Ahead of
annual meeting in Davos, WEF says that more concrete policies are needed to
bridge the widening gap between rich and poor
The Guardian, Larry Elliott, economics editor, Monday 19 January 2015
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| 45th Annual Meeting of the World Economic Forum, WEF, in Davos. Photograph: Laurent Gillieron/EPA |
The World
Economic Forum has urged governments to measure minimum wages, trade union
membership, investment in public services and corruption as part of an action
plan for tackling rising inequality.
Ahead of
the start of its annual meeting in Davos on Tuesday, the WEF published 14
measures of inclusive growth as it responded to criticism that the gathering of
2,500 business leaders, academic and policymakers has become an exercise in
hand-wringing about the gap between rich and poor.
The Forum
said there was a need to make the discussions about tackling inequality “less
vaguely aspirational” in a policy paper that has co-incided with new research
from Oxfam showing that on current trends the richest 1% of the world’s population will by next year own more wealth than the other 99%.
Between
2012 and 2014 growing inequality was identified by WEF members as the most
likely threat to the global economy and the concerns have led to WEF staff
drawing up ways of measuring policies that affect inclusiveness, including
business ethics, social safety nets and the quality of basic infrastructure.
“Since the
onset of the financial crisis, the question of how to unlock new sources of
productive employment and strengthen the contribution of economic growth to
progress in broad living standards has become an increasingly important concern
for political and business leaders in developed and developing countries alike.
These challenges have been at the top of the World Economic Forum Global Risks
Report survey in recent years”, the paper said.
“But while
there is widespread international consensus on the need to develop new and
improved growth and development models in this respect, little in the way of
concrete policy guidance has emerged. There is a growing need for analytical
frameworks and evidence-based solutions suited to this purpose.”
Christine
Lagarde, the managing director of the IMF, Pope Francis, Jim Kim, the president
of the World Bank and Mark Carney, the governor of the Bank of England, are
among those who have stressed the need to ensure that the fruits of economic
progress are shared more equally. Carney will be taking part in a panel in
Davos this week titled: “A richer world but for whom”.
Rick
Samans, a member of the WEF board and a former economic adviser to Bill
Clinton, said: “There is almost universal agreement about the direction that
countries need to go in. It has almost become a mantra. We are coming up with
concrete policy guidance.”
The WEF
paper says governments should assess 14 yardsticks of progress under six
pillars: education and skills; employment and labour compensation; asset
building and business investment; corruption and rents; fiscal transfers; and
basic services and infrastructure. Using the tool would allow policy makers to
have a clearer sense of how well they were exploiting “available policy space
across the full spectrum of levers”.
Samans said
the intitial work by the WEF covered 96 rich, middle income and low income
countries, and would be refined over the next months. “We are attempting to
provide a tool - a rigorous and dispassionate one”, he added.
In
countries such as the UK, real incomes have been squeezed since the deep
recession of 2008-09, with living standards lower than they were at the time of
the 2010 election. The WEF said governments should assess whether a “rising
tide lifts all boats” by looking at labour’s share of national incomes, whether
pay is linked to productivity, minimum wages, trade union density, the scope of
collective bargaining and labour-employer cooperation.
The WEF
study said: “However one defines it, there is no policy challenge that
preoccupies political leaders around the world more than that of how to expand
social participation in the process and benefits of economic growth and
integration. The recent financial crisis has taught no more fundamental lesson
than the need to rebalance the relative emphasis placed by economists and
policymakers on efficiency-enhancing measures and top-line economic performance
(growth in GDP/capita), on the one hand, and institutional frameworks and
incentives that strongly influence bottom-line economic performance (i.e.,
sustainable, broad-based progress in living standards), on the other.
“In rich
and poor countries alike, it has become increasingly clear that the former is a
necessary but not sufficient condition for the satisfaction of societal
expectations of national economic performance.”
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