Inequality can damage businesses. Are businesses about to tackle inequality?

There is a growing realisation among the world’s top economists and business leaders that excessive inequality is damaging the economy.  Among many examples are the head of the IMF, who warned in May that inequality produces “lower and less durable economic growth”. In November the CBI agreed, saying that “societies where more people share in prosperity tend to have higher GDP growth per capita and experience longer spells of growth than less inclusive economies”. Just yesterday, the OECD produced new research showing that “income inequality has curbed economic growth significantly”.

Anyone who is familiar with the debates about the impact of climate change will be aware that recognising a problem is a necessary but not sufficient step towards solving it.Nicholas Stern pointed out in 2006 that the costs of mitigating climate change are far smaller than the costs of dealing with the consequences will be, but eight years later we have not done what needs doing.

So we are pleased that a new campaign (“An Economy That Works”) which was launched yesterday, brings together businesses and NGOs (from Friends of the Earth to the TUC) to “work with the UK government over the coming years to identify the key policy levers for change, support their adoption, and encourage wider uptake of innovative business practices that together are needed to guarantee a competitive and successful UK economy now and in the future”.

The characteristics of An Economy That Works which the campaign aims to promote include both environmental matters ( enhancing nature, zero waste, low carbon) and social ones (high employment, equality of opportunity, wellbeing).  The basic idea is that in the longer term, healthy businesses require a healthy society and healthy ecosystem.

High employment, equality of opportunity and wellbeing are inextricably tied to reducing inequality:  The UK currently has a higher proportion of low-paid, low-skilled workers than is normal for a developed country. We cannot – and should not try to – compete with developing countries with a ‘bargain basement’ model. We can compete on the basis of high skills and high value, but the longer we take to put in place a strategy to make that happen, the further we fall behind the countries that do have such a strategy:  we risk the kind of obsolescence that consigns nations to economic oblivion. 

Duncan Exley, Director