Abstract
The global economy may have become so unsustainable that it poses a danger to life on Earth. The majority of people suffer from severe economic inequality (exclusion), while the environment endures a terrifying rate of resource depletion. The prevailing form of capitalism suffers from a critical imbalance: increased economic interdependence through globalisation coexists with rising isolation and exclusion. This article argues that economic inclusion is essential for sustainability, unlocking the economy’s true potential, and fostering collective well-being. By examining the concepts of an inclusive economy and inclusive growth, the study develops a theoretical framework to address these challenges. It reveals that aligning the economy with sustainability necessitates economic inclusion, not only for survival but also for unlocking the economy’s full potential and fostering collective well-being. Given the economy’s strong influence on social organisation, inclusion can serve as a crucial balancing factor to bridge the shortcoming or imbalance mentioned above. The study’s first goal is a conceptual and theoretical analysis, while the second goal is to examine the relationship between an inclusive economy and inclusive growth. Underlying this is the fundamental question: Is the economy ultimately about money or people?
The research methodology involves a systematic review of literature and qualitative analysis of existing sources on economic sustainability and the necessary structural/systemic changes needed in the economy. A key finding is that economic inclusion significantly contributes to reorienting the economy towards human well-being and a healthy biosphere, with inclusive growth acting as a critical catalyst for this transition. The synergy between an inclusive economy and inclusive growth enables the economy to pursue higher objectives: improved growth (where value creation is decoupled from resource consumption), enhanced quality of life for everyone, and a more morally responsible economy characterised by fairness and equity. To restore its equilibrium, the economy must balance economic progress with social equity and ecological parity – with productive economic inclusion identified as the key factor for such a realignment.
The terms inclusive growth and inclusive economy are frequently used in policy documents and the media, often without sufficient understanding. Their prominence has increased following their adoption by the United Nations (UN) in its 2015 framework for Sustainable Development Goals (SDGs). The UN considers both concepts essential for achieving sustainable development by 2030, with eight of the seventeen goals directly related to either inclusive growth or an inclusive economy. These goals emphasise fair access to resources, opportunities, and economic benefits, as well as reducing inequalities and promoting social inclusion. However, the meaning of these terms is multifaceted and continuously evolving. The study aims to clarify the inherent meanings of an inclusive economy and inclusive growth and to explore how inclusive growth builds an inclusive economy.
The pursuit of an inclusive economy is not merely a positive endeavour but a crucial aspect of our existential challenge. The world is overusing its resources significantly, and there is extreme inequality in resource distribution. This trajectory poses a catastrophic crisis unless urgent change occurs. Inclusivity is considered a potential solution to this crisis and offers concrete goals in the face of climate change. It is important to note that inclusivity in this context refers to productive inclusion, enabling more people to add value to the economy, rather than inclusion for its own sake (resulting in free-riding).
The fundamental purpose of the economy is to organise society by allocating tasks and resources to create prosperity for the well-being (quality of life) of all. To help facilitate the reorganisation of the economy to become more sustainable, the inclusive economy aims to prevent social exclusion and stimulate productive inclusion. An inclusive economy seeks to restore the original purpose of the economy: organising society for collective well-being, where the market serves as an effective instrument for resource distribution and wealth creation to protect this well-being. This does not imply complete economic equality but rather fair economic equity based on people’s contributions to the economy.
The theoretical framework for an inclusive economy integrates mainstream (neoclassical and Keynesian) and heterodox (institutional and ecological) economic theories. Inclusive economic theory aims to bridge the gap in economic science regarding individual and collective economic behaviour, motivation, and outcomes. An integrated framework consisting of idealistic neoclassical theory, realistic neoclassical theory, and neorealistic economics is used to combine these different theoretical streams, offering a broader and more realistic approach to economic analysis and policymaking. Inclusive economic theory explores the limitations of neoclassical and neorealistic paradigms to draw valid conclusions about real economic behaviour and provide inclusive guidance when these theories do not align with observed behaviour. The goal is not just to increase the status of social concerns in economic policymaking but to develop an integrated economic theory as a guiding framework for individual, social, and environmental realities in an inclusive economy.
