…Climate change risks wiping out one-quarter of global GDP and inflicting immeasurable suffering. Governments and businesses urgently need to shift to a low-carbon economy, eliminate harmful subsidies, support climate-threatened states and pursue a price for carbon.
…Ageing in developed economies and burgeoning youth in developing economies offer opportunities for growth. Governments need to think how to protect people not jobs.
…Inequality is another pressing issue – 800 million people still live in poverty and that number is growing. Investment in digital connectivity and the innovation economy is vital to generate growth and redistribute its benefits more fairly
Davos-Klosters, Switzerland, FRI, JANUARY 25 2019-theG&BJournal-The risks posed by climate change topped the discussion in the closing session of the World Economic Forum Annual Meeting. Surface temperatures have already risen by nearly 1°C and are not stopping, with the five warmest years on record occurring since 2010. A rise of 3°C will wipe out 25% of global GDP, while the cost in human suffering will be immeasurable, according to the World Bank.
“Climate change is happening faster than we thought it would,” said Kristalina Georgieva, Chief Executive Officer of the World Bank. She called on government and business to eliminate harmful subsidies for energy and agriculture, invest in shifting to a low-carbon economy, support those countries most at risk from the consequences of climate change, and relentlessly pursue a price for carbon.
Climate-harming subsidies have been halved, but $300 billion still need to go. Egypt, for example, has slashed its energy subsidies from 7% to 3% of GDP, which has released new money to invest in people and renewables as well as making the energy sector more attractive for private investors. The low-carbon economy has already created 65 million new jobs and company bosses increasingly realize that climate-friendly investments are good for their bottom lines and reputations.
Seventy jurisdictions have now put a price on carbon and policy-makers must relentlessly roll this out globally to put wind in the sails of the low-carbon economy. Georgieva added that “it is morally right and also absolutely essential for the sustainability of our world” that countries such as Niger, Chad and the small island states, which did little to contribute to climate change yet face the worst of its consequences, are supported in adapting to a changing environment.
The G20 has defined demographic change as one of its major priorities. In developed economies such as Japan, an ageing population threatens to decrease the labour force, increase social-sector costs and depress growth. But the government has found an untapped pool of talent in the country’s women. Over the past five years, the participation of women in the Japanese labour market has soared, surpassing the US and approaching Nordic levels. Over the same period, Japan’s labour productivity increased the fastest of any G7 economy, said Haruhiko Kuroda, Governor of the Bank of Japan.
Meanwhile, artificial intelligence and the internet of things have filled the labour gap left by the ageing population. In developing countries such as South Africa, governments are grappling with how to find jobs for a burgeoning population of young people. Lesetja Kganyago, Governor of the South African Reserve Bank (SARB), celebrated the energy and creative spirit that young people bring to the economy. But, with technology transforming societies at such a rapid pace, he called on governments to rethink how education systems give young people the capacity to embrace the opportunities of the changing economy. From a policy perspective, governments and unions need to work together to make the transitions in labour that are needed. “You cannot protect jobs,” said Kganyago, “you must think how we protect people.”
Inequality remains a pressing issue to address. The top 1% in G20 countries earn 10% of total income, while half the world has nearly no access to healthcare. The rate at which low- and high-income countries are converging has slowed. Meanwhile, 800 million people live in extreme poverty – and that number is growing in sub-Saharan Africa, driven by conflicts, natural disasters, population growth and bad governance.
One way to eliminate inequality is to link innovation – a key driver of long-term growth – to the Sustainable Development Goals (SDGs), said Mariana Mazzucato, Professor of Economics of Innovation and Public Value at University College London. “Can we frame the SDGs into concrete missions as bold as the one to get to the moon and back again in one generation?” she asked.
The big development banks in Africa and Asia can help by crowding in public and private funding for innovative solutions. Companies need to rethink the priority to maximize shareholder value and instead prioritize stakeholder value, said Mazzucato.
In Africa, the “weapon of choice” to fight extreme poverty is digital connectivity, argued Georgieva. Investing in connecting every trader to the internet, every individual to mobile banking will be a game-changer, she said.
Getting governance right is key to solving the world’s most complicated problems. While we don’t need to reinvent the Bretton Woods institutions, we do need to “start by restoring our trust in multilateralism” while taking concrete action at the country level to give effect to multinational agreements, argued Lesetja Kganyago.
Kuroda advised leaders to create new global frameworks – if not institutions – to reform international taxation and to guarantee cross-border data security. Georgieva called on leaders to focus more attention on those who are losing out and left behind. “Put decisions into the hands of mums and grandmothers and you’ll see great things happen” she said, to applause from the hall.
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