Workers should share global prosperity
A Hangzhou charter for fair growth and responsible capitalism would give the G20 Leaders Summit a much-needed sense of purpose, according to an economist with a London think tank.
The summit sees government leaders and central bankers from the world’s largest economies meet to exchange views on economic policy.
Alan Wheatley, associate fellow for international economics at Chatham House, said one of the key ingredients to push for a new round of world economic prosperity is to increase the share of global income that goes to workers rather than to companies.
“Countries like Japan, Germany and the United States are good examples that too much of national economic income goes to the corporate sector, and not enough to the labor sector. As a result, people don’t have enough spending power, and therefore the demand for investment is subdued,” he said. “If you are a factory owner, why would you build a new factory if people do not have the money to spend on your products.”
Wheatley thinks China is doing a good job in rebalancing its economy toward services and consumption instead of investment, as the tertiary sector is growing while investment is falling, but he said the nation can do an even better job by accelerating the trend.
To do that, Wheatley suggested that the Chinese government invests less in hard infrastructure and more in social infrastructure, such as health spending, education and social security, so that people can have the confidence to spend more and save less as they grow older.
He credits China’s concerted efforts to engage in global economic governance, saying the intention is admirable and welcome, but he is keen to see more practical proposals as to how that goal could be achieved.
He does not expect a big departure on economic policy in Hangzhou, as the G20 “is best suited to act in an acute crisis, and it has proved itself as a useful forum for an emergency such as the 2008 financial crisis, whereas now what we are witnessing is a phase of chronic economic status, not lifethreatening.”
Commenting on British Prime Minister Theresa May’s presence in Hangzhou, Wheatley said that the G20 could be a great opportunity for May and President Xi Jinping to get to know each other and to start the relationship on a positive footing, and a potential platform to signal May’s stance on China.
Alan Wheatley, associate fellow for international economics at Chatham House