In this interview, Ruth Bergan (Transform Trade) and Phil Bloomer (Business & Human Rights Resource Centre) analyse what is meant by ‘Accelerated, Inclusive & Resilient Growth’, how to anchor these issues within a growth metric and its potential impacts on the international economic system. Full series around the G20 can be read here.
How can growth be ‘accelerated, inclusive and resilient’?
Ruth Bergan: Given that discussions around economics have broadened in recent years to include concepts such as donut economics and the circular economy, the focus of India’s G20 presidency comes as a surprise. Recent evidence suggests that accelerated growth is often neither inclusive nor resilient. In a globalised economy, the benefits of growth often accrue to the most powerful actors: the richest countries, companies and individuals.[1] Examples of this include the ‘hourglass’ shaped concentration of power in supply chains that see major agribusinesses making huge profits or the significant amounts being raked in by energy companies, both at a time when communities are struggling to afford food and keep the lights on.[2] It is also clear that, despite some evidence of decoupling for a small number of economies, growth tends to entail increased greenhouse gas emissions.[3]
Free trade – both the liberalisation of trade through international agreements, and more globalised supply chains – has been viewed as one of the main mechanisms driving accelerated growth. However, recent years have seen a growing consensus that the gains from increased international trade will not necessarily be equitably distributed and that the trade system has not lived up to its promise to help raise living standards and ensure full employment, “while allowing for the optimal use of the world’s resources”.[4] In the UK, scoping studies ahead of trade negotiations continue to show an increase in emissions as a result of new agreements.
Phil Bloomer: The ‘growth model’ of the last forty years is unsustainable. It has encouraged business and investors to externalise their environmental and social costs – accelerating climate breakdown, a fifth mass extinction, and unsustainable levels of inequality that now threaten the fabric of our societies and democracies. These are major market failures.
“Business as usual is not an option. Governments will need to be far more active in shaping markets to deliver a form of growth that delivers a just transition to climate security and shared prosperity.”
Business as usual is not an option. Governments will need to be far more active in shaping markets to deliver a form of growth that delivers a just transition to climate security and shared prosperity. This will require more assertive business regulation and incentives that send unambiguous market signals to business to stop emitting greenhouse gases, respect human rights across their supply chains, and generate growth with productivity gains shared by the majority.
The good news is that key governments are tentatively moving towards this new approach with green industrial policy, and human rights and environmental due diligence legislation as two examples. The mis-named Inflation Reduction Act in the USA, and the European investment in the Green Deal are massive incentives for investment in economic transition to zero carbon economies, with resilience and inclusion at the core of their strategies. In Europe, these incentives are complemented with business regulation to insist companies adopt transparent reporting, and human rights and environmental due diligence.
Does this require the refiguring of growth metrics, such as Gross Domestic Profit (GDP)?
Ruth Bergan: The short answer is yes: growth, together with increased free trade, cannot be seen as ends in themselves.
“Growth must be actively oriented towards an economy that is inclusive and resilient. This means redefining what success means for an economy in the context of the climate and inequality crises…”
Growth must be actively oriented towards an economy that is inclusive and resilient. This means redefining what success means for an economy in the context of the climate and inequality crises: we are likely to need some growth, but in which industries? And how will that growth operate within planetary boundaries? Our definition of an inclusive economy must include the aim of achieving decent work for all and, unlike current GDP measures, recognise the huge contribution of workers in the informal sector who often experience the poorest conditions and worst abuses. But that won’t be enough: a sustainable economy must also take into account the ‘caring economy’, recognising in particular the significant unpaid reproductive work that women continue to do around the world.
“[…] a sustainable economy must also take into account the ‘caring economy’, recognising in particular the significant unpaid reproductive work that women continue to do around the world.”
