Don Tapscott is writing from Davos for The Globe and Mail. He is chancellor of Trent University and an author, most recently (with his son Alex) of the book Blockchain Revolution.
Here at Davos, U.S. president-elect Donald Trump is the elephant not in the room. Mr. Trump is the backdrop to every discussion and people are worried. After his election and Brexit there is concern that extreme right-wing populism could sweep Europe in coming elections. People worry that NATO is at risk and that Mr. Trump would like to see the breakup of the European Union.
The president-elect is calling into question a half-century of understanding about how the world works. He is questioning the security agreements that have kept the world relatively stable after two catastrophic wars. He is also questioning basic trade partnerships, global institutions and international understandings of the modern world.
The fuel for this populist anger at elites is the prosperity paradox: Wealth creation is occurring (albeit slowly) but it is not leading to widespread prosperity for the population.
We need growth, but it has to be inclusive. Yes, stock markets are up and penthouse prices in global capitals are soaring. But the annual median per capita income declined across all advanced countries by average rate of 2.4 per cent over the past five years. The rich are getting richer while most other citizens are getting poorer.
The Davos people want deep "structural reform" in market economies that will fuel growth and reduce inequality at the same time. The World Economic Forum argues that sustained, broad-based progress in living standards should be recognized by policy makers as the bottom-line objective of national economic performance. People do not live on GDP alone. Citizens also need economic opportunity, security and quality of life.
A good example is Canada. In a report in which the Forum ranked countries by the overall well-being of its citizens, Canada came 15th. This is despite our economy doing relatively well.
I asked Richard Samans, the Forum's managing director, about Canada's poor showing. He said Canada's strong performance is pulled down by our "below-average rankings for income inequality, poverty rate, net national saving, carbon intensity and public debt."
With respect to our strengths, Mr. Samans said that "the data in the report indicate that Canada stands out among advanced countries for the quality and equity of its educational system, relatively high level of home and pension asset ownership, and effectiveness of its financial system in supporting real economy business investment."
Mr. Samans is optimistic about our country. "Canada is a leading example of a country that is taking the challenge of inclusive growth seriously. It has both strengths to build on and weaknesses deserving further attention, and many of the latter are the focus of the government's growth strategy."
To achieve inclusive growth, Canada needs to build a stronger innovation economy. This doesn't mean retreating from extractive industries but building hubs for innovation and business building.
The Forum's research shows that many countries say they like the idea of inclusive growth, but this doesn't seem to be changing their policies. Chief economic advisers and finance ministers need to prioritize inclusiveness every bit as much their traditional focus on macroeconomic, financial supervisory and trade policy.
To replace the GDP, the Forum calls for an Inclusive Development Index (IDI). This would be based on 12 key performance indicators of inclusive development. The index has three pillars. The first is growth and development, which includes GDP growth, labour force participation and productivity, and healthy life expectancy. The second is inclusion, including median household income, poverty and inequality measures. The third is intergenerational equity and sustainability, including adjusted net saving (including natural capital depletion and human capital investment), demographic dependency ratio, public debt and carbon intensity.
The Forum believes that growing inequality is not "an iron law of capitalism." We can have both growth and inclusion. We just need to find the political will.
Don Tapscott