Economic growth as measured by gross domestic product is necessary for a country’s well being, but it is not enough. To ensure adequate or rising living standards for people, you need sustainable and inclusive growth, according executive committee members of the prestigious World Economic Forum.
“Any growth, for it to be meaningful, has to be inclusive,” said Saadia Zahidi, a member of the WEF Executive Committee. “Unsurprisingly, we find that while growth is recovering, there are still major challenges when it comes to equity and inclusion across both rich and poor economies.”
The World Economic Forum executive committee released a report this week on inclusive growth as world leaders started to gather at its annual conference in Davos, Switzerland.
Global Growth Strong
The World Bank predicts the world economy will grew by 3.1 percent in 2018. The International Monetary Fund estimates global growth to reach 3.9 percent this year. And a Reuters poll of 170 economists expects GDP growth to reach 3.7 percent, as business and consumer confidence surges.
By all estimates, the global economy is strong. But how is it affecting people?
Designed as an alternative measure of economic performance, the Inclusive Development Index (IDI) measures factors impacting people, such as income inequality, demographic pressures on savings, and care for or depletion of natural resources. So it is a deeper look into an economy.
The top rated advanced economies on this measurement are Norway, Iceland, Luxembourg, Switzerland and Denmark. The top rated emerging economies are Lithuania, Hungary, Azerbaijan, Latvia and Poland.
According to the report, Norway ranks high because it has (1) policies that benefit the non-oil sector, (2) a high GDP per capita, (3) the fourth-largest labor productivity rate, and (4) the fifth-highest employment rate among advanced economies. Furthermore, it has low income inequality, high living standards and low carbon emissions.
In contrast, the United Kingdom is seen in the report as “lagging behind its peers” on seven of the 12 IDI indicators. “In particular, wealth inequality has been increasing over the past five years.” Likewise, in the United States, its IDI performance is weaker than other advanced economies despite its strong GDP economic growth. Specifically, the United States has one of the lowest average healthy life expectancy ratings and one of the highest poverty rates among advanced economies.