Fresh thinking about what an inclusive, resilient trade system might look like will need to be at the heart of this. At Transform Trade we have already started developing ideas, in collaboration with the communities and producers we work with around the world.[5] One of the essential building blocks will be shifting the power within supply chains so that workers and communities can help to shape them for good.[6]
Phil Bloomer: GDP is a powerful indicator of the amount of goods and services provided by an economy each year. That’s important to know, but that’s all it is. It is a very poor measure of what society actually values or of our progress towards human welfare, climate security and shared prosperity.[7]
“[GDP] is a very poor measure of what society actually values or of our progress towards human welfare, climate security and shared prosperity.”
GDP alone says nothing of the distribution of wealth in our societies, or the scale of pollution of the environment on which we all depend, and simply ignores unpaid care work that plays such a critical welfare role. The UK economy grew after 2008, but all the growth was captured by the top decile (in fact more than all). This scale of active inequality leads swathes of people to believe the ‘system’ does not work for them. And, at present, unfortunately, they are right.
The alternatives, or additions, to GDP are legion. But whether it is Bhutan’s Gross National Happiness, Europe’s Quality of Life indicator, or Canada’s Quality of Life Framework, they need to measure wellbeing (health, housing, work and wages, and inequalities), sustainability and resilience (our stocks and flows of capital – environmental, economic, human, and social) and inclusion (inequalities and deprivations). Of course, GDP is neat and tidy – just one indicator that is relatively easy to calculate. But it is like mountaineering with a compass but no map.
“Of course, GDP is neat and tidy – just one indicator that is relatively easy to calculate. But it is like mountaineering with a compass but no map.”
What lessons can be learnt from analysing the economies of the G20 who are developing in an age of sustainability and inclusivity?
Ruth Bergan: What is striking about the G20, as a club of the world’s richest economies, is that it demonstrates that a strong economy that is more open to trade does not necessarily equate with inclusivity or resilience. For example, South Africa ranks as the world’s most unequal country (more equal countries aren’t necessarily so because they are poor, Belgium and Iceland figure in the top ten at this end of the scale).[8] India itself is both the world’s fifth largest economy and also home to almost one quarter of the world’s poor.[9] Of the individual G20 country members, only Argentina is not also a member of the top 20 most greenhouse gas emitting countries.[10]
“In trade terms, the evidence that the world’s most powerful countries are pushing towards greater sustainability and inclusivity is mixed at best.”
In trade terms, the evidence that the world’s most powerful countries are pushing towards greater sustainability and inclusivity is mixed at best. Some, including the UK, Canada and the US have taken steps to incorporate mostly non-binding provisions on things like climate change, gender equality and labour rights into their trade agreements. However none are members of the Agreement on Climate Change Trade and Sustainability, which, whilst far from perfect, goes further than most initiatives in seeking to align three crucial and interdependent areas. Instead of focusing on inclusivity and sustainability, the biggest global powers, the US, China and the EU, have been engaged in a fight for pole position in key strategic areas such as energy, critical minerals and setting global norms, for example in regulation and the digital economy.
Phil Bloomer: Democratic politicians in Europe, the USA, and other key G20 countries like Brazil, have realised that the rise of anti-democratic and authoritarian forces is linked to the public’s rising fear that their economies are not serving them. As Mark Carney, former Governor of the Bank of England, said “Rather than a new golden era, globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities”.[11] The growth in extreme inequalities belies the once confidently proclaimed mantras of rising tides, lifting boats and trickle-down economics. Populist, authoritarian leaders thrive in these waters of public fear and uncertainty, providing easy answers that blame ‘others’ and tear at the tissue of our societies’ mutual trust.
“Populist, authoritarian leaders thrive in these waters of public fear and uncertainty, providing easy answers that blame ‘others’ and tear at the tissue of our societies’ mutual trust.”
This has given new impetus to assertive government action to shape markets in G20 countries and beyond. The ‘Overton Window’ is expanding with previously unthinkable policies becoming sensible and desirable.[12]
The economic downturn and cost-of-living crisis has heightened this struggle between populist and democratic forces, as have the consequences of worsening conflicts, especially Russia’s invasion of Ukraine and now the human suffering in Gaza and Israel.
