The concept of inclusive growth is comparatively new in the arena of development economics. Along the lines of the definitions of pro-poor growth to which they relate, these conceptualizations of inclusive growth focus on outcomes. Klasen (2010) makes a distinction between pro-poor and inclusive growth based on which groups are recipients of the outcomes from growth; according to Klasen “pro-poor growth focuses on people below the poverty line, while inclusive growth is arguably more general: it wants growth to benefit all stripes of society, including the poor, the near-poor, middle income groups, and even the rich” (Klasen 2010: 2).
Today, inclusive growth as a socioeconomic model under development due to the increased inequality in both developing and developed nations, is a model that should concern policymakers, academics and practitioners around the globe. Financialization and the increased power of giant corporations have led to the concentration of economic power (money) into the hands of non-productive forces where huge amounts of profit are not reinvested to grow or develop the economy but are being used just for the creation of more money. This shifts the economic role from a value creation organization into a value extraction mechanism. Corporate profitability is not translated into widespread economic prosperity. The allocation of corporate profits to stock buybacks deserves much of the blame.
Αccording to Martin Ravallion, the former head of research at the World Bank, as cited in The Economist, a 1% increase in incomes in the most unequal countries produces a mere 0.6% reduction in poverty; however, in the most equal countries, it yields a 4.3% cut. In other words, societies can get much more bang from a boom if they ensure benefits are more widely shared.
This brings us to the point at which trickle-down theory ends and inclusive growth begins. According to the Organization for Economic Cooperation and Development (OECD), inclusive growth is “a new approach to economic growth that aims to improve living standards and share the benefits of increased prosperity more evenly across social groups”.
Inclusiveness has its application in both macro (aggregate) sense and micro (in terms of specific) sense. Based on the principle of creative economy it must be addressed as a system for the creation of a more sustainable and balanced socio-economic ecosystem taking into account national economies, environmental issues, cultural diversity, natural resources, social progress and of course human wellbeing. Taking into account the negative evolution in global economy we believe that inclusive growth must be addressed as an economic model that should be applied globally in order to achieve a sustainable and balanced Economic System.
The socioeconomic model of inclusive growth today should be based on the following pillars :
- Collaboration between nations in order to achieve a sustainable global economic growth taking into account: cultural diversification, environmental and natural resources.
- Efficient allocation of invested capital to more sectors on the basis of collaborative business.
- Closer co-operation between production forces, science and investors.
- Collaboration between the private sector and the public sector in order to enchase entrepreneurship and business development inside a much more fairly regulated framework.
However, there is an important caveat to all this. The objective of inclusive growth ought not to be equal outcomes regardless of the efforts, an approach that can hurt the incentives for growth. Instead, inclusiveness means leveling the playing field, getting rid of special enticement for lopsided development, and making the effort to engage every segment of the population.
Global Socioeconomic Framework Today
Over the last decades we have seen great changes in the global economy. Changes affecting almost all business industries in every advanced or developing country, as today businesses all over the world are interacting with each other due to globalization. Although one would expect that changes like the evolution in technology, communication, international regulations about free trade and production relocation from advanced economies to poor countries would significantly improve the economies all over the world, this has not happened so far. Globalization did not manage to achieve the main objective which was to build a cultural, economic, business and knowledge exchange bridge to join nations under the umbrella of equality in all aspects of the wider socio-economic life.
Today we are living in the era of the New Normal where the global economy has not yet fully stabilized. The latest downturn was fundamentally different from recessions of recent decades. We were experiencing not merely another turn of the business cycle, but a phase of restructuring in the economic order that still continues worldwide. The question is, “What will new normal finally look like?” While no one can say how long this economic cycle stage will last, what we find on the other side will not look like the normal of recent years. The new normal will be shaped by a confluence of powerful forces some having arisen directly from the financial crisis and some that were at work long before it began. Obviously, there will be significantly less financial leverage in the system. Business models that rely on high leverage will suffer reduced returns. Companies that boost returns to equity the old fashioned way—through real productivity gains—will be rewarded but this will take a long time to be understood and measured.
Given the crucial role that the financial system plays in any economy, recovery efforts will depend on a well-functioning system of saving and allocating capital, among other factors. Although a number of reforms that address some of the underlying issues within the system have been well received, there are still many issues that remain to be addressed, including effective supervisory frameworks, cross-border bank resolution in times of failure and significant changes in the role of the shadow banking system. The banking system should be more active and support production forces, something that is not happening today.
