Inclusive or exclusive growth?

Some days ago, I noticed a media report pointing out how Pakistan has been ranked 52^nd out of 79 developing economies in something called the Inclusive Development Index (IDI). The punchline was how we ranked better than India, of course. Before gloating further on this accomplishment, let us pause and consider what this Index is, who has formulated it, and why. The need for an IDI has emerged from none other than a moot of global business, political and opinion making elite, which gathers annually in the snowy Swiss mountains of Davos, at an event called the World Economic Forum (WEF). Davos has been hosting the WEF since the early seventies, when it was still known as the European Management Forum. Over time however, WEF’s influence has grown, and now the ‘non-profit’ entity manages to bring together a couple of thousand who’s who from around the word.

This year, WEF’s Pakistani delegation included not only the PM, but also the now retired Chief of Army Staff, and even our only Oscar winning filmmaker. This Pakistani contingent was of course joined by many other leaders from another 100 or so countries. The WEF is supposed to be an impartial entity with no political or national agenda. It aims to bring together world leaders to a common platform to help ‘improve the state of the world’. In effect, however, WEF is dominated by the global business elite, or the world’s 1,000 leading companies, which it actively relies on, to help ‘shape a better future’

The profit driven imperatives of large corporations being harnessed to help improve the state of the world can however be a tricky proposition. Broad-based expansion of economic opportunity and prosperity may not be possible without regulating and redistributing the immense affluence of the global elite, and expecting the global elite to identify such solutions is like asking someone to axe their own foot.

Thus, a concept like ‘inclusive growth’ is enticing for entities like the WEF, since it aims to present a win-win situation for all, whereby the rich can keep getting richer, while trying to make economic growth help the poor as well. In practice, such lofty ideas often lead to business as usual. Top-down growth, led by market mechanisms, which are dominated by the haves, continue causing concentration of wealth and rising inequality.

The problem of growing global inequality has now lowered prospects of economic growth in the long term. The phenomenon of populism spreading across the developed world in the Trump era, with elections also approaching in the Netherlands, France, and Germany, has made the Davos attendees understandably nervous. An unpredictable new political and economic order could threaten the post-war liberal democratic order, which had enabled multinational corporations to flourish. Unemployment, stagnation and unchecked income inequalities have evidently motivated populist movements in Western countries, which are perhaps more threatening to the existing world order, than the lingering disparities within developing counties around the world, including our own.

It is in this context that the WEF’s ‘Inclusive Growth and Development Report 2017’ needs to be considered. The report contains the abovementioned IDI, aiming to provide a more complete measure of economic development than GDP growth, which focuses on ideas of inclusion and sustainability. Instead of merely noting that Pakistan is ahead of India on the IDI, our media and analysists should realise that we need to transcend such indices, and think more deeply about how to address the underlying causes of structural poverty within our country.

The WEF report provides some useful ideas in this regard, such as the need for contending with domestic corruption and unfair rents, which are also major reasons for inequality of wealth. Yet, the WEF itself seems incapable of highlighting and addressing the inherent inequalities of the market based global economic system, which is used so effectively by big business, to make huge profits for their own shareholders, without much regard for the rest of the world.

Published in The Express Tribune, February 3^rd, 2017.

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