Industrial policy is rightly back after 40 years of ideological disparagement: ‘governments cannot pick winners’. The USA has focused market-shaping on unprecedented business incentives. The Chips Act and the Inflation Reduction Act, passed in August 2023, together include more than $400bn in tax credits, grants and loans. By April 2023, the Financial Times reported over 75 major projects with companies promising to create at least 82,000 jobs and capital spending commitments nearly 20 times greater than in 2019.[13] The IRA incentives also promote rights for workers.
Europe has an equivalent investment in the European Green Deal.[14] And Europe increasingly complements these incentives with regulations to insist companies adopt transparent reporting (Corporate Sustainability Reporting Directive), and to demand they identify and address the human rights and environmental risks for workers and communities in their operations and supply chains (Corporate Sustainability Due Diligence Directive – CSDDD).[15]
The European Commissioner, Didier Reynders, was clear when he initiated the process of developing the CSDDD: it is meant to fundamentally shift European business models to respect human rights and stop environmental harm. If final negotiations are successful, the Directive will fundamentally shift the calculus of risk in boardrooms towards respect for human rights and environmental regeneration. This is why responsible companies and investors welcome the Directive as creating a ‘level playing field’ for social and environmental responsibility.
Other examples of this shift to community and workers’ empowerment, plus ecological regeneration include: Brazil’s proposed Corporate Accountability Bill that will “require companies to respect and protect human rights, conduct due diligence on human rights risks in their operations, and establish mechanisms to remedy any human rights violations that may occur”; a “major overhaul of Mexico’s Mining Regulation” that expands community workers’ and environmental rights; and outside the G20, Sierra Leone’s Mines and Mineral Development Act that enshrines community consent and women’s land rights.[16]
How can the UK Government institutionalise inclusive and resilient growth for the widest benefits? And what would be/are the largest obstacles and opportunities to the UK’s approach?
Ruth Bergan: On the global stage, the UK Government could position itself as a champion of an inclusive and resilient global economy. It could help to change the narrative so that trade is fully aligned with key UK foreign policy ambitions such as achieving the Sustainable Development Goals (SDGs) and delivering on the Paris Climate Agreement. A UK trade strategy that sets out how this might be done would be a good start.
As Antonio Gutterres has said, keeping global warming to 1.5 degrees will need us to “massively fast-track climate efforts by every country and every sector and on every timeframe”.[17] Trade cannot be excused from these efforts.
Inclusivity and resilience go hand-in-hand. To design a truly resilient approach to trade, the UK could pioneer ways of ensuring that communities are able to participate in the development of trade policy.
“To design a truly resilient approach to trade, the UK could pioneer ways of ensuring that communities are able to participate in the development of trade policy.”
There are many organisations globally who seek to ensure trade happens in a sustainable way and could be part of such an initiative. Seatini, Third World Network, GRAIN and Focus on the Global South are just a few examples. Citizens’ assemblies provide an interesting model for this kind of engagement and there have been a number of projects in the UK using related techniques and focusing on trade, including Which?’s National Trade Conversation.[18]
“If the UK can learn one thing […] it’s that ordinary people recognise the importance of trade and want to engage, given the opportunity.”
If the UK can learn one thing from the existence of these organisations and the success of creative consultation on trade, it’s that ordinary people recognise the importance of trade and want to engage, given the opportunity.
Phil Bloomer: In the few lines available, let me focus on one key change that could be transformational to our economy: the purpose of the corporation.
“[…] one key change that could be transformational to our economy: the purpose of the corporation.”
Our chances of achieving ‘accelerated, inclusive and resilient growth’ are stymied by the current blinkered interpretation of corporate law to maximise the short-term financial returns to shareholders. This interpretation helps drive inequality, too many socially useless outcomes, and our climate emergency.
