Davos 2018 diary: Global leaders face decision on addressing inequality
A decade after the shock of the financial crisis, the search for reliable markers to measure the economic health of nations and their fiscal policies continues. On the eve of its 48th annual meeting in Davos, the World Economic Forum released the latest report of its own measurement tool: the Inclusive Development Index.
It has long been acknowledged that while gross domestic product is an important measurement of the state of a country’s economy, it is far from sufficient. Attempts at a more holistic approach to measuring the economic stability and strength of a country have seen the launch of the social progress index, the happiness index and others. The WEF is hoping that the Inclusive Development Index becomes the hallmark for measuring growth that includes a wider strata of society – and also to tackle the widening wealth gap. Explaining the thinking behind its index, the forum says reliance on GDP alone is fuelling inequality and short-term policies for political gain. Rather, the Inclusive Development Index relies on 15 markers. From the snowy slopes of Davos, participants will examine these markers and consider how to strengthen their economies.
This year’s meeting kicks off under the shadow of a stark statistic issued by Oxfam: the world's wealthiest 1 per cent got 82 per cent of the wealth generated in 2017. Many of them will be present or have their interests represented in Davos. The warning is clear. A continuation of this disparity will only lead to more divisions and political instability, which is why inclusive growth will be the key theme at the meeting.
The WEF's new index is also an acknowledgement of how much the fourth industrial revolution – a term coined by its chairman, Klaus Schwab – has affected economic activity and livelihoods. With the future of work impacted by technological advances and low-skilled jobs threatened by automation, inclusive approaches to growth are needed for sustained growth. However, it will not be easily adopted. With world leaders like US president Donald Trump promoting tax cuts for the rich, protectionism and short-term measures, it will be a challenge to get decision-makers to adopt inclusive and long-term approaches.
The task in Davos this week will be to incorporate findings from the index report – which includes only the 103 countries that have the right indicators to measure – in their decision-making.