Wealth creation solely left to the market has consequences, such as imbalances between producers maximising profits, and consumers not having the same drive to maximise utility. The recognition that inconsistency and irrationality are part of economic processes, alongside self-interest, is crucial. While perfect rationality is an ideal, a more collaborative framework is needed where consumers maximise utility and producers maximise profits within a shared goal of wealth creation that benefits all, which is the essence of true economic progress. In this way, inclusive economic theory provides deeper insights into causes and offers the potential for better policymaking by considering a combination of the three paradigms to understand individual and social behaviour. The role of economic theory, especially inclusive economic theory, is to accurately decipher complexities and develop targeted interventions grounded in reality. This includes behaviours like transcendental awareness and healthy communality, which can improve well-being.
The inclusive economic theory offers an alternative paradigm that reorients (not replaces) neoclassical and neorealist theories. This restores the original purpose of the economy, leading to a reconsideration of neoliberal supercapitalism, which remains trapped in Enlightenment idealism. The need for greater realism and broader inclusion in economic theory (and practice) has become crucial. This inclusion involves both biocentric ethics and shared community values. The emphasis is on ethically constrained optimisation in the context of shared collectivist ideals. The inclusive economic approach offers a revaluation and reorientation of the dominant neoclassical economy and develops realistic alternatives to conventional capitalism and socialism (both growth-dependent economies). It introduces a shift in emphasis from a money-driven economy to an economy focused on real-life resource management. The latter includes a revised measure of sustainable economic well-being within a value-based framework for the economy. Research found that societies that optimise collective utility, separate from each individual optimising their own utility, fare the best. Inclusive economic theory makes collective well-being, not just growth, a central focus, bringing the economic model closer to sustainable economic progress. As such, economic growth must become inclusive.
The need to introduce the inclusive principles of shared responsibility, collective well-being, and collaborative productivity as balancing building blocks for a truly sustainable economy is rapidly increasing. The importance of creating a more inclusive, albeit non-centralised, economic order should be seen as simply the next logical step in the evolution of economic progress. Inclusive economic growth is central to this progression. Sustainable economic growth requires inclusive growth. The latter signifies a rate of growth that can be sustained without sacrificing future economic growth for short-sighted, short-term economic gains, as this can cause significant economic problems and financial crises. Inclusive growth is a multidimensional understanding of growth, departing from one-dimensional thinking (e.g., only GDP growth). In contrast to the vertical trickle-down structure of the traditional growth-driven economy, inclusive growth follows a horizontal structure. It functions as a network that builds a buffer against external shocks through a system of nodes to avoid spillover effects and systemic risk (a domino effect). It favours low-impact production processes, small-scale economic development, and the drastic reduction of waste. When growth is inclusive, relationships within the human economy are valued and not sacrificed in exchange for a mere consumption experience.
Inclusive growth thus represents a new kind of growth that provides a true definition of what a healthy economy is. When growth is truly inclusive, sustainable development will be a natural consequence. This means optimally utilising every productive component in the production process through inclusion, not exclusion/filtering. It opens the way for a faster rise in the well-being of the poor compared to the non-poor. It also minimises the negative external effects associated with growth, which, in the long term, weakens a country’s trade competitiveness. This organic expansion-growth increases the likelihood that export income will grow faster than import costs due to the added diversification of a country’s economy. Inclusive growth positively disrupts supercapitalism and redirects focus away from socialist economic alternatives. Hence, an inclusive economy realigns the machinery of the economy by placing human dignity and collective well-being at the centre of the growth process. This is the significance of an inclusive economy in a time when new models for true economic progress are desperately sought.
Keywords: ecological conservation; economic sustainability; inclusive economy; inclusive growth; quality of life
- This article’s featured image was created by Julia M. Cameron and obtained from Pexels.
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