In 2019, the British Academy, with many senior business advisors, concluded “that the purpose of business is to solve the problems of people and [the] planet profitably, and not profit from causing problems.” They went on to state eight ‘Principles for Purposeful Business’. They included “Regulation should expect particularly high duties of engagement, loyalty and care on the part of directors of companies to public interests where they perform important public functions.” And “Corporate governance should … establish accountability to a range of stakeholders.” And “Measurement should recognise impacts […] in their workers, societies and natural assets both within and outside the firm.[19]
This is a radical agenda for the UK, (though now increasingly mainstream across Europe and some emerging markets): it would mean company directors have a higher duty of care for the public interest; are accountable to communities and workers, not just investors; and act on ‘double materiality’ – namely the risks to the company of human rights abuse and pollution, as well as risks to workers and communities, in the company’s operations and supply chains.
As Andy Haldane pointed out in 2015, when Chief Economist at the Bank of England: “A generation ago…the average share was held by the average shareholder for around six years. Today, that average share is held by the average shareholder for less than six months.” He also highlighted that in 1970, 10% of profits were typically paid to shareholders through dividends. Today, however, that figure is between 60% and 70% – essentially “eating themselves” by starving investment for growth.[20]
Of course, there are many other key elements to inclusive and resilient growth including green industrial policy, public investment in sustainable infrastructure, paid for by taxes on the super-rich as Prof Jayati Ghosh recommends and the strengthening of workers’ rights to ensure growth in productivity is better shared.[21]
In the context of the current inflation crisis, how should the UK’s political parties look to prioritise ‘accelerated, inclusive and resilient growth’ as we approach the next general election?
Ruth Bergan: Both David Cameron and Lisa Nandy, in their new international roles, have spoken about the need for the UK to regain its standing when it comes to international development. The UK was at one time recognised for its global leadership on aid and debt, but trade remains unfinished business.
“The UK was at one time recognised for its global leadership on aid and debt, but trade remains unfinished business.”
Even Crawford Falconer, the UK’s second permanent representative for trade and a devout free-trader, admitted earlier in November that the trade system was not fit for purpose for tackling climate change.[22]
The UK Government has tended to emphasise the self interest in meeting our international commitments, for example giving high priority to seeking benefits for the UK private sector at the food security summit on 20th November.[23] This needs to change. In a context of climate change and increasing instability, no strategy for resilient growth can be shaped by the national interest alone. Instead, it must be built on the SDG commitment to “leave no-one behind”.[24]
The challenge for UK political parties as they approach the coming General Election, will be to break free from a narrative that has for too long been dominated by domestic issues and rediscover their internationalist credentials, this time shaped by the people at the sharp end of growth and globalised trade.
Phil Bloomer: There is perhaps a year to the next General Election in the UK. In this year, the major political parties have a critical role to play in explaining to the British public the enormous opportunity of our transition to a net zero economy. All political parties need to invest heavily in building public trust to counter the active disinformation of nefarious conspiracy theories on social media against rapid climate action.
Politicians must speak to a new social contract where, with care and strategy, the growth and benefits of the transition accrue to the majority, and the costs are minimised. It will also demand honesty and openness about the disruptions there will be as dirty industries transform, alongside genuine promises of major investment in social protection for affected workers and communities.
The UK current model does not deliver climate security or inclusive growth. The New Economics Foundation found the poorest half of UK families were £110 worse off since the General Election in 2019 while the top five per cent are an estimated £3,000 better off.[25] In 2022, the CEOs of Britain’s biggest companies gained a 16% pay rise, sending their average earnings to 118 times the median UK full time pay.[26] The International Monetary Fund states: “Excessive inequality can erode social cohesion, lead to political polarization, and lower economic growth.”[27] UK political parties need to explain the growth penalty from high inequality, and the importance of investing more at the bottom of the pyramid which generates demand in the economy, increases tax revenues, and reduces public spending on essential welfare while enhancing human dignity and freedoms.