Over the past 30 years, there were some main vehicles through which companies have globalized: Capital concentration, worldwide strategic alliances and cross-border Mergers & Acquisitions. These vehicles were instruments used by companies to increase their global reach and competitiveness but after a long time this didn’t seem able to create a viable economic model of equality and social stability. Instead of growth and prosperity it brought severe economic and social problems on a national and international level. The Global Society must review the functioning of the financial system, redefine production roles, link and balance the global market forces.
Today while global corporations tend to dominate the business world, many healthy small & medium sized businesses are facing many obstacles to survive and grow. SME’s are the main development backbone in any national economy as history has taught us. In order to survive and thrive SME’s need to operate in a more friendly legislative framework by removing regulatory barriers that are harder for small and mid-sized enterprises to overcome than for large enterprises. They need the support and the collaboration of governments, regulations and global funds, not only for the sake of profits, but for the sake of an international social stability.
Hostile takeover and severe competition are no more producing the desired results. Overconsumption and huge budgets on marketing and communication are no longer business instruments that can boost business and economic stability.
In order to reignite the engines of economic growth, global leaders must unlock the capital sources and allocate these more wisely by investing more in production forces. To provide investors, consumers, entrepreneurs, and the like with the trust and support necessary to take risks and innovate. To accomplish this, they need to strengthen institutions through more efficient and effective legal and regulatory frameworks, as well as enhanced corporate governance mechanisms. Instilling trust back in the system could pay dividends as financial markets stabilize, liquidity increases, and capital is allocated to its most productive uses. Although emerging and advanced economies face challenges that will be neither easy nor straightforward to address, long-term sustainable growth can be attained through collective action and international cooperation. Dialogue at the local, regional, and global levels will be critical in providing greater assurance, minimizing negative outcomes, and promoting a more stable financial system. Improvement efforts need to be driven by local-level reforms to ensure that the appropriate financial systems are in place, thereby helping extend prosperity to all.
We believe that in the very near future, in order to change the course of the global economy and boost entrepreneurship, we must think and act differently.”We can’t solve problems thinking the same way when we create them”. The model of capital concentration in the hands of the financial system, inequality in global investment allocation, overconsumption and outdated marketing strategies can no longer work. Each separate nation should organize its economy in such a manner that it will be able to take advantage of its own strong points and collaborate globally, in order to reduce cost, overcome useless competition and protect natural resources all over the globe. In some countries enterprises can really grow while in some others they can be developed and transfer know-how to the developing nations gaining mutual benefits.
We are working exactly to this direction. Our first and most important priority is to connect business people worldwide and build a global network that will boost entrepreneurship, culture , knowledge exchange ,innovation and synergy among different nations.
We are aiming to create a network of business people with a different way of thinking regarding entrepreneurship and how this connects to and is affected by the wider global society. Regarding businesses we want to align the corporate culture and performance with the fast changing socio-economic environment trends. Following the global evolution in economy, business and science we want to assist public and privately held organizations to evaluate their objectives and strategy and position or re position themselves effectively in this new global business community.
Inclusive Growth has been developed by Stamatis Alamaniotis (Bio info) and it is being complemented by researchers, scientists and independent professionals from various industries. This team shares a vision to create a more sustainable growth model for business in Greece and other countries. It is a new approach of doing business based on collaboration between individual professionals, institutions and organizations from the private and public sectors that are in the same line of thinking about the need for structural changes in the wider business and economic framework.
During his 20–year hands-on business experience, Stamatis Alamaniotis has assisted many organizations from various industries to develop their business, to define or redefine their strategy, to improve their business culture and operation and to design a model that could efficiently fit their business in a fast changing market environment.
Stamatis Alamaniotis has extensive experience dealing with international business and has participated in the development of Strategic Alliances and Partnerships for various business objectives. In 2004 he started working as an independent business consultant on Business Development and Business Process Re-engineering subjects for small and medium size companies and has gained experience in Due Diligence Processes, Mergers, Acquisitions and the funding of projects. Additionally he has been working on an Integrated Business Plan aiming to optimize the Greek Olive Business Industry and improve Greece’s EVOO’s international presence.