Wealth creation, choice, competition, stability, and solid governance are key characteristics of modern economies. However, the efficiencies and innovation of the market are often accompanied by unwanted consequences, such as unsustainable wealth inequality, social unrest, human suffering, and environmental damage. The pursuit of socially inclusive economic growth has emerged as a way of charting a course through these challenging waters.
To this end, most high-income countries operate some form of social market economy system, enabling them to care for those who are at an inherent disadvantage, such as people living in poverty, the elderly, children, and people who are disabled. It takes advantage of the benefits of the market, including innovation, efficiency and wealth, to provide for those unable to work.
The role of financial and professional services in leveraging skills and innovation in support of the social market economy and inclusive growth is key to understanding and shaping the future city economy.
Creating the right conditions
In order to deliver socially inclusive economic growth – and draw together the magic ingredients of diversity, vibrancy and enterprise, alongside a thriving social market economy – cities need to create the right conditions by securing:
- equal access to good education
- limitations on income inequality
- affordable and livable housing
Policy and financial levers are key. City leaders, businesses, and educational institutions need to co-operate to ensure an agile and accessible education system, and design employment policies that combine flexibility with social protection.
At the same time, intervention in the social safety net is crucial. Delivery of a basic income for every adult, irrespective of whether they are in paid work or not, offers one possible route to making city living affordable and avoiding some of the worst consequences of the market system.
But there’s little point in introducing an innovative social safety net if rents are unaffordable. Identifying innovative housing solutions is also required; driving a sustainable housing stock pipeline, securing affordable rents, and developing minimum basic accommodation standards will all drive change in this area.
Diverse cities are successful cities
For city leaders, the dilemma is what these interventions should look like and who pays? With some cities seeing their budgets increasingly squeezed, but others enjoying increasing devolution of resources and power, the debates around public vs. private provision has resulted in a number of potential models for the future city economy. The risks of inaction are potentially huge and cities that do not draw on their financial and professional service sectors may fail to grasp new solutions to funding public services.
In the same way, cities that reject diversity operate inefficient labour markets and become monocultures that stifle creativity and enterprise, and risk becoming unlivable. Global experience has repeatedly shown that when inclusion fails and disparity is rife, talent and investment leave, growth slows, and poverty increases. The penalty for poor policy-making is a spiral of decline, while cities that get it right are most able to soar.
The pursuit of inclusive growth, through innovation and enterprise alongside a social market economy is not a choice, it’s a necessity and should, with the right leadership and vision, eventually pay for itself.