“[…] the UK public seeks a candid conversation about our economic future – the opportunities and the challenges we face half-way through the decisive decade for our climate security.”
In this final year before the election, the UK public seeks a candid conversation about our economic future – the opportunities and the challenges we face half-way through the decisive decade for our climate security.
Ruth Bergan is Head of Policy and Advocacy at Transform Trade. She has worked on international trade policy for over 13 years, including work on the impact trade rules have for climate goals, improving democratic scrutiny of trade policy and exposing the injustice in the international investment protection regime. Previously she worked on workers’ rights in international supply chains and international migration.
Phil Bloomer became Executive Director of Business & Human Rights Resource Centre in 2013. Phil leads strategy and outreach globally working with 80 global team members and allies. Programmes are focused on transformation of business and investment models especially in areas of the just transition to net zero carbon; labour rights in supply chains; rights in technology and civic freedoms. Phil sits on several external groups including Civil Society Advisory Group for Principles for Responsible Banking, the Expert Review Committee of World Benchmarking Alliance; Climate Outreach’s Board, and the European Citizen’s Initiative for a Living Wage. Prior to joining the Resource Centre Phil was Director of Campaigns and Policy at Oxfam GB, joining them after 11 years in Latin America working on human rights and indigenous rights.
[1] Bob Sternfels, Tracy Francis, Anu Madgavkar, and Sven Smith, Our future lives and livelihoods: Sustainable and Inclusive and growing, McKinsey Featured Insights, October 2021, https://www.mckinsey.com/featured-insights/sustainable-inclusive-growth/our-future-lives-and-livelihoods-sustainable-and-inclusive-and-growing
[2] Researchgate, Figure 3, Source publication: A global food polity: ecological-democratic quality of the twenty-first century political economy of food, August 2017, https://www.researchgate.net/figure/shows-the-so-called-hourglass-shape-of-the-agrifood-market-communication-between-the-two_fig3_318654053
[3] Esin Serin, Can we have economic growth and tackle climate change at the same time?, Grantham Research Institute on Climate Change and the Environment at LSE, June 2022, https://www.lse.ac.uk/granthaminstitute/explainers/can-we-have-economic-growth-and-tackle-climate-change-at-the-same-time/
[4] World Trade Organization, Marrakesh Agreement Establishing the World Trade Organization, https://www.wto.org/english/docs_e/legal_e/04-wto_e.htm
[5] Transform Trade, People centred trade, https://www.transform-trade.org/people-centred-trade
[6] Ese Emerhi, #ShiftThePower Manifesto for Change: Where it started and where we are now, BOND UK, March 2022, https://www.bond.org.uk/news/2022/03/shiftthepower-manifesto-for-change-where-it-started-and-where-we-are-now/
[7] Anam Parvez, The Gross Domestic Problem: What would a new economic measure that values women and climate look like?, Oxfam Views & Voices, August 2023, https://views-voices.oxfam.org.uk/2023/08/the-gross-domestic-problem-what-would-a-new-economic-measure-that-values-women-and-climate-look-like/#:~:text=Oxfam’s%20paper%20published%20today%2C%20a,compass%20of%20an%20economic%20system
[8] World Population Review, Wealth Inequality by Country 2023, https://worldpopulationreview.com/country-rankings/wealth-inequality-by-country
[9] Roy Katayama & Divyanshi Wadhwa, Half of the world’s poor live in just 5 countries, World Bank Blogs, January 2019, https://blogs.worldbank.org/opendata/half-world-s-poor-live-just-5-countries
[10] WorldOMeter, CO2 Emissions by Country, https://www.worldometers.info/co2-emissions/co2-emissions-by-country/
