Video Transcrip: Economic Growth has Stalled. Let's Fix It

Our ability to create and sustain economic growth is the defining challenge of  our time. Of course there are other challenges -- health care, disease burdens  and pandemics, environmental challenges and, of course, radicalized terrorism.  However, to the extent that we can actually solve the economic growth  challenge, it will take us a long way to solving the challenges that I've just  elucidated. More importantly, unless and until we solve economic growth and  create sustainable, long-term economic growth, we'll be unable to address  the seemingly intractable challenges that continue to pervade the globe today,  whether it's health care, education or economic development. The fundamental  question is this: How are we going to create economic growth in advanced and  developed economies like the United States and across Europe at a time when  they continue to struggle to create economic growth after the financial crisis?  They continue to under perform and to see an erosion in the three key drivers of economic growth: capital, labor and productivity. In particular, these developed  economies continue to see debts and deficits, the decline and erosion of both  the quality and quantity of labor and they also see productivity stalling. In a  similar vein, how are we going to create economic growth in the emerging  markets, where 90% of the world's population lives and where, on average, 70% of the population is under the age of 25? In these countries, it is essential that  they grow at a minimum of seven percent a year in order to put a dent in poverty and to double per capita incomes in one generation. And yet today, the largest  emerging economies -- countries with at least 50 million people -- continue to  struggle to reach that seven percent magic mark. Worse than that, countries like India, Russia, South Africa, Brazil and even China are falling below that 7%  number and, in many cases, actually regressing. Economic growth matters. With economic growth, countries and societies enter into a virtuous cycle of upward  mobility, opportunity and improved living standards. Without growth, countries  contract and atrophy, not just in the annals of economic statistics but also in the  meaning of life and how lives are lived. Economic growth matters powerfully for  the individual. If growth wanes, the risk to human progress and the risk of  political and social instability rises, and societies become dimmer, coarser and  smaller. The context matters. And countries in emerging markets do not need to  grow at the same rates as developed countries. Now, I know some of you in this  room find this to be a risky proposition. There are some people here who will  turn around and be quite disillusioned by what's happened around the world and basically ascribe that to economic growth. You worry about the overpopulation of the planet. And looking at the UN's recent statistics and projections that the  world will have 11 billion people on the planet before it plateaus in 2100, you're  concerned about what that does to natural resources -- arable land, potable  water, energy and minerals. You are also concerned about the degradation of  the environment. And you worry about how man, embodied in the corporate  globalist, has become greedy and corrupt. But I'm here to tell you today that 

economic growth has been the backbone of changes in living standards of  millions of people around the world. And more importantly, it's not just economic  growth that has been driven by capitalism. The definition of capitalism, very  simply put, is that the factors of production, such as trade and industry, capital  and labor, are left in the hands of the private sector and not the state. It's really  essential here that we understand that fundamentally the critique is not for  economic growth per se but what has happened to capitalism. And to the extent  that we need to create economic growth over the long term, we're going to have  to pursue it with a better form of economic stance. Economic growth needs  capitalism, but it needs it to work properly. And as I mentioned a moment ago,  the core of the capitalist system has been defined by private actors. And even  this, however, is a very simplistic dichotomy. Capitalism: good; non-capitalism:  bad. When in practical experience, capitalism is much more of a spectrum. And  we have countries such as China, which have practiced more state capitalism,  and we have countries like the Unites States which are more market capitalist.  Our efforts to critique the capitalist system, however, have tended to focus on  countries like China that are in fact not blatantly market capitalism. However,  there is a real reason and real concern for us to now focus our attentions on  purer forms of capitalism, particularly those embodied by the United States. This is really important because this type of capitalism has increasingly been afforded the critique that it is now fostering corruption and, worse still, it's increasing  income inequality -- the idea that the few are benefiting at the expense of the  many. The two really critical questions that we need to address is how can we fix capitalism so that it can help create economic growth but at the same time can  help to address social ills. In order to think about that framing, we have to ask  ourselves, how does capitalism work today? Very simplistically, capitalism is set  on the basis of an individual utility maximizer -- a selfish individual who goes  after what he or she wants. And only after they've maximized their utility do they  then decide it's important to provide support to other social contracts. Of course, in this system governments do tax, and they use part of their revenues to fund  social programs, recognizing that government's role is not just regulation but  also to be arbiter of social goods. But nevertheless, this framework -- this two stage framework -- is the basis from which we must now start to think about how we can improve the capitalist model. I would argue that there are two sides to  this challenge. First of all, we can draw on the right-wing policies to see what  could be beneficial for us to think about how we can improve capitalism. In  particular, right-leaning policies have tended to focus on things like conditional  transfers, where we pay and reward people for doing the things that we actually  think can help enhance economic growth. For example, sending children to  school, parents could earn money for that, or getting their children inoculated or  immunized, parents could get paid for doing that. Now, quite apart from the  debate on whether or not we should be paying people to do what we think they 

