Growth: The Good, the Bad and the Ugly
(Transcript of Dr CC Tan’s comments at the St Gallen Symposium, Singapore, 2016)
Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
The good aspects of growth are that growth generates healthy economies and enhances standard of living. Then there is some degree of trickle-down economics helps those in lower social economic classes. Growth provides the resources for governments to make transfers to those in need and also provides a future for the next generation, especially where meritocracy reigns and people can level up. Growth of individual wealth can lead to benefits for humanity, such as the Bill and Melinda Gates Foundation and the Zuckerberg Foundation, as well as local examples such as Lien and Tsao Foundations in Singapore.
We know what we can do to drive economic growth. This include entrepreneurship – people with innovative ideas, passion and drive to turn them into workable businesses. Intrapreneurship is a concept of applying entrepreneurial thinking and attitudes while working for organisations. Qualities such as multi-skilling, pride in work and respect for workers, improvements in productivity and resourcefulness are all essential to economic growth. Such characteristics are complemented by individuals and companies being bold to invest in new technologies and markets in order to survive future structural economic shifts.
The bad aspects of growth are firstly that there is a limitation of trickle-down economics. The income and asset gap widens. Gini coefficients go up leaving behind the most vulnerable, who have a harder time living in an increasingly inflated economy. The richest 10% of the people in the world hold 57% of global income. The poorest 20% hold just 2%. The richest 1% now has as much wealth as the rest of the world combined. The richest 62 individuals (one busload) had in 2015 as much wealth as the poorest half of the global population. (In 2010, it was 388 individuals!)
Consumption of resources exceeds capacity of the planet. Global Footprint Network estimates that humanity is currently living far beyond the planet’s means, consuming the earth’s renewal resources as if we had one and a half planets to draw on. 11% of the global population generate 40% of global C emissions, while 50% of people create only 11% of C emissions. High income countries, 16% of world’s population account for 64% of world’s spending on consumer products and use 57% of world’s electricity, The EU, home of 7% of the world’s population uses 33% of the globally sustainable nitrogen budget – mainly for meat and dairy products, which are unhealthy. Rising middle classes will consume even more. Global population is expected to grow by 1.3B over next 20 years, with middle class from 2B to 5B consumers by 2030, especially in India and China.
There are the twin failures of, firstly, failure to prioritise tackling domestic and international poverty, at the same time as giving far too little attention to understanding and respecting the limits of sustainable natural resource use. Growth that erodes the very foundation upon which growth is possible is bad growth; and secondly, economic development, rising up the value chain and disruptive technologies remove job security and endanger societies. At the Davos World Economic Forum in 2016, it was highlighted that disruptive labour market changes, including the rise of robots and artificial intelligence will result in a net loss of 5.1M jobs over the next 5 years in 15 leading countries that account for 65% of the world’s workforce. It is actually 7.1M but 2M will be successfully redeployed. Women will be the biggest losers as they are mainly in low growth or declining areas such as sales, office and admin roles. Men 1 job gained for 3 lost. Women 1 job gained for 5 lost.
Farmers became manufacturers can computer engineers. Of course, not all and not that quickly, but there is evolution of skills, constant learning of fresh skills to compensate required. When driverless cars become the norm, what will happen to all who depend on driving for a living? (5M people in the USA alone.) Freeing people to think, create, be artists, scientists and entrepreneurs sounds good, but it is not natural and must be managed.
Detroit, which had population growth from 300K in 1900 to 2M in 1950 due to automotive engineering, due to global competition, competition and inability to adapt, manufacturing jobs disappeared. In 2012 it was the murder capital of the US and in 2013 filed for bankruptcy.
The Ugly face of growth has several aspects. Governments have allowed the interests of powerful elites and lobby groups to dominate over the interests of marginalised communities and humanity as a whole in many countries. Growth has sometimes been predicated on territorial assimilations and theft of intellectual property through hacking. No countries need be named, but we know some of them. There is often destruction of environment to fuel economic growth – forest and peat fires in Sumatra not only deplete arable land but also cause transboundary haze with deleterious health effects, even death and contributing to CO2 levels in the atmosphere. Trafficking and slavery to fuel growth is another ugly face. Human rights organisation Amnesty has accused Apple, Samsung and Sony, among others, of failing to do basic checks to ensure minerals used in their products are not mined by children. In a report into cobalt mining in the Democratic Republic of the Congo, it found children as young as seven working in dangerous conditions in the cobalt mines.
Mark Dummett, business and human rights researcher at Amnesty said that mining was “one of the worst forms of child labour”. “The glamorous shop displays and marketing of state-of-the-art technologies are a stark contrast to the children carrying bags of rocks and miners in narrow man-made tunnels risking permanent lung damage,” he said. “Millions of people enjoy the benefits of new technologies but rarely ask how they are made. It is high time the big brands took some responsibility for the mining of the raw materials that make their lucrative products.”
