The "Hidden" Key to Economic Growth

As an upcoming YGL participant at the Annual Meeting of the New Champions 2011 (aka “Summer Davos”) of the World Economic Forum in Dalian, China (14 – 16 September 2011), I was asked to submit an opinion piece on “Mastering quality growth” for discussion and publication at the summit. I am posting the article to my blog so that you may send me questions that you would like to have addressed by the WEF.

I will select several questions to incorporate in two sessions I am participating in: “New Perspectives on Growth” on Wednesday, Sept. 14, and “Women Entrepreneurs – How are women changing entrepreneurship and driving growth?” on Friday, Sept. 16.

The Hidden Key to Growth:
Ready, Willing, and Waiting for an
Invitation to the Boardroom

There are several factors contributing to anything that could be termed “quality growth,” including environmental sustainability, better distribution of global income, and new metrics to calculate that growth. All worthy topics, but I would like to address a social issue that may get overlooked in the enthusiastic search for such growth.

It would be nice to think that discrimination is the kind of unwanted baggage we left behind in a previous century, but that is not the case. Discrimination based on national, ethnic, racial, or religious causes is still common. Yet evil as these realities may be, one type of discrimination is even more common: Women, regardless of their ethnic, racial, religious or national backgrounds, remain second-class citizens in most of the world.

What does this have to do with growth? Everything. The real cost of discrimination is considerable, and for many countries in Asia and the Mid-East it represents a significant piece of “missing GDP.” In order to achieve higher and more balanced growth, all nations, and especially the more male-dominated societies, need to let go of this useless baggage so as to achieve their full potential.

For the last half decade I have resided in Japan, one of the world’s largest and most backward economies. By “backward,” I mean a nation whose major corporations make gender discrimination a matter of policy. Companies hire women by the tens of thousands each year, then give them mostly menial jobs while their male counterparts, no matter how incompetent, are promoted regularly. The reasons for this lie deep in Japanese cultural tradition, and to those who argue that “outsiders should not criticize or try to change our culture,” my response is: When your traditions are choking your own economic health, insiders not outsiders should be crying the loudest for change.

A survey conducted last year by a prominent U.S.-based nonprofit examined the top 200 companies on the Fortune Global 500. It found dozens of giant corporations that had no women directors of any kind. None. Japanese companies took the dubious honor of having 19 companies big enough to be ranked among the world’s top 200 but not open enough to find room for a single woman in their boardrooms. Some of Japan’s most internationally active firms were on the list: Toyota, Nissan, Honda, Panasonic, Canon, and Toshiba had not a single female director among them. The final tally was 265 board seats. Total female representation: 0.

A 2009 survey of Japan’s top 100 companies found 17 women out of a total of roughly 1,200 board members, and of those 17, 16 were classified as “outside,” i.e., non-executive directors. Observers could be excused for thinking that Japanese companies are more interested in window dressing than in meeting diversity issues head-on.
Let’s focus on the bottom line: Gender discrimination hurts business and robs national economies of vitality and growth. To put it positively, many countries could add percentage points to their GDPs just by moving more women into the workforce.

In Japan’s case, a Goldman Sachs study concluded that if the labor force included the same percentage of women as men, that change alone would add 8 million new jobs and boost GDP by 15 percent. In other words, this massive but dismally performing economy could grow by more than the entire GDP of Canada and Israel combined if only it was willing to give women a better chance to work. I have seen time and again how bright, motivated women workers not only equal their male counterparts but often outperform them by a wide margin. Foreign companies have known this for years. In a phenomenon known as “gender arbitrage,” they compete to hire these legions of overachieving women and give them good jobs and salaries. They certainly don’t do that to win CSR awards; they do it because it helps their bottom lines. Who loses? The domestic firms that put tradition ahead of profitability and bigotry ahead of growth.

This is not a Japan problem; it’s a global problem. Increasing women in the workplace, and attracting and promoting capable women is a sign of efficiency. It makes sense for business. How many nations today can say they don’t need to increase GDP growth, especially if the solution is completely domestic and inexpensive?

William H. Saito

Tokyo, Japan

The Forum of Young Global Leaders is a unique, multistakeholder community of exceptional young leaders who share a commitment to shaping the global future. Each year the World Economic Forum identifies 200-300 extraordinary individuals, drawn from every region of the world. Together, they form a powerful international community that can dramatically impact the global future.

Posted by whsaito

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