It was clear in the run-up to 2008 that globalization was making the system inadequate, and that questions were arising about the converse issue of tax not being paid anywhere. The G20 has asked the OECD to help it address the issue at international level.
Governments need to work together on all these areas to craft better policies for better lives and deliver more inclusive, sustainable economies and societies.