A balancing act is needed to find the sweet spot for inclusive, non-exploitative growth. Sadly, an action plan for achieving sustainable development agreed more than 2 decades ago in the 1992 Rio Declaration on Environment and Development have not been put into practice due to feeble, siloed approaches by government departments and NGOs. Rising global challenges of climate change, financial crises, food price volatility and commodity price increases may be forcing the international community to recognise that these issues are unavoidably interconnected and must be tackled together. An example is the UN Conference on Sustainable Development (Rio+20) June 2012, which brought forth new Sustainable Development Goals to guide humanity in the future adopted by the UN in September 2015.
It is necessary for growth to help humanity rise from human deprivation (domains of hunger, illiteracy, poverty, voicelessness, gender inequality) and yet remain within an environmental ceiling (domains such as climate change, biodiversity loss, nitrogen use – boundaries of these three already crossed!). The sweet spot is a band in between these thresholds known as the “doughnut economy”. Sustainable development is only possible if eradication of poverty and environmental sustainability are pursued together. None of this will be easy.
What is required is an integrated vision for sustainable growth. We need rising recognition that eradicating poverty and achieving social justice is inextricably linked to ensuring ecological stability and renewal. We need to recognise the interconnectedness of the social, environmental and economic dimensions of sustainable growth.
Mainstream economics have failed to deliver inclusive and sustainable economic growth and policymakers continue to rely on economic indicators such as GDP growth, that are not up to the task of measuring what matters for social justice and environmental integrity. New metrics beyond GDP are needed to measure impact of social activity (tonnes of carbon emitted and also social metrics (number of people facing hunger or below one of several different types of poverty lines).
The concepts of entrepreneurism and social entrepreneurism are becoming merged. The raison d’ete of business must be to create a better future for humanity, not just a better bottom line.
Social entrepreneurship equals business entrepreneurship in that each entrepreneur must take responsibility for leaving the world slightly better than he found it. Traditional paradigms must be changed. Social entrepreneurs must demonstrate that there are new ways of creating value, not just for profit, but also for people and the planet. Such a paradigm must gain traction and jolt behemoths of industry to change the way they think about their place in the world.
In Davos 2016, there was concern over lack of trust in business, with more than half citing it as a concern, compared to 37% just three years ago. “Re-shaping companies built on profit alone into ones where profit and purpose combine, is not going to happen quickly or easily, but it’s a transformation that is already starting and that business need to keep pace with,” said Mr Dennis Nally, global chairman of PwC.
Because the problems are too big for any sector, government, business or civil society to solve, everyone needs to come together to find new ways to work together and find innovative solutions to address the world’s biggest social and environmental issues.
Growth: The Good, the Bad and the Ugly
Growth: The Good, the Bad and the Ugly
(Transcript of Dr CC Tan’s comments at the St Gallen Symposium, Singapore, 2016)
Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.
The good aspects of growth are that growth generates healthy economies and enhances standard of living. Then there is some degree of trickle-down economics helps those in lower social economic classes. Growth provides the resources for governments to make transfers to those in need and also provides a future for the next generation, especially where meritocracy reigns and people can level up. Growth of individual wealth can lead to benefits for humanity, such as the Bill and Melinda Gates Foundation and the Zuckerberg Foundation, as well as local examples such as Lien and Tsao Foundations in Singapore.
We know what we can do to drive economic growth. This include entrepreneurship – people with innovative ideas, passion and drive to turn them into workable businesses. Intrapreneurship is a concept of applying entrepreneurial thinking and attitudes while working for organisations. Qualities such as multi-skilling, pride in work and respect for workers, improvements in productivity and resourcefulness are all essential to economic growth. Such characteristics are complemented by individuals and companies being bold to invest in new technologies and markets in order to survive future structural economic shifts.
The bad aspects of growth are firstly that there is a limitation of trickle-down economics. The income and asset gap widens. Gini coefficients go up leaving behind the most vulnerable, who have a harder time living in an increasingly inflated economy. The richest 10% of the people in the world hold 57% of global income. The poorest 20% hold just 2%. The richest 1% now has as much wealth as the rest of the world combined. The richest 62 individuals (one busload) had in 2015 as much wealth as the poorest half of the global population. (In 2010, it was 388 individuals!)
Consumption of resources exceeds capacity of the planet. Global Footprint Network estimates that humanity is currently living far beyond the planet’s means, consuming the earth’s renewal resources as if we had one and a half planets to draw on. 11% of the global population generate 40% of global C emissions, while 50% of people create only 11% of C emissions. High income countries, 16% of world’s population account for 64% of world’s spending on consumer products and use 57% of world’s electricity, The EU, home of 7% of the world’s population uses 33% of the globally sustainable nitrogen budget – mainly for meat and dairy products, which are unhealthy. Rising middle classes will consume even more. Global population is expected to grow by 1.3B over next 20 years, with middle class from 2B to 5B consumers by 2030, especially in India and China.