should do anyway, the fact of the matter is that pay for performance has actually yielded some positive results in places like Mexico, in Brazil and also in pilot  programs in New York. But there are also benefits and significant changes  underway on left-leaning policies. Arguments that government should expand its role and responsibility so that it's not so narrowly defined and that government  should be much more of an arbiter of the factors of production have become  commonplace with the success of China. But also we've started to have debates about how the role of the private sector should move away from just being a  profit motive and really be more engaged in the delivery of social programs.  Things like the corporate social responsibility programs, albeit small in scale, are moving in that right direction. Of course, left-leaning policies have also tended to blur the lines between government, NGOs and private sector. Two very good  examples of this are the 19th-century United States, when the infrastructure  rollout was really about public-private partnerships. More recently, of course,  the advent of the Internet has also proven to the world that public and private  can work together for the betterment of society. My fundamental message to you is this: We cannot continue to try and solve the world economic growth  challenges by being dogmatic and being unnecessarily ideological. In order to  create sustainable, long-term economic growth and solve the challenges and  social ills that continue to plague the world today, we're going to have to be  more broad-minded about what might work. Ultimately, we have to recognize  that ideology is the enemy of growth. Thank you.  

Bruno Giussani: I want to ask a couple of questions, Dambisa, because one  could react to your last sentence by saying growth is also an ideology, it's  possibly the dominant ideology of our times. What do you say to those who  react that way?  

DM: Well, I think that that's completely legitimate, and I think that we're already  having that discussion. There's a lot of work going on around happiness and  other metrics being used for measuring people's success and improvements in  living standards. And so I think that we should be open to what could deliver  improvements in people's living standards and continue to reduce poverty  around the world.  

BG: So you're basically pleading for rehabilitating growth, but the only way for  that happen without compromising the capacity of the earth, to take us on a long journey, is for economic growth somehow to decouple from the underlying use of resources. Do you see that happening?  

DM: Well, I think that I'm more optimistic about human ability and ingenuity. I  think if we start to constrain ourselves using the finite, scarce and depleting 

resources that we know today, we could get quite negative and quite concerned  about the way the world is. However, we've seen the Club of Rome, we've seen  previous claims that the world would be running out of resources, and it's not to  argue that those things are not valid. But I think, with ingenuity we could see  

desalination, I think we could reinvest in energy, so that we can actually get  better outcomes. And so in that sense, I'm much more optimistic about what  humans can do.  

BG: The thing that strikes me about your proposals for rehabilitating growth and  taking a different direction is that you're kind of suggesting to fix capitalism with  more capitalism -- with putting a price tag on good behavior as incentive or  developing a bigger role for business in social issues. Is that what you're  suggesting?  

DM: I'm suggesting we have to be open-minded. I think it is absolutely the case  that traditional models of economic growth are not working the way we would  like them to. And I think it's no accident that today the largest economy in the  world, the United States, has democracy, liberal democracy, as it's core political  stance and it has free market capitalism -- to the extent that it is free -- free  market capitalism as its economic stance. The second largest economy is  China. It has deprioritized democracy and it has state capitalism, which is a  completely different model. These two countries, completely different political  models and completely different economic models, and yet they have the same  income inequality number measured as a Gini coefficient. I think those are the  debates we should have, because it's not clear at all what model we should be  adopting, and I think there needs to be much more discourse and much more  humility about what we know and what we don't know.  

BG: One last question. The COP21 is going on in Paris. If you could send a  tweet to all the heads of state and heads of delegations there, what would you  say?  

DM: Again, I would be very much about being open-minded. As you're aware,  the issues around the environmental concerns have been on the agenda many  times now -- in Copenhagen, '72 in Stockholm -- and we keep revisiting these  issues partly because there is not a fundamental agreement, in fact there's a  schism between what the developed countries believe and want and what  emerging market countries want. Emerging market countries need to continue to create economic growth so that we don't have political uncertainty in the those  countries. Developed countries recognize that they have a real, important  responsibility not only just to manage their CO2 emissions and some of the  degradation that they're contributing to the world, but also as trendsetters in 

R&D. And so they have to come to the table as well. But in essence, it cannot be a situation where we start ascribing policies to the emerging markets without  developed countries themselves also taking quite a swipe at what they're doing  both in demand and supply in developed markets.  

BG: Dambisa, thank you for coming to TED.  

DM: Thank you very much.