'Green growth is the central economic transformation and investment opportunity ahead of us' Image: REUTERS/Bruno Domingos
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- Growth is essential to meet many of our economic goals, including eradicating poverty, reducing inequality and tackling climate change.
- But our current growth model is environmentally destructive and fuels inequalities through a lack of inclusivity.
- Any new growth model must support people across different contexts and adapt to the needs of different economies.
Global per capita income increased sevenfold in the last century, and the share of people living in extreme poverty fell sharply to less than 10%. In parallel, every indicator of human welfare has seen dramatic gains and today most of us live with material choices and technology that would have been unimaginable a hundred years ago.
Yet, more than 700 million people worldwide remain in extreme poverty. Economic averages and aggregates hide the remaining pockets of unacceptable poverty, insecurity and deprivation. Meanwhile, the quest for economic progress has come at the expense of depleting the planet’s resources and for our children to inherit a world where they can thrive.
No wonder there are growing calls to temper the quest for economic growth and to focus instead on fixing the ills caused by the growth model that the world has followed for much of the 20th century.
We, the co-chairs of the World Economic Forum’s Global Future Council on the Future of Growth, believe that we should not turn away from growth but must transform the growth we have into the growth we want – and need.
Growth is essential to meet many of our economic goals, including eradicating poverty, reducing inequality and tackling climate change. All these goals require growing resources in order to allocate those resources across competing demands without taking from others. It is much easier to allocate resources in a growing economy than in a stagnant one.
Additionally, economic growth is still needed in large parts of the world to cover basic needs and attain higher living standards. The pandemic and successive crises have exacerbated global poverty while progress on the Sustainable Development Goals (SDGs) has stalled. Achieving these goals requires sustained economic growth in countries left behind.
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We cannot, however, afford to continue with an environmentally destructive model of growth. Economic growth has been too carbon-intensive and has fuelled the climate crisis, already hurting global economic prospects. The world is significantly off track from its goal of limiting warming to 1.5℃, and a swift and massive phasing down of fossil fuels is needed to mitigate rising temperatures.
Both climate mitigation and adaptation require enormous investment with estimates at trillions of dollars annually – far more than the $630 billion of current annual climate finance. Growth is needed to meet these financing needs, while growth itself must be sustainable and driven by clean energy and must adhere to the hard carbon budget needed to achieve net zero.
At the same time, growth must also be resilient to the shocks that will likely increase with climate change. Green growth is the central economic transformation and investment opportunity ahead of us, and our policy-making and business models need to adapt to support that.
Moving to a green growth model is also crucial to increasing productivity without which living standards cannot be sustained. Labour productivity, an important driver of growth, has been declining in advanced economies since the 1990s and over the past decade in emerging markets and developing economies. This decline was only compounded by the pandemic and recent crises. This will involve harnessing technology, exploring sectoral strategies and prioritizing human capital.
Finally, growth must be inclusive. After decades of reducing inequality, global convergence has stopped and many feel they have been left behind by globalization. Increasing inequality has fuelled geopolitical fragmentation between poorer and more prosperous countries, as well as contributing to instability and discontent within domestic borders.
While economic growth needs to continue to reduce domestic and global inequality, it must also focus on lifting marginalized communities, factoring in gender, religion, race, ethnicity and more, to ensure growth benefits all. This is important because no model of economic growth can be sustained without popular support. The hollowing out of the middle class underpins the pushback against the current growth model, and finding ways to support and empower the middle class in all countries is essential to building support. It is also a vibrant and prospering middle class that provides a market for domestic and international entrepreneurs and serves as an incubator for innovation and ideas.
Many issues are two sides of the same coin: artificial intelligence and technology have the potential to eliminate jobs through automation and widen inequality; they can also drive labour productivity and create new products, services, markets and industries, driving up demand and growth.
Demographic change, particularly the ageing of advanced economies and the forecasted demographic growth of the African continent, could create stagnation in some economies. If harnessed wisely, however, they can bridge job and labour needs across countries. In all scenarios of future growth, investing in people will be critical. Advancing skills and human capital development can drive productivity and empower people.
Moving from the growth we have to the growth we want is more than a technical, managerial or policy project. It is a political movement that requires leadership, vision, campaigning, and broad-based support.
Recent history is replete with examples of governments, especially in liberal democracies, having to backtrack on necessary environmental proposals in the face of popular protest. The hard carbon budget may be nearly exhausted, but the domestic political agenda does not reflect this sense of urgency.
Many of these problems cannot be solved without multilateral cooperation, but we are still struggling to find consensus amidst geopolitical fragmentation and great power rivalry. Growth strategies imposed from the outside or above will not succeed. Any new growth model must support people across different contexts and adapt to the needs of different economies.
The potential exists to reshape our global growth story, enhancing life quality, economic stability and environmental health. Growth is necessary but realizing the desirable form of growth demands transcending immediate self-interests and fostering widespread political and public backing.
The authors are co-chairs of the World Economic Forum's Global Future Council on the Future of Growth, part of the Future of Growth Initiative. The initiative aims to support policymakers in balancing growth, innovation, inclusion, sustainability and resilience goals while managing the trade-offs and leveraging their synergies. For more information, or to get involved, please contact firstname.lastname@example.org.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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