2019 H2 Economics Paper 2 Essay 5: Suggested Answers

Inclusive growth and sustainable growth are key objectives of modern economic policy, reflecting a shift from pursuing economic expansion for its own sake to ensuring growth improves welfare for all and endures over time. Inclusive growth focuses on the equitable distribution of the benefits of progress, while sustainable growth emphasises long term environmental and resource viability.

Inclusive growth. Inclusive growth is a pattern of economic expansion that creates opportunities for all members of society to participate in and benefit from growth, ensuring that rising national income translates into higher living standards across income groups. It is concerned not only with the pace of growth but with its distributional equity. In an economy experiencing inclusive growth, increases in real GDP are accompanied by improvements in employment, income equality and access to essential services such as education, healthcare and housing, so it is both pro growth and pro equity. A key indicator is the Gini coefficient, which measures income inequality; a fall in the Gini coefficient alongside sustained GDP growth indicates a more equitable income distribution. Median real income is another useful measure, since rising median wages in line with GDP per capita suggest gains are widely shared. For example, Singapore has pursued inclusive growth through Progressive Wage Models, Workfare Income Supplements and SkillsFuture, which raise wages at the lower end while improving productivity and employability.

Sustainable growth. Sustainable growth is economic expansion that can be maintained over the long term without depleting natural resources, degrading the environment or compromising future generations' ability to meet their needs. It requires balancing higher living standards today with the preservation of ecological and fiscal resources for tomorrow. It seeks to prevent negative externalities such as pollution, deforestation and carbon emissions that arise when economic activity imposes unpriced social costs, which if unchecked lead to overproduction of harmful goods and depletion of natural capital. It also implies operating within productive capacity and avoiding inflationary or fiscal imbalances. Governments pursue it by adopting green technologies, promoting renewable energy, implementing carbon pricing and encouraging sustainable consumption and production. For instance, Singapore's Green Plan 2030 aims to decouple growth from resource degradation through solar deployment, waste reduction and sustainable transport.

Countries today increasingly strive for growth that is both inclusive and sustainable, to avoid the trade offs that traditionally come with economic growth.