Europe’s inclusive and responsible growth
Since the start of 2019, young people have taken to the streets to demand bold moves from governments in the fight against climate change. At the same time, France’s Gilets Jaunes are more worried about the end of the month, than the end of the world. How can Europe integrate this desire for greater personal prosperity with environmental and social concerns and still ensure growth? Do we even need more growth?
At the 19th Brussels Economic Forum this week, policymakers were in largely in agreement: what Europe needs is sustainable and inclusive growth.
“Europe does not need growth for the sake of growth but for improving the wellbeing of its people. Growth must be inclusive and sustainable,” said Valdis Dombrovskis, Vice-President of the European Commission.
Spain’s Minister of Economy, Nadia Calviño agreed. The European project, she said, was based on “a promise of prosperity in terms of the welfare of its people and we need to ensure we protect these values while also preserving our ability to be prosperous.”
Gita Gopinath, Chief Economist of the IMF, said that growth in Europe had been week and fragile for the last 12 years. Europe needed more growth but “growth should not come at the expense of inclusiveness. Whenever we consider a policy we should simultaneously think about sustainability,” she said.
Measuring growth
If Europe is serious about wanting to focus on sustainable and inclusive growth, then it needs to look beyond simple measures such as GDP, argued Tim Jackson, Professor at the University of Surrey.
“We need to be sure that GDP growth does not trump other priorities like society and the environment,” he said, adding that “there is no growth on a dead planet.”
Although there is a strong correlation between GDP per capita and wellbeing, the IMF, like many other institutions, was increasingly looking at complementary measures, said Gopinath. “In our own surveillance work we are reporting not just on average performance but also on wealth distribution,” she said, noting that the Fund’s recent report on the US, cited inequality as a source of concern.
Inclusive and sustainable growth
But can Europe grow its economy while simultaneously pursuing its environmental and social goals?
“There is no contradiction between reducing emissions and growth,” said Vice-President Dombrovskis, noting that CO2 emissions in the EU had fallen 22% while its economy had expanded by 50%. The EU’s transition to a low-carbon economy was expected to have a moderately positive effect on jobs overall, he said.
It is also perfectly possible to have labour markets that are both highly flexible and secure, said Gopinath, pointing to the Nordic countries and Denmark as examples. “Flexible labour markets and structural reforms are not anathema to being climate friendly and sustainable,” she said.
A lack of money was not the problem, said Jackson. “The €3.9 trillion euros the European Central Bank has and plans to throw at the economy would be more than enough to finance the investment needed to save our economy from an unworkable climate,” he argued.
Dombrovskis agreed, saying it was necessary “to steer the firepower of international and European financial markets towards financing this planet.”
Minister Calviño urged politicians to make Europe “the vanguard of change for intergenerational justice and fairness, what the European dream means.” “If we succeed in this transition then others will follow our lead” she advised. “ The young are leading the process and we have to listen to them. They are teaching us a lesson and saying ‘we want to have our future – you cannot spend it all.’”
Sharing prosperity in a transformative age
Europe should embrace rather than fear technological advances such as Artificial Intelligence, argued Riccardo Illy, President of the Illy Group, as Europe’s declining birth rate and ageing population mean there will not be enough people to do the jobs in the future.
Tim Jackson, however, warned that AI had the potential to completely “destabilise our economies.” “If we go down the AI route in which most capital is owned by a minority of people we will see an increase in inequality,” he warned.
To prevent this, “we need to move towards a system that rewards people for the results they bring not the number of hours they work,” said Illy. Our education systems also need to evolve, he said, arguing that sustainability and entrepreneurship should be taught in all schools in Europe.