The Inclusive Growth and Development Report 2017
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Insight Report The Inclusive Growth and Development Report 2017 January 2017 Contents The Inclusive Growth and Development Report 2017 is published by the World Economic Forum. Preface v by Richard Samans Executive Summary vii Richard Samans Member of the Managing Board Part 1: Inclusive Growth and Development Jennifer Blanke Chief Economist Rising to the Challenge of Inclusive Growth 01 and Development Margareta Drzeniek Hanouz by Richard Samans, Jennifer Blanke, Gemma Corrigan, Head of Global Competitiveness and Risks Margareta Drzeniek Hanouz Gemma Corrigan Practice Lead, Economic Growth and Social Inclusion Initiative Part 2: Data Presentation 47 2.1 Selected Country Summaries 48 2.2 Inclusive Development Index 60 We thank Madhur Singh and Andrew Wright for their editing work and Human After All, Moritz Stefaner and Tim Bruce (Lowercase, Inc.) for their excellent graphic design and layout. 2.3 National Dashboard of Key Performance Indicators 72 The terms “country” and “nation” as used in this Report do not in all cases refer to a territorial entity that is a state as understood by international law and practice. The terms cover well-defined, geographically self-contained economic areas that may not be 2.4 Policy and Institutional Indicators 78 states but for which statistical data are maintained on a separate and independent basis. 2.5 How to Read a Country Profile1 86 World Economic Forum Geneva Part 3: Methodology and Acknowledgements 92 Copyright © 2017 Methodology of the Benchmarking 92 by the World Economic Forum Framework on Inclusive Growth and Development All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by Technical Notes and Sources 102 any means, electronic, mechanical, photocopying, or otherwise, without the prior permission of the World Economic Forum. Bibliography 124 About the Authors 132 Acknowledgements 133 1 The full data edition with 109 country profiles and an interactive data platform can be found online at the following address: wef.ch/igd17. The Inclusive Growth and Development Report 2017 | iii Preface RICHARD SAMANS Member of the Managing Board Over the past several years, a worldwide consensus has for a new global growth agenda at a time when the world emerged on the need for a more socially-inclusive approach economy sorely needs new impetus. to generating economic growth. However, inclusive growth This Report, and the System Initiative on Economic Growth and development remain primarily an aspiration. No systemic and Social Inclusion of which it is part, exemplify the World framework has emerged to guide policy and practice. Economic Forum’s ambition to serve as a platform to enable The World Economic Forum’s System Initiative on Economic closer cooperation between multiple institutions and Growth and Social Inclusion has taken on this challenge with stakeholders sharing a common aim. We wish to thank the the release of the “Inclusive Growth and Development Report International Labour Organization, International Monetary 2017.” Building on a beta version of a policy framework Fund, Organisation for Economic Co-operation and released in 2015, this Report provides a practical guide for Development, World Bank, World Trade Organization, policymakers and stakeholders seeking to build a strategy to Finance Ministry of Canada, as well as Barclays, McKinsey capture greater synergy between economic growth and more Global Institute, and Microsoft for their thoughtful written broadly-based progress in living standards in their countries. contributions to this volume. We also wish to express appreciation to all members of the System Initiative who In addition to the Report’s policy framework and metrics – provided comments and general guidance. The richness which provide a comparative illustration of institutional of the data found in these pages is also due to the work of strength and enabling environment conditions in 15 of the numerous public and private institutions. most relevant policy domains for inclusive growth – a new set of national key performance indicators are presented to help Finally, this project benefited immeasurably from the creativity countries track progress. These have been compiled into a and diligence of Jennifer Blanke, Margareta Drzeniek Hanouz, composite global index, the Inclusive Development Index, and particularly Gemma Corrigan, as well as valuable input measuring the accumulated level as well as the most recent from Thierry Geiger, Stefan Hall, and Aditi Sara Verghese. five-year trend of performance for the 109 countries for which such data is available. The former offers a more integrated Geneva, January 2017 and holistic picture of the state of economic development of countries than Gross Domestic Product per capita alone. The latter is useful for governments and stakeholders seeking to assess the effect of changes in policy and conditions within a typical political cycle. Together, the policy framework and benchmarking data are intended to provide countries with the practical tools needed to help turn the ambition of inclusive growth into a practical and measurable plan of action. At the same time, they yield several important conclusions for national policy and international economic cooperation, which the Report articulates in considerable depth. These provide the basis The Inclusive Growth and Development Report 2017 | v Executive Summary Around the globe, leaders of governments and other Policy Framework and Metrics stakeholder institutions enter 2017 facing a set of difficult The ultimate objective of national economic performance and increasingly urgent questions: is broad-based and sustained progress in living standards, • With fiscal space limited, interest rates near zero, and a concept that encompasses wage and non-wage income demographic trends unfavorable in many countries, (e.g., pension benefits) as well as economic opportunity, does the world economy face a protracted period of security and quality of life. This is the bottom-line basis on relatively low growth? Will macroeconomics and which a society evaluates the economic dimension of its demography determine the world economy’s destiny country’s leadership. Many countries have had difficulty for the foreseeable future? in satisfying social expectations in this regard. For example, in the last five years, annual median incomes declined by • Can rising in-country inequality be satisfactorily 2.4% in advanced economies, while GDP per capita growth redressed within the prevailing liberal international averaged less than 1%. economic order? Can those who argue that modern capitalist economies face inherent limitations in this To borrow from a business concept, growth can be thought regard – that their internal “income distribution system” of as the top-line measure of national economic performance, is broken and likely beyond repair – be proven wrong? with broad-based or median progress in living standards representing the bottom-line. Inclusive growth can be thought • As technological disruption accelerates in the Fourth of as a strategy to increase the extent to which the economy’s Industrial Revolution, how can societies organize top-line performance is translated into the bottom-line result themselves better to respond to the potential employment society is seeking, i.e., broad-based expansion of economic and other distributional effects? Are expanded transfer opportunity and prosperity. payments the only or primary solution, or can market mechanisms be developed to widen social participation However, inclusive growth is more than that. An economy is in new forms of economic value-creation? not a business, and history and scholarship have shown that there is a feedback loop between the bottom- and top-lines These questions beg the more fundamental one of whether (growth and equity) in a national economy. This feedback a secular correction is required in the existing economic loop can run in either a positive or a negative direction. The growth model in order to counteract secular stagnation and extent to which it is a virtuous circle is influenced by a diverse dispersion (chronic low growth and rising inequality). Does the mix of structural and institutional aspects of economic policy, mental map of how policymakers conceptualize and enable going well beyond the two areas most commonly featured in national economic performance need to be redrawn? Is there discussions about inequality: education and redistribution. a structural way, beyond the temporary monetary and fiscal measures of recent years, to cut the Gordian knot of slow This Report presents a policy framework encompassing growth and rising inequality, to turn the current vicious cycle seven principal domains (pillars) and 15 sub-domains of stagnation and dispersion into a virtuous one in which (sub-pillars) which describe the spectrum of structural factors greater social inclusion and stronger and more sustainable that particularly influence the breadth of social participation growth reinforce each other? in the process and benefits of economic growth. Societies that have had success in building a robust middle class and This is precisely what government, business, and other leaders reducing poverty and social marginalization have tended to from every region have been calling for. Over the past several create effective economic institutions and policy incentives years, a worldwide consensus has emerged on the need in many of these areas, while also pursuing sound