WEF The Inclusive Growth and Development Report 2015

Amid increasing concerns about rising income inequality and its negative economic and social impact, the World Economic Forum, the international institution for public-private cooperation, today publishes a new contribution to the discussion.

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Around the world, no bigger policy challenge preoccupies political leaders than expanding social participation in the process and benefits of economic growth.

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 The report, which covers 112 economies, seeks to improve our understanding of how countries can use a diverse spectrum of policy incentives and institutional mechanisms to make economic growth more socially inclusive without dampening incentives to work, save and invest.

There is no bigger policy challenge preoccupying leaders around the world than expanding social participation in the process and benefits of economic growth and integration. A geographically and ideologically diverse consensus has emerged that a new, or at least significantly improved, model of economic growth and development is required.

But despite accumulating evidence that reducing inequality can actually strengthen economic growth, the political consensus about inclusive growth is still essentially an aspiration rather than a prescription. No internationally- recognized policy framework and corresponding set of indicators or measurable milestones has emerged to guide countries targeting broad-based progress in living standards, rather than economic growth per se, as the bottom- line measure of national economic performance.

Strong economic growth is the sine qua non of improved living standards. While a growing national economic pie does not guarantee that the size of every household’s piece will be larger, such an outcome is arithmetically impossible unless the overall pie does indeed expand. Growth creates the possibility of a positive-sum game for society, even if it does not assure it.

The extent to which economic growth broadens improvements in economic opportunity and living standards is influenced by an interdisciplinary mix of structural and institutional aspects of economic policy, going well beyond the two areas most commonly featured in discussions about inequality: education and redistribution.

Appreciation of the crucial role of institutions – particularly legal frameworks and public agencies that administer rules and incentives – in the development process has grown in recent decades, supported by an expanding body of research and practical experience. In fact, economic institution building has been a crucial part of the development path of essentially every country that has industrialized and achieved high living standards.

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