The world is at a social, environmental andeconomic tipping point. Subdued growth, rising inequalities and acceleratingclimate change provide the context for a backlash against capitalism,globalization, technology, and elites. There is gridlock in the internationalgovernance system and escalating trade and geopolitical tensions are fuelinguncertainty. This holds back investment and increases the risk of supplyshocks: disruptions to global supply chains, sudden price spikes orinterruptions in the availability of key resources.
Persistent weaknesses in the drivers ofproductivity growth are among the principal culprits. In advanced, emerging anddeveloping economies, productivity growth started slowing in 2000 anddecelerated further after the crisis. Between 2011 and 2016, “total factorproductivity growth” – or the combined growth of inputs, like resources andlabour, and outputs – grew by 0.3 percent in advanced economies and 1.3 percentin emerging and developing economies.
The financial crisis added to thisdeceleration. Investments are undermined by uncertainty, low demand and tightercredit conditions. Many of the structural reforms designed to reviveproductivity that were promised by policy-makers did not materialize.
Governments must better anticipate theunintended consequences of technological integration and implementcomplementary social policies that support populations through the FourIndustrial Revolution. Economies with strong innovation capability must improvetheir talent base and the functioning of their labour markets.
Adaption is critical. We need awell-functioning labour market that protects workers, not jobs. Advancedeconomies need to develop their skills base and tackle rigidities in theirlabour markets. As innovation capacity grows, emerging economies need tostrengthen their skills and labour market to minimize the risks of negativesocial spillovers.
Sustainable economic growth remains the surestroute out of poverty and a core driver of human development. For the pastdecade, growth has been weak and remains below potential in most developingcountries, seriously hampering progress on several of the UN’s 2030 SustainableDevelopment Goals (SDGs).
The world is not on track to meet any ofthe SDGS. Least developed countries have missed the target of 7 percent growthevery year since 2015. Extreme poverty reduction is decelerating. 3.4 billionpeople – or 46 percent of the world’s population – lived on less than US$5, 50a day and struggled to meet basic needs. After years of steady decline, hungerhas increased and now affects 826 million up from 784 million in 2015. A totalof 20 percent of Africals population is undernourished. The “zero hunger”target will almost certainly be missed.