Happy New Year – we can make a better world, but it won’t make itself

4 Jan 2019 Ryan Miller    Last updated: 4 Jan 2019

If we continue to chase some short-term economic growth at the expense of inclusive growth we not only make things harder for the majority of people, we are creating growth that will not be sustained.

 

New year, new us, new start, new everything.

Clichés like this can provide impetus even if they are nonsense. We begin 2019 with our lives in the same shape as they ended 2018, for good and bad.

Using and nurturing the positives, while shearing, changing and (where possible) getting something out of the negatives remains basic but useful strategy. The turn of the Gregorian calendar may be arbitrary but if it serves as a milestone, let it.

Isolating the core thematic concerns of life in Northern Ireland, the UK and the world in general is tricky but Scope is happy to simplify everything to three issues, in no particular order.

The first is environmental – including dwindling resources, the ever-growing (and more frightening) damage done by our casual use and disposal of plastic and, of course, the gargantuan and terrifying reality of climate change.

The second is economic. Most people are struggling, despite some economic growth. The crises of Universal Credit and in-work poverty are blows to the Prime Minister’s championing of high employment – including, of course, zero-hours contracts – and her acknowledgement that more must be done to make sure “everyone in every community can feel the benefit” vastly undersells the problem.

The third is the crisis of information and democracy, and their effects on both our security and freedom. This appears to be a growing problem and how it will develop, or might be solved, is unclear.

These three issues cannot help but be interrelated. Nevertheless, this article will focus on the second, largely in isolation. Towards the end of last year, the International Monetary Fund published its G20 Report on Strong, Sustainable, Balanced, and Inclusive Growth. The paper’s observations are mixed.

Setting up for a fall

In its simplest terms, the report says that there is decent growth among G20 nations, but this is not inclusive, and the number of raised red flags heralding a downturn is increasing – with the IMF saying a more inclusive growth would also be more sustainable growth.

Per the report:

The G-20 economies continue to grow strongly for now, but risks are increasing and progress toward more balanced, sustainable, and inclusive growth is slow.

  • The global expansion continues, with growth for 2018-19 projected to remain steady at a high level. However, there are signs of moderation, growth is more uneven, and risks have risen. Growth remains robust in the United States amid procyclical fiscal policy, but it has slowed in Europe and Japan, and some emerging economies are facing headwinds. Financial vulnerabilities and escalating trade tensions are beginning to leave a mark and can weigh on growth going forward.
  • Prospects for medium-term growth are dim. Productivity growth remains sluggish in many countries, partly reflecting the period of weak investment after the crisis but also decreased labor supply and productivity due to aging—especially in advanced countries but also in emerging ones (e.g., China).
  • Global imbalances persist, and financial vulnerabilities have increased. External imbalances are broadly unchanged, but they are increasingly concentrated in advanced economies and could be exacerbated by the policy mix in some countries. Debt levels are high and financial vulnerabilities have accumulated.
  • Inclusive growth remains a challenge. Inequality—which has been high or rising in many countries— reflects inadequate access to economic opportunities through better education, healthcare and financial services, especially for poor women. The changing future of work could add further to the challenge of achieving inclusive growth.

Recommendations

The report goes on to say that some economies need to keep an eye on or address their public debt or deficit – in the case of the UK, the emphasis is on the latter – amongst other structural vulnerabilities (raising productivity is highlighted as a common problem; this is certainly an issue for the UK – and NI in particular).

Moreover, it has interesting things to say about the necessity of inclusive growth for robustness in the medium- and long-term.

It says: “Depending on country circumstances, investment in human capital—for example, through education—and healthcare, coupled with appropriate redistributive fiscal measures can help ensure that these gains are widely shared…

“Growth that is widely shared and delivers equal opportunities in access to markets and resources is also critical for the sustainability of growth and social cohesion, as excessive inequality can trigger economic instability and it has been associated with a lack of support for growth-enhancing reforms and the emergence of populism and inward-looking policies.”

The IMF’s observations will seem like common sense to many people, especially those who work in the third sector. They are also bound to chime with the majority of people in NI, the UK and the west, whose belts are continually getting tighter thanks to inflationary costs that have increased faster than incomes for the past decade, and continue to do so.

Both those groups might find the IMF a (mildly) surprising strategic ally but there it is; the chorus of people saying that non-inclusive growth is unsustainable continues to grow.

The big unknown – and potential torpedo below the waterline – is Brexit. The IMF report makes no mention of Brexit and its potential for a cascading economic disaster. If growth throughout the G20 sits on shaky foundations then the potential ramifications of a no-deal Brexit in less than three months (a mystifyingly real possibility) go way beyond problems for the UK.

The great irony therein is that this problem – withering personal financial circumstances for the majority of society – is one of the major drivers of our decision to leave the EU.

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