As the world economy starts to emerge from the COVID-19 crisis, the time will soon come for leaders to look beyond safeguarding lives and livelihoods and to set their sights on a more profound challenge: bettering them. This societal challenge might be ten times as big as the pandemic and last ten times as long. The three goals we have in mind—growth, sustainability, and inclusion—buttress one another yet don’t always pull in the same direction; we see powerful reinforcing as well as counteracting loops among them. And so, while many might broadly agree on the aspiration, there’s a very tough question lurking in the background: How do we go about building a future that delivers growth and sustainability and inclusion?
Sustainable and inclusive growth can be a dynamic, self-reinforcing combination, but achieving that will require addressing counteracting forces.
Full disclosure: we’re not going to offer an answer. Instead, we propose a way for changemakers in business, government, and society to explore the problem, a mental model that might offer the best chance to reach the answer. It starts with this: we believe the ands are crucial and that they are in fact the means to the end. The three elements of growth, sustainability, and inclusion are deeply connected and cannot be viewed as trade-offs. Consider this: without growth, how could we achieve prosperity and well-being or pay for the transitions needed to make the economy more sustainable and inclusive? Without sustainability, how could we fashion growth for the current generation and the ones to follow? Without inclusion—an opportunity for productive work and a satisfying life for all citizens—how could we ensure the demand needed to propel growth? Indeed, getting to and—moving to a world in which growth and sustainability and inclusion form a powerful dynamic—is the imperative for the next era of business.
But before we get to the challenge of and, let’s face facts: hastening growth, sustainability, and inclusion are incredibly difficult challenges in their own right. Fortunately, thinkers, strategists, activists, and many others around the world—dreamers and doers—are working on it. We are too. In our view, the world will need to confront three problems simultaneously:
Growth is elusive. In the mature G-7 economies, GDP growth has halved to 1 percent per year on average since the 2008 global financial crisis.1 It’s the same story in emerging economies: despite some exceptions, such as China and India, growth in emerging economies overall has been lower recently than in the early 2000s.
Poverty is still endemic, despite the progress made. More than 600 million people still lived in extreme poverty as of 2017. And in 2020, another 100 million or so people joined them as a result of the COVID-19 pandemic. This will persist unless today’s leaders create sufficient jobs with decent wages, as well as a robust social contract that ensures access to affordable housing, healthcare, and energy for the bottom one to three quintiles of the population, depending on the country. Meanwhile, a new threat to personal income is mounting: the rise of technology-driven changes in the ways we work, which the pandemic has accelerated. We estimate that more than 100 million people will need to make occupational transitions by 2030 in a set of eight advanced and emerging economies.
Ensuring a sustainable future will require massive investment. For example, the International Energy Agency estimates that net-zero emissions might require investments of almost $5 trillion each year by 2030, and $4.5 trillion per year by 2050.2 The annual bill equates to about half of global corporate profits in 2019, or about one and a half times the annual increase in public debt over the preceding 15 years. Additional investments needed for decarbonization in agriculture, transportation, and other sectors could nearly double the bill. While many of these investments would produce a return, their financing or pricing is not yet set up.
And that’s just the start: as we explain in this article, even if the global economy were to get these three goals notionally right, there are contingencies among them that, if left unresolved, could wreck any progress made. READ MORE
By Bob Sternfels, Tracy Francis, Anu Madgavkar, and Sven Smit
Source: mckinsey.com
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