Growth obsession is fueling inequality around world, WEF says

[SYDNEY] Economists and policy makers are relying too much on gross domestic product as a measure of national performance to the detriment of people's living standards, according to the World Economic Forum.

Ahead of its annual meeting in Davos, the Swiss-based foundation has sought to counter the focus on short-term growth by developing an alternative metric called the Inclusive Development Index, which rates 103 countries on growth, equity and sustainability.

The top is dominated at the top by smaller European nations, with Norway the most inclusive advanced economy followed by Iceland,Luxembourg and Switzerland. Denmark is fifth followed by Sweden, Netherlands and Ireland.

Australia is the only non-European nation featuring in the top 10, in ninth place and Austria in tenth.

"Decades of prioritizing economic growth over social equity has led to historically high levels of wealth and income inequality," the WEF said in a report released Monday. That's "caused governments to miss out on a virtuous circle in which growth is strengthened by being shared more widely and generated without unduly straining the environment or burdening future generations." The findings largely make for bleak reading. Over the past five years, despite a growing world economy, social inclusion has fallen or been unchanged in 20 of 29 advanced economies and inter-generational equity has worsened in 56 of 74 emerging economies, according to the report. Over the same period, less than half of the advanced economies were successful in reducing poverty and only eight saw a decrease in income inequality.

WEF argues that using GDP as a primary economic metric is ineffective as it measures current production of goods and services rather than the extent to which the economy contributes to broader socio-economic progress as seen in median household income, employment opportunity, economic security and quality of life.

Germany ranked the highest among countries in the Group of Seven, coming in 12th. It was followed by Canada in 17th place, France 18th, the U.K. 21st, the U.S. 23rd, Japan 24th and Italy 27th.

BLOOMBERG