Six actions G20 countries must take to grow the economy inclusively

Posted on in Policy Context

TheGlobe and Mail.com – ROB/Commentary
Nov. 14, 2015.   Bruce Moore

Bruce Moore is a Civil 20 delegate, former United Nations diplomat and Canadian NGO executive director.

Since the global financial crisis, G20 economies have focused on regaining high rates of growth. Unfortunately, growth is indiscriminate in determining who benefits.

The 2008 Growth Report from the Commission on Growth and Development concluded that with growth, there is a natural tendency for income gaps to widen. Over the ensuing seven years, the benefits of growth have been flowing up. Just as the superrich are becoming increasingly conservative, growing numbers of others are becoming increasingly reactionary. After all, who wants to conserve stagnant incomes, inequality and rising levels of poverty? Mounting civic unrest portends that social cohesion is approaching its tipping point.

According to the Civil 20 (the formal Group of 20 link to civil society), not all growth is good growth for development. The Civil 20 communiqué, approved by the C20 Istanbul Summit in September, states that “in order to be inclusive, growth must target poverty and inequality and benefit the whole of society, including the most excluded groups. Furthermore, the excluded must actively participate not only in the growth process, but also in determining the policies that will best foster ‘their’ growth.”

That communiqué was the culmination of an 18-month consultation with more than 5,000 individuals from 91 countries, involving 500 non-government organizations. G20 leaders will hopefully use this baseline logic when discussing growth at their summit this week in Antalya, Turkey. Otherwise, robust growth may become a proxy for inclusive growth.

Inclusive growth means investing where low-income people currently work, in micro, small and medium enterprises, in the informal and formal sectors. G20 countries provide significant financial incentives to a narrow band of transnational corporations, agribusinesses and extractive resource industries. Increasing size of the economy requires admitting these other actors to a similar club through investments to increase their scale, expand their value chain and reach larger domestic and global markets.

Inclusivity includes rural communities. Every dollar invested in agriculture has, on average, a $3 multiplier effect in the wider economy. Adding value beyond the farm gate and supporting the non-farm sector adds jobs, protects the agricultural base and contributes to food security.

To be good for development, growth strategies need to apply rights-based approaches aligned to the International Labour Organization’s “decent work agenda” to provide more, better-paid and safer jobs.
History has shown that government-led development without active participation by target populations, and civil society-led strategies without enabling government legislation, have both failed. Civil society, defined by the United Nations as the “third sector” of society, outside of government and business, and which includes non-government, not-for-profit and voluntary organizations, can help to identify the forms of growth, appropriate to the needs and skills of excluded peoples, and participatory structures for implementing an inclusive agenda, which will also help restore the social cohesion that is currently under mounting stress.

The funding challenges for governments are classical. While the goal of inclusive growth is to reduce poverty and eliminate exclusion, the public and private institutions in positions to effect change are controlled by the powerful non-poor and corporate power brokers.

If we are to grow inclusively, the G20 member countries must:

– Combat tax havens;
– Enforce the corruption of foreign officials act;
– Prevent transfer pricing;
– Ensure that royalty payments are transparent;
– Require that impact-benefit agreements underpin business licensing; and
– Fairly tax corporations in the countries where their activities take place and value is created.

As the world comes to realize that at least $1-trillion (U.S.) is lost annually to these and other forms of corruption, governments will lose their legitimacy if they fail to close the loopholes and enact preventative legislation. Put another way, the funds needed to implement inclusive growth are available.

Inclusive growth is a call for a more equitable distribution of wealth, for access by the excluded to productive resources, for participation by the “poor” in decisions that affect their daily lives and for the reform of macroeconomic policies that contribute to inequality. If this sounds familiar, it may suggest that governments are not complying with international agreements to which they are signatory parties.

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