There are the twin failures of, firstly, failure to prioritise tackling domestic and international poverty, at the same time as giving far too little attention to understanding and respecting the limits of sustainable natural resource use. Growth that erodes the very foundation upon which growth is possible is bad growth; and secondly, economic development, rising up the value chain and disruptive technologies remove job security and endanger societies. At the Davos World Economic Forum in 2016, it was highlighted that disruptive labour market changes, including the rise of robots and artificial intelligence will result in a net loss of 5.1M jobs over the next 5 years in 15 leading countries that account for 65% of the world’s workforce. It is actually 7.1M but 2M will be successfully redeployed. Women will be the biggest losers as they are mainly in low growth or declining areas such as sales, office and admin roles. Men 1 job gained for 3 lost. Women 1 job gained for 5 lost.
Farmers became manufacturers can computer engineers. Of course, not all and not that quickly, but there is evolution of skills, constant learning of fresh skills to compensate required. When driverless cars become the norm, what will happen to all who depend on driving for a living? (5M people in the USA alone.) Freeing people to think, create, be artists, scientists and entrepreneurs sounds good, but it is not natural and must be managed.
Detroit, which had population growth from 300K in 1900 to 2M in 1950 due to automotive engineering, due to global competition, competition and inability to adapt, manufacturing jobs disappeared. In 2012 it was the murder capital of the US and in 2013 filed for bankruptcy.
The Ugly face of growth has several aspects. Governments have allowed the interests of powerful elites and lobby groups to dominate over the interests of marginalised communities and humanity as a whole in many countries. Growth has sometimes been predicated on territorial assimilations and theft of intellectual property through hacking. No countries need be named, but we know some of them. There is often destruction of environment to fuel economic growth – forest and peat fires in Sumatra not only deplete arable land but also cause transboundary haze with deleterious health effects, even death and contributing to CO2 levels in the atmosphere. Trafficking and slavery to fuel growth is another ugly face. Human rights organisation Amnesty has accused Apple, Samsung and Sony, among others, of failing to do basic checks to ensure minerals used in their products are not mined by children. In a report into cobalt mining in the Democratic Republic of the Congo, it found children as young as seven working in dangerous conditions in the cobalt mines.
Mark Dummett, business and human rights researcher at Amnesty said that mining was “one of the worst forms of child labour”. “The glamorous shop displays and marketing of state-of-the-art technologies are a stark contrast to the children carrying bags of rocks and miners in narrow man-made tunnels risking permanent lung damage,” he said. “Millions of people enjoy the benefits of new technologies but rarely ask how they are made. It is high time the big brands took some responsibility for the mining of the raw materials that make their lucrative products.”
A balancing act is needed to find the sweet spot for inclusive, non-exploitative growth. Sadly, an action plan for achieving sustainable development agreed more than 2 decades ago in the 1992 Rio Declaration on Environment and Development have not been put into practice due to feeble, siloed approaches by government departments and NGOs. Rising global challenges of climate change, financial crises, food price volatility and commodity price increases may be forcing the international community to recognise that these issues are unavoidably interconnected and must be tackled together. An example is the UN Conference on Sustainable Development (Rio+20) June 2012, which brought forth new Sustainable Development Goals to guide humanity in the future adopted by the UN in September 2015.
It is necessary for growth to help humanity rise from human deprivation (domains of hunger, illiteracy, poverty, voicelessness, gender inequality) and yet remain within an environmental ceiling (domains such as climate change, biodiversity loss, nitrogen use – boundaries of these three already crossed!). The sweet spot is a band in between these thresholds known as the “doughnut economy”. Sustainable development is only possible if eradication of poverty and environmental sustainability are pursued together. None of this will be easy.
What is required is an integrated vision for sustainable growth. We need rising recognition that eradicating poverty and achieving social justice is inextricably linked to ensuring ecological stability and renewal. We need to recognise the interconnectedness of the social, environmental and economic dimensions of sustainable growth.
Mainstream economics have failed to deliver inclusive and sustainable economic growth and policymakers continue to rely on economic indicators such as GDP growth, that are not up to the task of measuring what matters for social justice and environmental integrity. New metrics beyond GDP are needed to measure impact of social activity (tonnes of carbon emitted and also social metrics (number of people facing hunger or below one of several different types of poverty lines).
The concepts of entrepreneurism and social entrepreneurism are becoming merged. The raison d’ete of business must be to create a better future for humanity, not just a better bottom line.
Social entrepreneurship equals business entrepreneurship in that each entrepreneur must take responsibility for leaving the world slightly better than he found it. Traditional paradigms must be changed. Social entrepreneurs must demonstrate that there are new ways of creating value, not just for profit, but also for people and the planet. Such a paradigm must gain traction and jolt behemoths of industry to change the way they think about their place in the world.
In Davos 2016, there was concern over lack of trust in business, with more than half citing it as a concern, compared to 37% just three years ago. “Re-shaping companies built on profit alone into ones where profit and purpose combine, is not going to happen quickly or easily, but it’s a transformation that is already starting and that business need to keep pace with,” said Mr Dennis Nally, global chairman of PwC.
Because the problems are too big for any sector, government, business or civil society to solve, everyone needs to come together to find new ways to work together and find innovative solutions to address the world’s biggest social and environmental issues.
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