SAFE Policy Lecture: Making Inclusive Growth a Reality

Tharman Shanmugaratnam, Deputy Prime Minister of Singapore, pleads for a new economic policy

Social inequality is known as the downside of globalization. The fight against inequality and the promotion of an inclusive, sustainable and balanced economic growth has been the declared objective of the most important industrialized and emerging market countries not only since the last G20 summit in July this year. How “inclusive growth” can be achieved was outlined by Tharman Shanmugaratnam, Deputy Prime Minister of Singapore, to 200 invited guests of a Policy Lecture on 5 December in Frankfurt, hosted by SAFE, the Center for Financial Studies and the German Central Bank. The President of the German Central Bank Jens Weidmann stated in his welcoming remarks that inequality could harm public growth. Thus, a major task was to find the right calibration of growth policies. In his subsequent speech, Tharman called for “a new spirit of activism in the role of government.” Perception of increasing inequality was rising across countries and optimism, that their own children will do better, was declining. Also the diminishing willingness of solidarity and nationalist trends in Europe and in the USA raise Tharman’s concerns.

Leaving things to the market, was no sustainable strategy, nor was collectivism or permanent redistribution. “We need a spirit of regeneration, a new strategy”, Tharman claimed. Especially in the creation of new and viable jobs, social mobility and integration the government should take a new activism.

According to the Deputy Prime Minister of Singapore slow productivity growth is one of the major causes of social stagnation and frustration. The goal should be to create more dynamics and accelerate the structural change. It should be easier for employees of slow growing sectors to change into a future-oriented sector. Thereby, lifelong learning was taking a key role. “Partnerships among educational institutions and companies could provide a major contribution for preparing people for new requirements of working life,” Tharman stated.

Education also played a major role for social mobility. Children, whose parents could provide for a high-level education, won themselves advantages. Therefore it would be important to support parents who are not able to provide this funding. This starts already with an early childhood education. Furthermore, Tharman pled for prudent urban planning which avoids the development of ghettos and promotes socially mixed neighborhoods. “If we do not succeed to enable social mobility, we will be permanently dependent on redistribution.” Socially mixed neighborhoods and schools would enable social advancement and facilitate the integration of people with different ethnic backgrounds.

Link to lecture video