The Role of the Government in

Creating Prosperity

13th TCI Annual Global Conference

New Delhi, India

November 29 to December 3, 2010

Outline

• Propositions

• What is Prosperity?

• Traditional Government Roles in creating prosperity

• Approaches to creating Prosperity

• New Approach to Creating Prosperity Using Inclusive

Growth

• What is Inclusive Growth and why it is Important?

• Conclusions

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Propositions

• Governments around the world aspire to encourage economic

growth and prosperity for their citizens

• All levels of government have a proactive and strategic role to play

in this effort, over and above their traditional regulatory mandate

• Globalization, rapidly changing technology, intense

competition, and rising expectations for a higher standard of living competition, and rising expectations for a higher standard of living

pose challenges to the established top-down approaches to

economic development

• And our principal indicator, GDP growth, may be questionable as a

reliable indicator of inclusiveness

• Growth and profits may be unquestionable attributes of the post-

modern economy, but unless broadly beneficial, recognizable

prosperity may not be the natural outcome

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What is Prosperity?

Prosperity can be defined as having higher salaries, a higher

standard of living, and more disposable income

Prosperity can be defined as both wealth and wellbeing. The

most prosperous nations in the world are not necessarily those

that have only a high GDP, but are those that also have

happy, healthy, and free citizens

2009 Legatum Prosperity Index Report

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Approach #1: The Role of Clusters in Creating

Prosperity

ProsperityProsperity

ProductivityProductivityGrowthGrowth

Source: Michael Porter6

GrowthGrowth

InnovativeInnovative CapacityCapacity

ClustersClusters

Approach #1: The Role of Clusters in Creating

Prosperity (Cont’d)

“Clusters…a form of dialogue between firms and the institutions that

support innovation”

Michael Porter, 2000

Clusters are groups of interrelated industries and institutions that drive

wealth creation primarily through innovation and the export of goods wealth creation primarily through innovation and the export of goods

and services.

Clusters create prosperity by:

• Stimulating innovation

• Facilitating Commercialization

• Promoting synergies and collaboration

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Approach #2: How the 12 Pillars of the Global

Competitiveness Index (GCI) Create Prosperity

Prosperity Prosperity

ProductivityProductivity

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ProductivityProductivity

CompetitivenessCompetitiveness

Determinants of Determinants of CompetitivenessCompetitiveness

Approach #2: How the 12 Pillars of the GCI

Create Prosperity (Cont’d)

Global Competitive IndexGlobal Competitive Index

Innovation Innovation

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Note how the 12 pillars cover more than just innovative capacityNote how the 12 pillars cover more than just innovative capacity

Source: Global Competitiveness Report 2010Source: Global Competitiveness Report 2010--20112011

Basic RequirementsBasic Requirements Efficiency EnhancersEfficiency EnhancersInnovation Innovation

and Sophisticationand SophisticationFactorsFactors

• InstitutionsInstitutions•• InfrastructureInfrastructure•• Macroeconomic StabilityMacroeconomic Stability•• Health and Primary EducationHealth and Primary Education

• Higher Education and TrainingHigher Education and Training•• Goods Market EfficiencyGoods Market Efficiency•• Labour Market EfficiencyLabour Market Efficiency•• Financial Market SophisticationFinancial Market Sophistication•• Technological ReadinessTechnological Readiness•• Market SizeMarket Size

• Business SophisticationBusiness Sophistication•• InnovationInnovation

Approach #3: Seven Components of Prosperity

ProsperityProsperity

Productivity Productivity

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Productivity Productivity

CompetitivenessCompetitiveness

Seven CapitalsSeven Capitals

Approach #3: Seven Components of Prosperity

(Cont’d)

CulturalCultural

HumanHuman

FinancialFinancial

ManMan--MadeMade

SocialPhysicalPhysical

Money, Financial SystemsMoney, Financial Systems

Infrastructure, MachineryInfrastructure, Machinery Health, SkillsHealth, Skills

Attitudes, BeliefsAttitudes, Beliefs

Source: The Monitor Group

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InsightInsight

InstitutionalInstitutional

Natural Natural EndowmentsEndowments

SocialPhysicalPhysical Infrastructure, MachineryInfrastructure, Machinery

Natural ResourcesNatural Resources

Natural EnvironmentNatural Environment

Legal & Regulatory Legal & Regulatory FrameworkFramework

Data, Pattern Data, Pattern RecognitionRecognition

Health, SkillsHealth, Skills

Similarities Between the Three Approaches

Macro Economic Factors:

• Low inflation, unemployment, and deficits

• Economic expansion, growth in GDP

• Overall health and stability of the economy

Micro Economic Factors:

• Efficient resource allocation• Efficient resource allocation

• Performance of individual economic sectors and regions

• Improve infrastructure and R&D capacity

• Provide incentives that encourage productivity and innovation

Regulatory Frameworks:

• Employment standards

• Occupational health and safety standards

• Environmental protection

• Natural resource planning, allocation, and use

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Towards a New Approach for Building Prosperity

ProsperityProsperity

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Social EquitySocial EquityEconomic Economic GrowthGrowth

Inclusive Inclusive GrowthGrowth

What is Inclusive Growth?

• Inclusive growth means economic growth that is

shared fairly among citizens

• It includes measurable criteria such as the literacy

rate and the general provision and distribution of

public goods (i.e. electricity, water, transportation)public goods (i.e. electricity, water, transportation)

• A call for active ‘moral leadership’ by both

government and business

• A call for a shift from conflict to cooperation and

collaboration

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Why is Inclusive Growth Important?

“If globalisation is to be sustained, with all of the

benefits its brings to humanity, growth must be

inclusive, it has to benefit the greatest numbers…”

Source: Indian Institute for Corporate Affairs,Confederation of Indian Industry,

The Evian Group, 2008

• The long-standing tension between economic and social

equity remains unresolved

• Globalization has increased the gap between the rich and the

poor, between participants and non-participants

• This widening gap will make globalization unsustainable

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Government Roles In Realizing Inclusive

Growth

• Three traditional roles of government: macro economics,

micro economics, and regulatory frameworks

• These are necessary, but insufficient because growth

associated with globalization has left many people behind and

increased the gap between rich and poor

• Additional roles of government are:• Additional roles of government are:

• Education

• Both moral and infrastructure leadership

• Use unique power of convocation to create productive dialogues

• Empower people to make positive changes

• Promote and reward positive characteristics

• Consider more than GDP growth when determining economic and social

well-being

• Embrace explicit policies that promote inclusive growth, i.e. the

Government of India has recognized inclusive growth as its highest

priority

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Conclusions

• Both established and new approaches are necessary to establish a

framework for developing policies and programs that create sustainable

prosperity

• Approaches to prosperity that do not address inclusive growth will not be • Approaches to prosperity that do not address inclusive growth will not be

sustainable over the long-term

• Inclusive growth is about ensuring that everyone benefits from economic

growth and experiences prosperity

Disclaimer: The views expressed here are all mine and are not those of the OntarioMinistry of Northern Development, Mines and Forestry

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Thank You

Indira Singh

Director, Executive Projects Office

Executive Director

Ontario Mineral Industry Cluster Council

Ministry of Northern Development,

Mines and ForestryMines and Forestry

Ontario, Canada

Indira.Singh1@ontario.ca

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