How can leaders increase trust and create more inclusive growth?

The events of 2016 led to a crisis of trust. We need to respond by creating more inclusive growth.

On both sides of the Atlantic in 2016, millions of people made it clear that they no longer believe business and government are looking out for their interests. Business and government have added to this disenchantment by castigating each other in recent elections and constantly pointing the finger at each other for our economic problems. In doing so, we’ve further confused and confounded the population, eroding trust to record lows. In the face of this, as more and more people are left out and left behind by globalization and technological disruption, it’s no wonder populist movements are reshaping our world.

It’s safe to say that we’ve heard this message loud and clear, so now the question is, how can we respond?

Business and government can restore trust and prosperity, but neither can succeed alone

First, we need to recognize that we all have a part to play in the solution and that starts by looking at where we’ve each fallen short. On the political side, we’ve seen a myriad of well-intended policies that increased the cost of opening businesses and hiring people, along with nationalist policies that made it harder for global businesses to operate supply chains around the world. All of this has increased costs and inhibited investment. On the other hand, businesses focused on improving quarterly profits have cut back on capital expenditures and investments in innovation that create long-term value and benefit the broader economy.

We can all do better, but, to end this cycle and get the job creation and growth that benefits everyone, business and government need to work together. Governments need to change many of the existing policies that hold us back, including reducing the red tape involved in opening businesses and obtaining certifications, as well as stopping unnecessary costs for businesses that hamper their ability to hire and invest. Businesses need to make a broad commitment to focus on all their stakeholders — employees, supply chains, communities and customers — and not just short-term profit.

Not only do we need to individually achieve these objectives; we need to partner together. We’ve seen that in the US, where businesses have partnered with local governments and universities to build innovation hubs that create jobs, train workers and drive growth. We’ve seen it in Germany, where business and government work together to ensure apprenticeships offer a path to prosperity.

That’s why I personally — along with many of my CEO colleagues — serve on boards and government consulting committees around the world, working to offer counsel to governments as they work to attract investment and propel economic growth. I’ve learned that to do any of that work, you need a baseline of trust. Without it, success is nearly impossible.

Once the broader population sees and believes our joint commitment to achieve inclusive growth, trust will be restored.

Address the hard truths of disruption and job displacement

However, before we can regain the public’s trust, we also have to be honest about some hard truths of globalization and disruption.

The fact is, we’re not going back to the middle of the 20th century. The global economy is changing fast, and today’s businesses — large and small — rely on global supply chains and global markets. If business turns away from the global community, we’ll just get less efficiency and economic growth and an increased risk to global security. Instead, we need to find a way to keep trading and growing together.

At the same time, we should support those who are being left behind and that means acknowledging that some parts of our economy are never going to be the same. For example, the vast majority of lost manufacturing jobs will never return. More than 85% of recent job losses in America were not caused by outsourcing or trade, they were the result of technological innovations that made the manufacturing process more efficient. In fact, compared with three decades ago, today American manufacturers produce twice as much with only a third of the workforce.

This is why the movement toward inclusive growth is so important: in the past decade, the top 1% of earners have seen a disproportionate amount of wealth accumulation. That’s not sustainable. Since economic growth is largely driven by consumption, if we expanded income and opportunities to the broader population, we’d see far more robust global economic growth. It’s imperative that business and government work together to speed up the rate of inclusive growth and improve economic security for a broader population, even as the global economy continues to change.