[11] Speech given by Mark Carney, The Spectre of Monetarism, Bank of England, December 2016, https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/the-spectre-of-monetarism.pdf
[12] Explainer on the ‘Overton Window’: Maggie Astor, How the Politically Unthinkable Can Become Mainstream, The New York Times, February 2019, https://www.nytimes.com/2019/02/26/us/politics/overton-window-democrats.html
[13] Amanda Chu and Oliver Roeder, ‘Transformational change’: Biden’s industrial policy begins to bear fruit, Financial times, April 2023, https://www.ft.com/content/b6cd46de-52d6-4641-860b-5f2c1b0c5622
[14] European Commission, The European Green Deal: Striving to be the first climate-neutral continent, The European Commission Priorities 2023, https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en
[15] European Commission, Corporate sustainability due diligence: Fostering sustainability in corporate governance and management systems, The European Commission, February 2022, https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en
[16] Carrot & Sticks, Bill No. 572, of 2022. 2022, https://www.carrotsandsticks.net/reporting-instruments/22-65-bill-no-572-of-2022-creates-the-national-landmark-law-on-human-rights-and-businesses-and-establishes-guidelines-for-the-promotion-of-public-policies-on-the-subject/; Dante Trevedan and Hernán González, Major overhaul to Mexico’s mining regulation, Norton Rose Fulbright, May 2023, https://www.nortonrosefulbright.com/en/knowledge/publications/04715af1/major-overhaul-to-mexicos-mining-regulation
[17] United Nations Meetings Coverage and Press Releases, Secretary-General Statement, Secretary-General Calls on States to Tackle Climate Change ‘Time Bomb’ through New Solidarity Pact, Acceleration Agenda, at Launch of Intergovernmental Panel Report, March 2023, https://press.un.org/en/2023/sgsm21730.doc.htm
[18] Advocacy team, National Trade Conversation, Which?, November 2020, https://www.which.co.uk/policy-and-insight/article/national-trade-conversation-aG1aV8N0pv7l
[19] The British Academy, Principles for Purposeful Business: How to deliver the framework for the Future of the Corporation, 2019, https://www.thebritishacademy.ac.uk/documents/224/future-of-the-corporation-principles-purposeful-business.pdf
[20] Duncan Weldon, Shareholder power ‘holding back economic growth’, BBC News, July 2015, https://www.bbc.co.uk/news/business-33660426
[21] Jayati Ghosh, Davos Man Must Pay, Project Syndicate, January 2023, https://www.project-syndicate.org/commentary/world-economic-forum-davos-tax-rich-wealth-climate-change-by-jayati-ghosh-2023-01
[22] Jon Stone, Britain’s chief trade negotiator backs scrapping UK regulations to get deals, Independent, September 2017, https://www.independent.co.uk/news/uk/politics/crawford-falconer-trade-deal-negotiator-regulations-legatum-institute-a7940216.html
[23] British Embassy Mogadishu, UK to host global summit to turn the dial on world hunger, Gov.uk, September 2023, https://www.gov.uk/government/news/uk-to-host-global-summit-to-turn-the-dial-on-world-hunger
[24] UN Sustainable Development Group, Principle Two: Leave No One Behind, https://unsdg.un.org/2030-agenda/universal-values/leave-no-one-behind
[25] Dominic Caddick and Alfie Stirling, Half of UK Families are £110 worse off a year since 2019 General Election, New Economic Foundation, December 2021, https://neweconomics.org/2021/12/two-years-on-britain-has-been-torn-apart-not-levelled-up
[26] Rosie Neville, Andrew Speke and Luke Hildyard, Analysis of UK CEO Pay in 2022: High Pay Centre, High Pay Centre, August 2023, https://highpaycentre.org/wp-content/uploads/2023/08/Copy-of-CEO-pay-report-2023-1-1.pdf
[27] Income inequality Overview, International Monetary Fund Website, Last updated September 2023, https://www.imf.org/en/Topics/Inequality
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