( For nearly a generation, none of the large, advanced capitalist economies have been able to both deliver growth and promote social justice at the same time. The United States produced generally strong growth from the early 1990s until the financial meltdown, but virtually all of the economic gains in that period were captured by the highly trained professionals and managers at the top of the skills ladder and by the wealthiest 1%, who hold about 45% of America’s financial assets. Inequalities of wealth are less drastic in the major Western European economies. But the annual growth rate of the German, French and British economies averaged between 20 and 35% lower than that of the US economy over this period; and the incomes of moderate and middle-income Western European households largely stagnated, much as they did in the United States.)
5. The most powerful responses start with growth – and specifically with greater public and private investments to enhance the comparative advantages of advanced countries as idea-based economies. This means more government support for basic research and development and stronger incentives for private research and development. It also means new efforts to reduce barriers to creating new businesses, for example by providing greater access to financing and reducing red tape. Young businesses are not only the main source of new jobs in advanced economies; they also account for a large share of technological and organisational innovations. When they succeed, that produces strong pressures on established businesses to adopt those innovations, raising productivity and incomes beyond the original innovators.
6. To ensure that these gains are shared more fairly, the advanced economies have to make major changes to their education and training systems. Access to higher education should be every young person’s right, so that anyone can build the skills needed to work productively in modern, technologically-based enterprises. Governments also have to help ease some of the cost pressures on businesses that are under intense competition, so more of their gains can translate into jobs and wages. This will mainly entail more serious efforts to slow increases in healthcare costs, for example through results-based reimbursements. The fast-rising costs of new treatments, along with the rapid ageing of the populations in all of the advanced countries, drive up these costs for employers – directly in the United States and indirectly everywhere through the taxes required to support healthcare. Ageing is also beginning to shrink the workforces of many countries, or at least slow their natural growth. To maintain workforce growth and the revenues based on it, advanced countries should prepare themselves for higher immigration.
7. The last generation’s advances in information and communications technologies play a major role in all of these developments. They accelerate globalisation by providing an infrastructure to manage worldwide production and assembly networks. Through new software, they are creating new ways to deconstruct large-scale business services and distribute their parts across many countries, much like manufacturing a generation ago. Advances in ICT are also critical to innovation in many other areas, from biotechnology to internet-based goods and services. And broadband internet is vastly expanding global markets for the intangible goods and services which are now the hallmark of advanced economies. ICT’s role in growth, therefore, is clear.
8. Much like globalisation, governments need new approaches to ensure that the gains from the impact of information and communications technologies across the advanced economies can be shared more broadly. First, broadband infrastructure should reach every business and every household. Next, governments should deliberately expand opportunities to form new ICT-based businesses, again by lowering barriers based on access to financing and bureaucratic red tape. The formation of new ICT-based enterprises will not only directly create more jobs; it will also increase incentives for workers to gain the skills needed to win those jobs. To give them the opportunities to do so, governments can provide grants to local educational institutions to offer all adults free training in computer and internet business skills.
9. Government should begin to address directly the increasing inequalities of wealth. In the United States, 93% of the value of all financial assets is held today by just 20% of Americans, and the top 1% hold over 40% of those assets. The wealth distribution is less skewed in the major European economies, but to only a modest degree. The hallmark of fairer growth should be greater opportunities to share in the wealth created in the world’s most advanced, idea-based economies. Creating the conditions for stronger job creation and wage gains, as described above, will help. But it will not be sufficient for real fairness. Over the next generation, European and American companies can be asked to set aside 5% of their ownership in a pool for their employees. These ownership stakes could be distributed as pension assets through contributions of stock to private retirement accounts, for example, or grants of stock of the kind that executives claim regularly. In this way, governments can reduce the pressures on state retirement systems and help spread the wealth in the world’s most advanced economies.