B7 Summit in Québec City: Setting the Agenda for Inclusive Growth
The B7 is composed of the leading business associations of the G7 states, including the Federation of German Industries (BDI). The B7 summit marks the end of a process lasting several months, to develop key recommendations for the G7 Leaders ahead of their summit with the goal of promoting economic growth, sustainability, and shared prosperity.
Under the chairmanship of Perrin Beatty, President and Chief Executive Officer of the Canadian Chamber of Commerce, the B7 Business Summit in Québec City featured prominent business figures from around the world. Among the participants were Dieter Kempf, President of BDI and Chair of the Global Business Coalition, and Tom Donohue, President of the U.S. Chamber of Commerce; as well as representatives of global companies like John Deere Group, Air Liquide and TransAlta, and the heads of other B7 business federations.
The two-day conference allowed for an intense exchange between the B7 and the Chair of the G7, the Canadian government. Kicked off by the Prime Minister of Canada, Justin Trudeau, the B7 discussed global economic challenges with Bill Morneau, Canadian Minister of Finance and Entertainment, Stephen Poloz, Governor of the Bank of Canada, and Francois-Philippe Champagne, Canadian Minister of International Trade.
The B7 presented recommendations to the G7 on the following topics.
Advancing Inclusive Growth
Inclusive growth is defined by the OECD as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.” During and subsequent to the last financial and economic crisis from 2007 to 2010, economic growth and productivity were weak and inequality rose globally. Evidence shows that excessive inequality has a negative impact on growth. Widening disparities in the ability of individuals to participate in, and therefore benefit from, economic growth drives protectionism, decreases trust in government, and increases uncertainty.
From a German perspective, the idea of inclusive growth is nothing new as Germany has been pursuing the social market economy for decades. Income inequality (measured in terms of the so-called Gini coefficient of disposable household income, OECD data for 2015) is correspondingly low in Germany. At a level of 0.29, it is well below the OECD average of 0.32 and the U.S. value of 0.39 (in this system, a value of 0 corresponds to complete income equality and 1 means that one person would everything). However, inclusive growth is not limited to the distribution of income. It equally applies to the generation of income, in which everybody should participate as well.
Business stands strongly in support of the concept of inclusive growth. Broadly based growth, a highly productive labour force, and an innovation-friendly environment are key interests for any company. High participation rates in the labour market, skilled workers, and strong productivity gains are to everyone’s advantage. This simultaneously drives investment and increases contributions to maintain the welfare state. As the inclusion of all members of society into the economy is ubiquitously beneficial, it is the best defence against nationalist and populist movements.
Improving Resource Efficiency
Under the 2030 Agenda for Sustainable Development, countries committed to sustainable management and efficient use of natural resources by 2030. Of the 17 SDGs, 12 refer to the sustainable management of global resources. Since 2000, the primary material intensity of the world economy has slightly increased. In other words, the rate at which the world economy exploits natural resources and generates emissions and waste is increasing faster than economic benefits are gained. If the current trend continues, the global extraction of natural materials is expected to roughly double by 2050.
This development causes unsustainable environmental degradation and scarcities. Increased population growth and economic growth will lead to a higher demand for natural resources that could result in price increases, price fluctuations, and may also lead to conflicts. However, economic growth has lifted billions of people out of poverty, and we undoubtedly need it in order to reach the goals of the 2030 Agenda. To create resource-efficient economic growth, we urgently need to scale up efforts to improve resource efficiency. Enhanced resource efficiency thus also has broader societal impact - it is key to securing continued development. Increased resource efficiency will thus not only lead to environmental resilience but additionally improve the resource security that is vital for human development, as envisaged by the SDGs. It is clear that businesses play a crucial role in the transition towards a sustainable world economy.
Scaling Up Small and Medium-Sized Enterprises (SMEs)
SMEs are often called the backbone of the economy. In fact, in many economies, two-thirds of the workforce is employed by SMEs. In all G7 countries, SMEs play an important role for the economy. They are often newly-founded companies. The launch of a business is difficult enough, and it is even harder to build a successful business while scaling up. Public support for this process is often necessary. In times of multiple challenges regarding technological change and newly nationalist voices, SME-centred policies could provide an answer for more inclusive growth, as well as delineating the importance of an open business environment.
Trade and the current protectionist trends played a key role in all discussions of the B7 Summit. The B7 agreed that open and rules-based markets are indispensable for inclusive growth. Go-it-alone nationalism and protectionism hurt the poorest most. The B7 strongly called upon the G7 to send a strong signal against all forms of protectionism at their upcoming summit in June.